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Exhibit No. 2027
Partners of J. P. Morgan + Co., 1914to 1918
1914
x
J.P.Morgan
T.
stotesbury x
Rdward
x
rharles steele
x
Henry D.navison
x
Temple Botdoin
x
Arthur R.Hewbold
Wm.Diernon Hamilton x
x
William R. Porter
x
Thomas W. Lamont
x
Horntio G. Lloyd
x
Thwight W. Morrow
Edwnrd R. Stettinius - Thomas Cochran
1915
x
-
x
x
x
x
x
x
x
x
x
x
- -
1916
x
x
x
x1
x
x
x
x
x
x
x
x
July
1916
x
x
x
x
- -
x
x
x
x
x
x
x
x
1918
1917
x
x
x
x
x
x
x
x
-
-
-
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
1 Rstate of Temple Bowdoin
(Information compiled from New York stock Rxchange Directory)
U.S.Senate, 74th rong., 2nd Sess., Special Committee invPstigating
the Munitions Tndustry, Hearings pursuant to R. Pes. 206, Bart 25, p.7656
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June 15, 1916.
PERSONAL AND CONFIDENTIAL:
My dear Arthur:
have purposely delayed writing you about the last Liberty
Loan and the Fourth Loan until I had opportunity to discuss this matter
with both Secretary McAdoo and Mr. Leffingwe11.
First let me say that no one understande or appreciates the
high character and great importance of the work you have and are doing
quite as well as I do. It has been a constant delight to have such a
partner, and, notwithstanding the great many difficulties and annoyances
and obstacles, the results tell a story of what has been done and I am
not for a moment going to let you or myself be discouraged by those dif-
ficulties.
Please understand that there is nothinE I would not do to make
this pork easier did conditions permit doing everything that I would like
to do. At any rate, I can promise that the next loan will be handled in
such a Tay as to clear up a lot of misunderetandinge that have developed
in the organization, and if I fail in accomplishing it, you need have no
hesitation afterwards in expecting me to accept your retirement, which
will do, however, with the utmoet regret.
Please consider this letter quite confidential.
raise
000,000,000 between now and November lat.
start about the 29th of September.
We have got to
The next campaign will
I have assurances that there will be
Mr. Anderson
6.15.18
no last-minute preparations, as in former loans; posters, buttons, literature,
etc., are now in course of preparation; even the Bond Bill has been sketched
up and Congress will be asked to deal with the subject in ample time I am sure
to avoid a last-minute rush.
Secretary McAdoo and Mr. Leffingwell have promised me complete
support, financial and otherwise, in building up a permanent organization,
which can get right to work on the next loan.
Other changes, such as I
have outlined to them verbally and in writing are, in general, approved and
will be put into effect after the first of July.
'What I now want to do is to get the needs of the various divisions
and at the committee organization together, including the district chairmen,
and lay out a very definite and comprehensive plan of organization and work
for the summer months in preparation for the next loan and to take care of
certificate issues in the meantime.
If that can be done next week, it will
enable me to leave for a good part of the summer eo as to avoid the necessity
for leaving forever.
It seems really an imposition upon you and the others
to ask you to take up this wort during hot summer months when I am away loaf-
ing most of the time, but, after all, it is not a personal matter but one of
national importance and we have got to make the sacrifice to do it. I would
be here all summer if my health permitted it.
1 am arranging to secure the necessary space in the Equitable
Building to carry out our program and now I am going to ask you to arrange
for three meetings during the week, and as early in the reek as possible,
so that we can come to an understanding;
one should be a meeting of the
staff, including Messrs. Greene, Colgate end Leach; another should be a
meeting of the general committee, and the third should be a meeting of the
district chairmen.
Prior to those meetings we will need to lay out the work in some
Mr. Anderson
3
6.15.18
detail and I am going to ask that you will arrange with Mr. Emerson to
join me Fonday Afternoon, say at three o'clock, so as to spend the rest of
the afternoon, dinner and the whole of the evening in diecursing this program.
Had you been with me in Washington and faced this situation frank-
ly with the others there, as I have done, I am sure you would see the necessity for abandoning every plan and engagement of every netury in order to
do all that is required of us.
losing the war.
Frankly, it may mean either winning or
I count on you without reservation.
Very truly yours,
A. M. Anderson, Lsq.,
Executive Secretary,
Liberty Loan Gemmittee,
120 Broadway, New York.
3S.MSB
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W6(70-i-Z
July 10, 1922.
Hon. Benj. Strong, Esq.,
Federal Reserve Bank,
New York City.
Dear Sir:
I enclose herewith letter addressed to
you by Richard L. Van-Za at, of Dallas, Texas, about
which Mr. A. M. Anderson spoke to you over the
telephone.
Very truly
ours,
b
711
AIIMPPIIIP.41110111110Pri.
J. P. MORGAN 8z Co.
Wall S t. corner Broad.
Nowlierlc.
DREX.F.:'
& CO.
Philadelphia.
MORGAN, GliENFELL &CO.
/4rk
London.
g9R3AIT, HARJES & CO.
Paris.
August 21st, 1911.
Dear Ben:
Senator Aldrich would like to have a conference on
board the u.Owera", off Twenty-third Street, Tuesday morning,
the 29th, at 10 o'clock.
He desires inc to ask you, Forgan,
Reynolds, Andrew, Wade, Goff, Fries and Vanderlip.
I very much
hope that nothing will prevent your being there, as I believe
the conference will be an important'one.,
I wish you would write to Wade, Goff and Fries at the
request of Senator Aldrich, asking them to be present.
Very truly yours,
fr
Yr. Benjamin Strong, Jr.,
7 Wall Street,
New York,
401
6_16 (Li
Dec. 30th, 1912.
\-k
Dear Ben:
You must know the pleasure and satisfaction that
the receipt of your letter, enclosing the check of $5,000.,
brings to me.
While in my business life many things have trans-
pired to make me happy, there has never been any association
that has brought me such real and keen satisfaction as the
-
association with you and the others in the Bankers Trust Co.
Perhaps you will
express
pardon my
taking this
occasion
to
not only my affection for you, but also my great
admiration for
the manner in which you administer the constantly
increasing responsibilities which
fall upon
your shoulders.
could write long upon this subject, but thank goodness it is
unnecessary, as you know too well my feelings toward you and
your Company.
Sincerely
Yr. Benjamin Strong, Jr.,
16 Wall Street,
New York.
yours,
I
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December 22, 1913.
We--6170-1-Z
Dear Mr. Strong:
Mr. Davison has asked me to return the enclosed
memorandum and convey to you his apologies for having kept it
here so long.
VerLruly yours,
r. Benjamin Strong, Jr.,
16 Tall Street,
New York City.
e-
trfraett
A.
Lemorandum.
Dec. 11th.
4010.1'
At the conference between president Wilson and some
members of the House Committee on the Judiciary Tuesday an understanding was reached as to the scope of the anti-trust legislation.
All of its details are to be left to the committee, and
a subcommittee has been designated to draft the measure.
The
Presidentsposition was said, by one of those present at the conference, to be conservative.
"big business".
He declared himself as not against
While desiring that there should be no cessation
in business, he said he wanted the laws to make it possible for
the "little" business to become a "big" business without hindrance
from the big interests.
It was decided to divide the legisla-
tion into seven "sister" bills.
These cannot follow in form the
seven sister bills of hew Jersey because those bills dealt largely with the existing laws of that State; but it was stated that
it might be good for political and sentimental reasons to have
seven bills.
The iresident was asked if he favored any method of
taxation to curtail monopolistic tendencies.
He replied, "No.
That was McReynolds' scheme, and i have never approved of it,
and do not now."
He also stated that he did not approve of the
suggestion of a "commission" to control the trusts.
In order to
make as little disturbance as possible in business, it was agreed
that the legislation should not become enforceable for a period
of two and perhaps three years from the date of its passage.
This
will apply particularly to the bill to prohibit interlocking directorates, which is to be one of the seven.
To make such a measure
immediately effective, the President suggested, might cause business
-2-
disturbance by requiring the withdrawal of experienced men from
boards and replacing them with inexperienced men.
During the
interim between the passage of the measure and its enforcement
such changes could be brought about gradually.
in one measure
trusts will be defined, prohibitions made and penalties fixed.
in another a definition will be given of "conspiracy in restraint
of trade."
Another will define "monopoly".
All of these will
be amplifications of the 3herman law, intended to male it more
definite and clear.
One of the seven will be a bill making it
possible for the individual citizen to proceed by injunction
against a monopoly when he believes his business is threatened.
In such a proceeding the plaintiff is to have the benefit of whatever evidence the government may possess in the particular case.
The President told the committee he 'wanted a measure drama which
would prevent the control of a large corporation by another through
stock ownership.
He admitted he did not know how this could be
done, and the members of the committee made a similar admission.
They were told, however, to make an effort to draft such a measure.
The President wishes the measure ready for consideration immediately after the Holiday recess.
The President was asked if he
had done anything towards the preparation of any of the measures.
He replied that he had not and did not intend to.
committee to do this work.
He wished the
"I have talked with Brandeis", he
remarked, "because he takes the cobwebs out of my head".
This
would indicate that Untermeyer has not been retained to write any
of this legislation, as he confided to a newspaper man recently.
Denver, Colorado,
April 19, 1917.
My dear Harry:
Reports that I am receiving out here indicate a possibility of
a considerable movement of state institutions and particularly trust
comnanies to ta,f.e.membership in the Federal Reserve System.
Ihether
this movement will actually develop before pending amendments to the
Federal Resorve Act become law, or not, it is impossible to say, but
I have strong hopes of the amendment in relation to state ban4 membership nassing, and am wondering whether this is not another instance
where the bankers can take the lead.
what in your
1 would like very much to know
opinion is the real obstacle to their joining.
I hone you keep well, not too busy and that you get the same
satisfaction I do in our participation in the war.
With warmest regards,
Faithfully yours,
H. P. Davison, Log.,
J. P. Morgan
Co.,
23 Wall St.,
New York Ci,ty.
BS/CC
RED CROSS WAR COUNCIL
NATIONAL OFFICERS
PRESIDENT OF THE
WOODROW WILSON
PRESIDENT
RODENT W. DE FOREST
HENRY P. DAVISON. CHAIRMAN
vIcE,REs1DENT
CHARLES D. NORTON
,OHN SKELTON WILLIAMS
TREASURER
GRAYSON M.-P. MURPHY
JOHN W. DAVIS
EDWARD N. HURLEY
COUNSELOR
CHARLES L. MAGEE
CORNELIUS N. BLISS. JR.
SECRETARY
RUNG D
WILLIAM HOWARD TAFT
EU OFFICIO
WILLIAM HOWARD TAFT
CHAIRMANCENTRALCOMMITTEE
ELIOT WADSWORTH
AUG 1.3 1917
.E.CHMMAN
ELIOT WADSWORTH
August 8, 1917.
HARVEY D. GIBSON
GENERAL MANAGER
Jizatta NON= Ilea
Hon. Ben Strong, Jr.,
Federal Reserve Bank,
New York, N. Y.
Dear Ben:
First let me express to you my keen appreciation for
your telegram relative to Trubee. I did not answer it
because from your communication I did not halow where to
address you. I understood that you were to be in New York
today
which
left me without an address so far as you were
concerned.
Trubee is getting on probably very well. I say this
not because of especially encouyteing developments but
rather because of lack of dipouraging developments. Undoubtedly a long time will be required before he can get
back to normal and, of
ourse, there is a possibility that
Pr
even this may not haopen. But we have him and that is the
main point as youso well know.
Herewith I return the papers which you were good
enough to send to me in your letter of July 23d. I know
Charley Ph1lips well and therefore his letters are
especially interesting to me. I think it would be well if
Phillips were to get in touch with Major Murphy and communicate to him directly any suggestions he night wish to make.
-2I hope you
are as fit as a fiddle.
Sincerely_yours,
Chairman, Red_ Cr4e-e-ii-meounotl.
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Dear Bon:
do not know that anything will
come of it, but I have passed the word along
diplemat1cally so that Ben's situation in France
will be looked into This is all I think there
is to do at the moment.
Sincerely yours,
Benjamin Strong, Jr., Esq.,
15 Nassau Street,
New York City.
zr),-ovt
,T2.7:,1Y.m24 23, 1916.
Dear Zan.T.2%
A thousand thn-nks for your note of the 21st.
have been very uncertain vhat to do about Bon.
I
713 was
disappointed in getting his oos-aission in the French Aroy 02
account df hid transfer to no Amovican forms, which /
understand took place after he had been sent to the officers'
training school.
If you knew him as I do, or even had opportunity
to read over his letters, you would realizewhat an earnost,
conscientious effort he has nade to do his full duty, and
how intelliL:ently he is callable of doing it.
Besides that
he speaks French and has neon csriss at the front.
hops that your ounl. _produces all the results
nalit satisfaction that It should.
Sincerely yours,
H. P. Davison, Lsci.
American fled Cross,
iCashington, D. C.
BSPAB
6
'January , 1Q24.
Dear Kate:
It was so good of you to trite me giving all of the neve of the
family- and friends out your .Ney, and the report about Harry delights me very
much indeed.
Confidentially, _Lan Choate, vho is a great friend of Mil:.
Payson, told
the other day VI:A Er. Payson was out of work, and that the
situation apnoarod to be a fairly desperate one.
Nothing so retards
recovery in tuberculosis as flnxisty, and it seems to me that their situation
must be a pretty serious one, and doubtless explains that you learn about :ro.
Payson contemplating returning home.
This, of course, is the last thing
rhichsLoshould do.
I an puzzled to know that, if anything, I could do to
help out in the situation.
He is really an engineer by profession and so
much out of line with anything that I have to do, that I ',00uld not know how
to get him a position, although I would try if Mrs. Prysou felt justified in
sending him to me.
Of course, we have nothing in the bank.
do hope you had a grand Christmas. te had a very quiet one at
home, indeed, but the two boys and iiatarine were with UG, which as
Mrs. Penrose wroto me that she had token COrothy Smeller under her
pins, and from what I he?rd directly from Miss Smoller, it seemed to be necessary
because the effect of meeting Pavlowa and all of her o/d friends seemed to
uncettle her a good deal. That you trite me cbout ycur own plans is most
interacting indeed. Please do not Jo too much.
Of course, you would not
think of California, except the elector fully scorePd, but I always have in mind
that beyond anything and everything in tuberculosis, rest and then more xost
and still more rest is the only known cure. Climate and treatment and everything else i2 of minor piLnificnce alongside of rest.
You will be interoted in the reports that I have from my own doctors.
Miller has been all oleo no r.,za c,,de the ticiwil X-ray and pathological examinations ...old says that I am better than I have ever been. He MS both delighted
and really surprised at the extent of the progress that I have made. From
him I went to see Coalzley, who gave my throat a thorough examination, and he
was amazed at the improvement that he taken place sines my return. The tubercular
infection left a oon'ciidorablo mass of scar tissue, which always enlarges the
vocal cords and surrounding tissues and leaves them somewhat uneven and
This is all being absorbed, fiD much so, in fret, th,it one can hardly distinguish
anything abnoroal at all.
hmever, :oyi that 1 need more exercise than
am getting, or could get in this climate now, and is sending me to Palm asch
for two or three weeks, there I am expected to play golf a little every aay and
0
January 4, 1D2Z.
//2
combine that with rest. I am leaving a week from Sunday and will be beck by
the first week in February. Were it not for his feeling about climate and
exercise, I would be tempted to run out to Colorado Springs for a short
visit, but it is a long trip and when 1 got there the possibilitios of playing
golf regularly are too remote to satiefy his program. .
I do hope tl)e.t you all keep well and contented and happy. You are
very much in my thoughts and I am just as keen as a briar to learn all about
Harry and his progress snd your program for him.
There is, of course, a
chance that next summer I will run out to Colorado 2pringe for a month, unless
I go to Furope, and your being there will of course be a considerable influence
in my decision.
You are likely to meet some friends of mine at Castle Hot Springs,
and I know you will like them. It is a rather simple little community with
not a groat deal to do, and I really think in that respect it
Chandler.
in
better than
Please give all the family my love and much to yourself.
Affectionately yours,
Mrs. Henry P. Davison,
Broadmoor,
Colorado Sprinp,s, Colorado.
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CO Newyork Ny July 23-15
Benj Strong Tr
Care W E s Strong
WOodailiole,Mass.
very much unable arrange programme for Monday as wished am so
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November 20, 1g23.
Dear Harry:
Thank you very much for your vire.
rvd,
selay
The packaLes have
ld I only hope they did not cense a lot of trouble.
Now pleae.don!t forgot to lot ma know ,x1,at the olirges
vcre.
.
And i think I recall leavinE unpaid also a bill for 0.35
at the Fas,hion 3,:op for exr,reasase.
it ,11 fmou;:t.
to, Dnd let t.t bo
onit you let me kno.:,
eAcuaa to lt me know how
you are.
My bf7,et-to you and to your mother and to all the family
including Mufti, ',lac) I hope io Lii recoiared.
Sincerely yours,
MrtHon,.
i.
Colorado Springs, Colorado.
B60E1
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A Cr<INOWLEn'aEf)
DEC 1 9 1923
Broadmoor,
Colorado Springs,
Colorado,-
November 27th, 1923
Benjamin Strong,
470 Park Avenue,
New York City,
New York.
Mr.
Dear ljr. Strong:
.,
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I apologize for not having, written
sooner but you understand my situation out here.
So fa:o bellind in my correspondence that T
-have decided that dictation is the only solution.
- As ii'ou
the least effort possible seems to be
t- doctor.
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r:0 are having a terrific snowstorm
at just this ninute but the paper promises fair
sunny vleatI]er tomorrow.
Up to the lf.si; day or
two we hav- really had very Food weather and T am
certainly glad we did not mqke the eastern shift.
My routine is just about the same.
Instead of
going to the Penroseb to hear you play the organ
Dr. 'jobb has let me so to the movies at the Hotel.
Those little jaunts do not seem to do 'e any harm
and I really feel quite strong now.
Mother and Nulty both seem in
excellent health. Mrs. Dangler is about the only
Russian Bank adversary T can scrape up. T am
some secret practice so shall exiDect to
take you on in the spring and knock down a few of
thoue eight hundred points lead. Mother said she
saw you in New York and that you see_ied quite hoarse.
I :hope this isn't any real troul,le as you certainly
deserve a few years of 7ood health now.
We all think of you and all miss
you more than you can realize. 1:fith lots of love,
Sincerely yours,
,&?1,
December 10, E-723.
Dear 1Thrry:
Thank you for your letter!
was a grand success.
I hear the Thanksgiving party
rd,w like a good chap,
those express charges were
let me know how much
My love to you all individually and
collectively.
The hoarseness your mother notices amounts
to nothing.My throat is really fine and behaving so that the doctors find
no
ground for complaint,
Sincerely pure,
Mr. Henry P. Davison,
Bro, dra
Colorado Sprillgs, Colorado.
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July 31, 1924.
Dear Harry:
i have just received yours of the Urd upon returaino from
Vlashington, and vnilo I .;ias sway the folks at the bank mws up a list
of suggestions for me to uee in connection tlith your lettr, 4nd
possibly my beet reply Lould be t eenci those susgostione righ on to
you.
They are enclosed.
I tbinic I haw:. read LIDOUD all the books referred to, and
as you Kished firct to ciiLit,h fundamentals and with theory, 1
suggest the four books checked on tLe lon
iis.
They are the
classical tacks ty,earllar writers and really lay the foundation for
clisubeec,uent readin.
Smith, of course, wrote co long ego
and in a world so difforent from he present world that one rwst
hive that in mind and mke i..110aoe for eoe things in the book
thich todcy appear to be a little crude. David Ricnrde was one
of the sound est wriers of 100 years a,so; and 4alter Bagehot, as
you know, erote Lord Street at a time when the world was eeethins
oith econooic diccuesion iid cobtentimi. Liis book, Ler.bz,..rd Strect,
probubly had ac profound an influence on banking in England as any
took ever tritten. After roadni those fourill think I would then
ckip to Hartley Lithera. One advantage in Utherst hooks is that they
are E0 beautifully and interestingly written that tbie drab subject
really sets some color and interest from hia pea. Besides that,
he is a 2ersonal friend of vine and a most charming fellow.
Ficardo's book is very difficult to get, and if you are not
suceeeeful let me know and I
lend you my copy.
In fact, if
you iould like mo to get any of these books, please let inc knov) your
choice and I will be delighted to attend to it.
It is such good news to hear of your fine progress. You
are doin,7.7 just the rLht thin6 in making assurance doubly and trebly
sure. That old enemy of ourstAs a bad tay with him and one cannot be
careless in dealing with him.
My plz,ns for the fall are still a little uncertain, but I am
If you are there it will be fine. I shall rot be able to stay more
hoping to be able to get out to Colorado Springs the end of 5.eptenber.
than a few weeks, but I an looking forward to seeing old friends there
and having a quiet rest. Ny best to you and to Frances and to:a/ay of
the family who may be with you j'Act
iL P. Davison, jr.,
Broadzioor,
Colorado Sprine;ot Colo.
en c.
no-3.
Yeure sicmcrelyr
W60-%70-4
October 7, 1915.
is
Benjamin Strong, Jr., Esq.,
Governor Federal' Reserve Bank,
62 Cedar Street, rew York.
Dear Mr. Strong:
Here is a document that belongs in your files.
Apologizing to
you for having retained it so long and thanking you for the courtesy of its use,
lam,
Very truly yours,
411111111111.101111111111110.111111.10111MMIM.11.10.11111.1r
October 11th, 1915.
De4LI Mr. 71:gaa:
The letter addressed bj the Labor
at1ona1
Peace Council to the -Govornors and memb.::r3 of the
c
Federal Reserve ioard has boon received.
for rntunning same.
Very truly yya2,:,.
Martin Eglm, Esq.,
23
all "treet,
New York City.
Val
Thrulk you
cAre,4170-71"
December loph, 1914.
Benj. Strong Jr. Lsq.
27 jedar Streot,
:New York.
Dear Ben:
Here is copy of our cable t9 harry, in reply to the
long one from him, of which you have a copy, anu here is his acknowledgment.
Yours truly,
T.
I. L.
J. P. IV ORGAN
1.1111111Mir
C7 11111111.1
New York, Dee. 9th ,1914.
COPY of telegram received from
Dumber four.
Day trio
n
(throegh Covernmene)
Have had a long conference with Chancellor
of the hxcheeuer, Lord Chief Jurtioe, Secretary of Treasury.
After free end fall discussion matter as tentatively unofficially
proposed ed uo, hich ne leu -All note is elove generml lines of
our Cemeittee's ideas, wee accepted by them nnd success assured
is as follows:2net a elutuel xociprocal credit of amount then to be
determined would be errenqed -,ondon or 7ev York for the benefit
of either party. That is to say, if exchange were very adverse
to liew York and gold had been shipped to dgnger line, a credit
would be estebliehod London for sendicete to be formed New York
on satisfactory termo condition then to be determined, or if
situation reversed, exchange beinij adverse London and. gold
seipped to Lian,;er point, a eorree2)on11ng credit would be arranged
New York for the benefit of parties London.
ads plan cordially approved, by all not only because of
benefit in operation poesible future need of which is doubted
but because of excellent sentimental effect. Arrangammat
London if necessary would be made through Bank of England, but
as it ia thouFht to be etrietly Joint Stock Benk business
it is sugges'ed it might be arranged through them. Of course
all such deteile as to London wculd be arranged here and as to
New York there, it being immaterial to Dew York who makes
arrangements here as it is also immaterial London as to details
armEta2ilyz,_
J. P. MORG.4X 4- CO.
New York, Dec.9,1914.
COPY of telegram received from LI) D'
(n000nd ,Jieet)
Joint 'took Banks have
confidential committee of seven with whom Chancellor of the
Exchequer proposes talk confidentially Thursday afternoon
disoussing plan with them for their consideration. A3 made
it clear we were acting without authority god that we believed
it would be most unwise and probably futile to go to the New
York banks at this time to form syndicate to serve a purpose
arrangements New :fork. (stop)
indefinite au to time and character as this necessarily is.(stop)
But assured them in our judgment there was no question as to
formation of such syndicate should the emergency arise, having
in mind that if such emergency arose conditions would be
altogether favorable to New York and there could be no question
about co-operation of the banks. (stop) They gad oe.epprecinted
that no details can be formulated and that it in merely the
meeting of minds as to fundamental principles in a spirit of
co-operation for mutual benefit. This plan you understand is
one purely outside U. 3. Government and it is hoped and
expected would be also outside British Government resulting in
private financial transaction. (stop) In case general plan
approved, it is proposed Issue general statement to effect that
a mutual and very satisfactory understanding had been arrived at
between the financial interests of 'llew York and London giving no
details. It is believed statement would be not only beneficial
but is necessary out of respect to our ,:ecretgry of Treasury
who
J. P. MORG.I.N. 4.
CO.
.71(ew York,
COPY of telegram received from
HT7)
-
Thi76 Theo t'
who inv7;
.
7.esentative3.
:,-7.'lease immediately confer with Wiggin, Chairman
anaei
heir yie.,13 in order
-that vie may have then for our rveting with Chancellor of
.Li.o.ukie
tho Exohequer
riiay.
Ie expeot of course tivir hearty
,.:provL.1 a;o.d oo-el,cration of the Idan, the cpirit of which
'4-ac
app-..'coiated by the high authorities at the
.icrvicwtoday.
Brown c ai ±n
hturay.
H. P. .i)aviion will no go Paris until *6 his matter
cettled.
Brown -
914,
Dc 3.
.
T
J. P. MORG./IN 4-
CO.
-
.N'ew York,
COPY of telegram received from
repreoenta V.
who
21ea3e immediately oonfer with ,,iggin, Chairman
k;heir vit. in order
an1/41 eabi,
*thrt c tally have them for our Iry ( tine, with Chancellor of
the Exchequer Priday. We expect of course their hearty
approval cou .Jo-operau-ion. o. Lhe p 1 e.n, the spirit of which
->,1
...e,.t
a-,:p...coied by tho high authorities at the
interview oday.
Jrown.all ing 3aturChay.
H. P. Davison 1411 no go Paris until Cnis matter
Brown - Davison.
111111111111ffir
J. P. MORG.4.111 4- CO.
New York, :.(3.1.1,1914.
COPY of telegram received from
R.P.Dforia
r :La. Your 9.
there ia no Wit ito o
sq. ,
,U11 don.
It is clearly under:;tood.
1,to ent but merely an
-agrecntent as tafundamentaU and a conti. donee
oxprecood thfA eitber ido will be tble to carry
pro rrsmuno iiios.,,40 of -mod.
"
30.
CO
/
J.
P. .111ORGA.71('
L.&
r.14
Lua
=3)fr
4-
CO.
'Arm' York' iEC
9 1914
COPY of telegram despatched to
A P DAVISOii
NIUE
Cl#ARIDGES
YOUR FOUR AND RIGHT
LONDON
HAVE CONFERRED WITH WIGOIN STRONG WkOP
TrIFY j.LL COVUUNICATE YOUR FOUR TO MCADOO TOP BOTAIGGIN :1TRONC
APPROVE GLITYRAL PLAN XING ALONG ans ALWADY Dr)C4SSED HER
PAISE STOP tIGGIN
':ITB
ft,4_; YOU DO TEAT alrAgivAiits tamtuss LATE
BAAXS UNTIL .!,UCH aa. AS B11GENCY ARISES AT WHICH TIME DETAILS
CAN BE FOMULATED 21OP
ALL HERE nEL THAT PUBLIC
TATEUENT 3Y
OWOOLL,WV An OUTLINED WILL HAVE GOOD EFPLCT STOP maw CHAUCELLOR
4'ILL AVOID GxviNG ramssrox THAT THERE rs ANY POFATIVR COMMIXEST /MU BANKSOR BAAXERS HERE AS IT L GULX
OEiI i
EITHER :JDE TEAT LaraIlli COMMUMENT GAN BB UDR
MORGAN
BY
1-4
S DZ. PT.
10:,
6
'\L 'RESERVE BANK
December 14th, 1914.
Dear 2oms
Thanks for yours of the 10th enclosing
etble correvendence WhiCh has just been delivered
I sugst care that this matter
at my apartment.
be dealt with entirely as a bank transaction from
now on, the negotiations havincs been instituted, of
course, as a result of suggestions made through Government channels.
hope to be at the office to-morrow and
trust will have an opportunity to discuss this
lth your partaers.
Very truly yours,
Lanont, Esq.,
23 -11 Ltreet,
New York City.
8S,Tr/VCM
3
2Y
eire,m7,°21.07-Z
16th, 1314.
014119,°ctcber
OCT 1 6 1914
Dear Ben:
'When I showed to Harry the attached letter from
Edfred Aiken, whom I have knovin well for a long time, he
said to me - "Ben ought to be interested to see that, for
it is one illustration of the point which I made to him,
namely, that his action in accepting the governorship has
had a lot of influence all over the country, more so than
he will ever realize."
Sincerely yours,
T. W. L.
-
-7
It is over
0
(vorrected Copy)
-
yev,r now eines Kate uts good enough to tlek re to sr to ,yela
coszethine about r,:ly assoo.lation sitb, Harry for you to -use in prepe-ring his hiogmphy.
I find no diffinlity in the say of arJ.,terial for a narrative of taone cvento
of those mow, useful yor.re of hie life he you ead I were anent; hic frimde ftrad
estociates. Eut ev(s) iitte-r this lonz delay, during xhiab, I have eAvelluch tbOtiaht
to the varioue ineidtilltR of our as4oeittion, I ctn.l find myself incapable of puttine
anything orr paper uhich is adequate to exprese the fooling or loss snd sorrow r,--o
experience sihenever Hr,rry cot:es into our viinds.
It is doubtiul if even hie most intimate friends tlye co to appreciate
the extent to hioh public co.vice wie the key eith ebich to open the door to tn
undoretanding of his charsctsr.
And ht I have to write of thoce de.ye an he
better understood by protacin,g it 1.1th v. rot torde of ray on underttanding of the
purpoz,e,..- of his life's teak.
Outside of what es did together in 410.i:impel, originally in tho tianggertent
of the liZsleiood liospitel, my first aea:osiation eith hin in tray b ineaa arlttor
tILF:o. he asked it
to becone an officer of the Ban!,7ers ?met Company in 1904. At that
timo ho x,line tone in come detAI, and With the vi:;or whiela altays char.,..ctv,rized
it no did , tlel, he regerdetirecent banking developmente in New York City to lis.*Ie
to become unsound and poosibly dangerous.
On the one band wero the great el caring.
house banker principtaly nattionrd bank.s, which to r-o7;(6 extent bad a co=on uurposo
ana common ideals exproseed in the rdloync govern:teat of the clea.ring hou.se,tesoci-
ttion. en the other hand wore the wholly ttnrattod, unassociated trust comps:nice,
cozily,. of them away orktnized and not 841..fe1y
ntged7 thich wore not members of the
clermn houee, the hotivities of como of ehich were liable to threaten the stt,bil..ty
of benkinr, in Tier York. lie felt that to bring together the heads of the great oie&riny, house banke _in such G comp3my z.- c had been ortatsd in the °Banks:re', tae doine
much to overcome the prejudices e.nd rIvarion which tory then developin3t tine' that
there Las an excellent field as bell for tuildinj up ti great tusinese sith the type
-2
of nz-nagement -shich such cn inetitution enjoyed.
For accurate hie judgment was did not fully di eeloae itself until the
_
olivtdcb, develod in tbcNo
b. banking citufs%tion in 1g-07. 11)r V= the first
fruit ef bit or rotaizeZ until the truet coripanice finally beest,lo no-7.0ton6 of the
Y
clearing bouee eeaocittion, largely ur tto leaderehip of the wen aseociwtee
then7wcre Tut Cozpany in 1O ad 1909.
The weal:nese of the tieg York ban'zin6; a:AN:a:Lion became clear t
ll of ue
in 1907 end a. Ion:3 step to-u-...re it. euro Sn$ effected Ithen thio rsa; finally brought
shout in a purpooe which
BOV antoniebincly
hes.d long had in nind.
ntn$o M o ti e ray be nieinterproted
&owe in the
hs..ct V.:4A t2_.,.e organization of the atra.zre'inxCv"-§ptAny was in .sor,1 ps.rt the founda-
tion Nr- the att-sek by Congrena upon the eo-c.:Aled.Ntoncy truzt" zhich cultilw&ted in
the investiratien,s, by the Pujo Committee in 29124
rt,apcneible for effort
The tea who
rd a correction of Vile aituf.tion
SO largely
e. charged sith acme
improper purpose in the very E E.,,,pe ?Itch be me taking toward etrengthoning banking
in. Nazi Yo
Put even Harryin record in thet reez.2-ett tt1 to diceioee the extent to
,h1
be vim" interetect in a true And thorouelgoingimprovezvat, for, az vs oil k. n o
wit-.* one or the firet to takt. advanta:c of the lencone of 1c7-07 an,d ally b.imeeit
rith Sen.ator Aldrich in b.is graat undertaking tozard ban:z.ing and currency refom,
the V.) eceits of hIth project, among other thing*, would defeat the very poenihility
of zuth
ex.introl of cr01, 1LS Parry Vt1.0 che,:rged with promoting' in conneciion vith
the ct,tiocia.tion grot.irt, cut of the Perk-ern Truct Coezprny tne the variout coneolidaf-
tione tIch ere more or /one intimately &eir=nciatod vith that organization.
!low, Irdeed,
could a eit;:n be charized with purponee houtile to the. et:I-rare
or tbe country, eelficli, dad fli-3eedn ,in their object, by inctigating the crear.ization of a "c-Ioney truatto when, at the aamo tiza.;,, he wiaa cagaRed ponaibly zero
-
actively thml 'Any othtr burItinese man in to country in the furthering of a bankirz
-0 rerorm thick -zOUld
-11101 S 'thing &-a
I can speak Pith
a, "monoy trust" an in.posAtility.
certain knowledge in Vlis rattor bto,use or ay oentot
Pith the :tort done by :5caator Aldrich and of our many converuations tt the tiElf; thEM
v1;:e ureed to became Covernor of the Federal Eeerv,acnk and resig?1 the preeidortcy
of the Bankern Trust Cerprany. Eo pao a supporter of the Owen-Glitsy. plan, tIthou6h
be preferred the A1drich plan. It V$. eJ, in fc,ot, Hfirry and Jack Morgral teho
urzed up-Of3 re that the organ!. xation or the Federal roa.erve bank ites$
Aity Piti.ch I
could notoecape t--:,nd should not dsoline, but, at the f-0...,me tirue, hewirnee.1
gratte4 of
teling that if to Feden-il Reserve
coviin,g to He cencfr,,tion,
ur
z
ass eqe-t,,eteful it met.nt,
chon&n in b.4,..ning relttions an'i persona rel&tione
biet ultimitely
Oast it o4d be a partinz: of comps.ny bet. u.
The
a-1.th a
.ould: be
holo roord of iy raations Pith Ellr:y from the time of Vie or1ze.-
tion of the ::::.i.-11korSbuot COr:,:pany,
b1ei I joirled
f,..e.z EC,nths
fter i. op..,,zed for
uuanoee, do= I* the craar.,IzIltion of tho Feder,a Roaervo Enk, t
co.nvincing
refutation of charsee. no frequently end care)oeoly rade- tbet ntlfith motives,. rather
thwa public
e ?fare, in?... .ired his b2,,nking
I cannot proceed tith .w,ythint;
°t av-.;ox%!1.1 ehouf:,
of 1,14,4.1ylo
th.
oLture of e, narm.tive ofevents3 pith!elich cooop-ell ed the- affootion
of n of toet thc top or the Iibt, I think wo mut put hie
emse of hucr. For. rzny of us vazt r-ecall those del/zit-NI
r
t dinner fter
the mostinge of the t:A:TUtiVn Co0, tte-C of tl.,oVtr Trif4t Corrpz-iny sfloin Ear:Ito
outhreeks of humor end hie enjoyn!-In of mythinc th.t c3-_11c-1.. it forth w-Ls t
one
thing V.) e.t.a: re looked fora4rd. I can hr bleunr,tstakfible lmgh e.ne -eeo his' pipe
think you rill rersezhor tbe k rIith dt. ol-1 he rel t-.ted the
oiriteUtifnber or tteFard
evoceurflil effort he t2a5 74--e..:-Io to ht.--et tenrc. Proeser
hie eyes now.
.7c
of Lueteeo of the Et-suittle Life, only to loam that ae,47,,ril had- been s truett-e for
NM. 4
dy to year el
-A.:3n he invited sw,ei friends e.bo4rd his bekt
And then,
lunalcon one d51 to ask for a large contribution to zone tharitAbIo orzadzatica,
Charlie ricyder. (I think it sr12..$) overtscrd eze one .:,&y
ho
crme s!toar...1,
Put e dov.z.: for 4I0,000,u and Chr-rlie, baitvinz, that come kind or eyncilefi.to
being arranged cjiec
eothe
0=
on Vac CaZ.:.?
run de
z.,,:uthidom
r..s.y
for ,1410,00D.
I
a7e clAkel agt-in Zen he deeorihe: Charlie Ubydeats
expreo-Aon upon being told that Lc b1oe:mittsd himself to a . 10,..0-03 cont:ileition
een.e hoeoltal or other ina4t4tion.
tud then you my v,-1T the occaelan during
the pie, at dinner t the rnion Leue club, rt.en lisrry ralinded GL-;orze Perkins thet
rdwqs
nrs. Pe:rk-ina ha,. a .dopoat account IA the Lincoln Trust Compazy khich t
about to close and it wa.e Uzeov.oro,d that .kirt$. Perkin' account
aitI thing chief fir....on6 t!-,e e2eAracteristice
trusted leader ae.e the uarG6ervedcog 1
true tuld
m_de him
hich. he save hi o confidence to lzie r.saccistes
pot1 theu. through thick n1 thin.
sod then
h1
everdr,:am!
an of uoh.d-go 1TLP.,-ny
.of the respect and concid,2rztica whfich he allowed for the o2iniorie of hie coliel%;=guss
end t-be unruacr-ted '2*.7 in which ha acted upon then that they hardly repair recount-
ing.
This, to las, t':.t,s evidenced IL qny tines in connecti,on tith the sur-veyo of the
alf4rs of other inatitutionn during the panto of 1.M7 ae well ad :It ether timeaSn
our relations that I foci tho name nurlt have. been :felt by all of those to them he
save hie confidence.
,tt, the
1;&,r1 probably about 1Y)1 that Herr*, and Iwt,;r4,
he=oe trustee:3 and memberd of the 07.cattlya tom:Atte, of the rzygle'Aood
It wan our first as4ociation. It wt,r, oh/-racteristio of hira thz>,t. ha 1,4- 3 unwilling
to
any responsibility for the slanagement of the hc.,e2its1 except IC W4, fully
faraiaraith every dettll of Its ffai,
raS Prer:ident
I
Treceurar, and
ve, dth three: others, tore the Excel...tire Comnitt(ree. Almost every Ile& be and I
together visited the hospita;
r;t"..cimainted tith t
rtn.ff
tie
tt..:*.t through the warde; tO tIth the patientar
with the mimeo;
emd, in a very short tixe
Irry'
Alob ho tms
iIu for thri'dopinztbcocaln-loA, e;Aklit1nl
0 interf..-4,3t6-4.s bccr.:rx. por-%ctly rzt.Cliteor:1 in at, -et s!itirj, ttivrf vir olit1n4ted;
hp1ti. itc
s not r.. ',-1EzEzr.frt na put in tt.
oretzigo'. App,ig tc te et
t ye&r ortc by
fi
C1.1ofgooci $,nd by vg,rio-,13 setAi.rtainnen., the
ninceec-ry iri.rov6:fttnts...s in
.fir.e.noeo, of V.:0 tor,.2itt1 tcier6 put or a cov.nd bsdo,
the builranc ex.c*. Ecritco icr -put uncr.x t.y,
conlete& iltboueh roce of tte
of jf.mloury
uho d1
bttr
tot rcr
a.11-4
tin ba.t.' been
tz.-.:Are of a tl-cr.".cter to arcuae
th;ro Toe; not orto parcion $q-oociAte4 with b.its.ii tb4.- torit
not ;:copt hicjuflc ert athout ec-nvr, !aid ivn L f,ftri11y
over to ot!
ho left
11r In ac orz;mizAtiond-,..vo3opmc-rit
r.c.k a it vaporfluourl for zto to roviw,' any pArt of
of the liankcra Till at Q-AltInny
toul
.
thoseycxr,tstxccpt
ttrtd the tori,
Li nc-on bA,t fri endo.
1nt4r.4to
Your
feding
r",
to
litich I tao petrticu16rly
.1'`es7 rx.tt.cre
to V",7 pai1c.
zilthout rottry
otrst--,-F0 to burst upon
That.
att the pooeibiliti ee of :Ala.' a eitutIttion
dovelopfing htd btenirEY1.rryte mind not only. throuFt. tho 1:tas1y part, of .1207, but, I
bell.va, for :4);--:I0 yeg.r8 bufz_tri.3.
14..ny tth
h
hnci dig= e cith1,,o the poo..21bil4:7;:ritOne,upLotor i
itiee of dityintitr i t1,1 kind of cor;p3t1tion
ho
Cor,;;;,&nie.3.,
t
Tao
re.L,7
ViAny no..
Coripc,nv had
-
el:.
exoie.
orut of ftt I
vfo r.iri
for Tirry
oftz:rte. to the E' nktri;
--..vit;s., as you, yo-lrotlf,
o bvm1Iiz
to
yt
rt
Ich othnro sgtre 7.cy.ing trrd
.V--...)no time th tho1c.
of 11)07 I pr(.7,aared
ndE.-,r*twti. 'to 17-o the n.tiz,6. pad by Tz,-...riorto of the,
d ve13, rea..1.1 hie zr12 foreboding,e to to that tv.*.F.,,in tor e for
trust eozpante.",
U c if methini; could not ha c
y
te...
check it.
rkz..-; in Ciet.ber, OLrrivizIF, at the bnlc I -got tore: to
etop 4t the Fir-et rit&tion1 Dank, ubere I found Hrry ir
of intereA rbid in the
h.r,d of over-,:,-,tynent of ir.terw.:t by
Beers on d.f?ouit secourts.s and tra=et evidence
azIr cof-petitora.
Trust
cormu1ts.:13.on trith
t.f,ro F5,174.!,
hurried 0 X 613 n ti on of th,t, F.:nickerhocker Trust. Con-
Ee asked me to tpke chs.rge of
pany with cort&In nen ttom he selected to serve as a little ext.:An-lag so'smitto.
Notice had been et ...i.routfs the Clearing. Bouse the day befor that the bank khi eh
-he.d forzorly cleared *hocks on the ,Lni okerbock'er Trunt Corip.n.y multi di acontie a
adc-kicdoing .so that morning.'
,De made A htiety survey of the lo tns in the uptozn office e.nd then under-
took to form some opinion aa to the leant and i.nveatmenta at the. nzlio. office on
Broeduay.
Harry tss in art d out (;t1rinsP, the couree or cur very ha.:.:ty tttenpt to
survey 6. complicated .1), ffdr.
thile sittin?. in the rear office,. te could bear those
Dori-Una tho lowz line of 'depositors 3; aSting to ova. out their btlencos el moring
for informtion t% to that v:6 going to happea.
The ca.sh KAI.. all gone. an4 Mr.
Baker, Mr. klorgan, rt. gootl-a.rd end Er. Etillmita tore ataitin
sOM6 IA, rd .fro ls us
7
ELStoEth it Vo found. Harry sena into the room gone time around noon and I svnt
pool-Ably fifteen' or tvnty minutes in hurriedly givir. hint s. picture of the oituathon,. althotgh by that tine lie had not coleted much more than tn exrzinfition of
ono-.b.lf of the records of assets gutnitte,,-.1 to us. The question cis estImr, first
the trust cea,-,any tiz.c.4 solvent, and second thother thtnrd orfi asseto adequate to
sescure loans to seo thom through a serioun crisis. In the abort apace of ti7e
a/lotted to us it vue e.bsolutely imposeible to alve my' Et +3 0.1 moes upon 5sh1ch tny
pledae of anaistnce could be based. la another 24 hours it ralEht h-avs been poseible
to do e
I veil remenber the 611I1 et/ ith thicla ediacuseed ithat eboe,ld b
to If:. Baker and far. Liorgan sho
id
ertrs.itinv: our tor& Moat reluetantly, end ;.d.th
tome appreciation of the possible .conte(;uenoes, to both agrocd that honesty and fair-
nese to everybody required us to say that it rae sbeoluttly impo3sible in the lenzth
Of time alloved. U.
0 E., uctor thostao zmeetione, or to1:11..,.e tiny reit:ale, report.
Am you know, the truct som?eny cl.osod its doors. In ft;4ct I believe the tellers
andows tare closed vitt:out our bcflig consulted. :lie consternation on the fuccs of
-7thc people on that line, srtfny of ems zon ton I. knew, I shall never forget. I
knot that tiarry left the tuilding with a cense of dejection and defeat abich it is
quite impossible for me to describe-.
Th:A night I rent home to Greenwich with r, deep feeling of apprehension
lest we Vbre facing a real disaster, aod especislly saY101.1g because of our impotence
to do anything for the re if of the Knickerbocker Trsct Company.
At about to
.._
L'6b12,2.3cotclock in the morning my telephone riz..-ng and I es.e asked by someone speaking for
Harry to motor in -.from Greenwich immediately, to assemble the ccemittee T,th la had.
been working; gith ma the day before nd start at once sn examination of the T.ruet
CoMpany of AM6r1cn., ctoping at tte Beitiont Hotel first to discuss the situation
with Hs,rry .and same of the other bankers.
Before leaving, I lit. t3 thi: 0 to roach one or to members of the committee
by telephone, one of thoe, undertock to nocatible the °there tit the office or the
Trut Company of America just as rapidly as they could droze and gct transportation.
On arriving in toen I found Harry, and,. se I recall, Mr. Perkins,. Vir.
Porter,. yourself, and atm° °the 8, just at darn, dressing and preparing for another
snxious day. ilarryts principal concern Teas leet another situation should develop
as the day before whoa lack of -tint you'd Sc the factor in the decision rather than
lack of knouledg.e. tie urged upon me the need of making the most hasty possible
sur-vey w.d.ch
ould preduoo an outline of conditions
ue to justify a prEalmiw:TY
loem to the Trust Company of America in coos it were needed.
It SetZe that the day before, at Harry's suggestion conveyed through Nr.
Converse, Ur. k!organ had csIled a mooting of the trust conpany presidents to be hold
in hie office- around noon and Harry wished me to make some kind of a report to that
mestin.. As I rtcall, the Trust Company of Azsrica at that time had asaetc, of close
to t100,000,000.
We had
el cot
to serve on the committee men who had special knodedgc of
various types of loan& to that it you'd be possible to divide up the or
and.
-6sceemp/i& mac result in the shortest poasible ripace of time. Mrini; that morning
I think ii&rry one it to at)e re ,end form an catimatta of our progrocs xo lf)SP then
three or four times, acte. trsItE, frequently on the telephone. By 12:7.0 e vas xirging
haste and finally,- at one o'clock.: -4111ard icing,:.yarr,; I joined bim at Fr. Morgant a office
to make some. sort of
preliminary rep rt. you v-1111 reeal that the old officer,- of
J. P. tioreAn and Cmpany in twee dayo Vcro divided into email roars In the rear,
ttze cf thich ;fere connected by folding doors.
The truet cosTeny previdsntc bore
mooting in one mon, tut then I eect ir, 1-14rry wad George Perkine took me into the
rear mom tvhere I fonnd r. orge.n, Mr. Baker, and Ir.
mtlde one of hie chert,ote?rietic romsrka,
ti1ln.
nd then Er. Morgan
much to the point, end so effective in
results, He ari-dd to me oilave you enyene Pith you the elit make a. report to the gentleMen in the nr.-..xt room.
They are the presidenta of the trust companies end when they
Cane into the office they had to be introduced to e4ch other, E,114.3 I don't think
can be evected fron elm-. Sit do.--va with Ur.
uc about it.
So
much
kor, kr-r. Stillman
hile jflrdFins, ti-ho eas txith
wee telling the trust nom-
ptny pre-cidents of -kht Ne had learned in our morning 4:mm1mA/en, I rent over the
principal ftures of the trust ompanytv affairs in the'nexts room aith the
three
gentlemen and endeavored, with that waa refaly meet inadequate informtion at ti-mt
momcnt, to dve the% a picture of the eitution. I reica'aber Mr. Morga.m repeatedly
saying., "I.',re they solvente'
Hvan..ted no details, hut the g.f-nerai fLett, and reaultrs,
and seeme,:i to be satiall.ed with the opinions I expressed. There were tvo or three large losna in the trust company concerning irlich I hAd to ask. 'gr. Morgan, Mr. Baker
and Mr. Stillman for their ova opinion, and id th that I romaiker telling Mr. tflorgaa
that I a ae satisfied that the corkany laas solvent; that I thought their surplus had
been pretty much. taped out; but t1.2ftt the capi01 sae not greatly impaired, if at all,
althouA tr;:re the corny to be liquide.tcd there vore many assets rhich it !would take
some years to finally convert into cash. He asked ras if the backers -eould be jus-ti
fled in seeing the company through, and I told- him that ttiesc fry ht opinion.
I recall his V.:J:11 saying to Mr. Bak.er and Mr. Stillman *This is the 1..,1e.co to stop thc
trouble/. then."
But in the' thole course or our moctina, which rtay have .lasted for
three quarters of en hour, I doubt if 1-;r. Morgan spoke more than five or tax timoo.
Then he eaid to Er. Perkins, or to Harry, din Id come into the room, 'You
cndiM az that meeting and tell 15r. Thorne to come over.' 2- The doors tore then
thrown open end in marked
ba6s kfld bos,os f111tX
long line of men from the Trust Company of Amelica tith
'ith covaritiee.
Er. Baker tent back to the Firet ilationa
Bank, or to the Hanover I$nk, to arrmge matters with Lir. iloodward according to
predetermined plan.
.at the telephone in the adjoining room connal-
15 r.
nictling tith his bank, and Vt..- Morgan and I at at
big tablo thilc,iir. Thorne and
He clerks e-read ;ut the necuritice and tboir values were determined for the purpoee
of ecuring the first loan to the. ?mot Compeny of ;Aeries,. Pr. Vorgan had a pad
front of him eki
figuree.,,
e
e tent along,:, wad then he was satisfied that collat-
ere? had been :.telivered edeiNats for en advance, he wuld ciiik Mr. Stillman to tele77hene over to the National City Bank to e.end over currency for the tinOkint determined
upon.
This rent on until three o'clock, then about $3,030,000, as 1 recral, har.i been
sent over jo the Trust COMptay of inerica
This cash, Indt.-tr the arrsai.cem,ent, was to
be furnithed by the three bsnk.s and J. P. ilorgen
Company.
The securities were put
end taken down to the vault.
into CZ"tek
I took the pains' one time during those oxcitini- .d. .ys to try end ascertain
juet that was in Mr. Morgan' o mind in connection uith the report which Tko had madc
beo=t,
and/convinced tt!Larry- had told ir.Baker that he vented me to take charge or the
ci.P-mintions and that he yould vouch for me;
that Hr. Baker Ltd told ilr. ilorgen that
be mild accept ny opinion about these aesoto; and that Harry had, in fact, inspired
the whole procedure upon ahich Er. otgan vs raying t.s the b-z--ci II of hie on attitude
in developing plane to stem tho.ptnie.
It 1:ou1d make the stntemont too long to tet out in chronological order, tith
dates, all that tranSpiren throughout the next few ittyeke.
I tall sz-kod to proceed ot, once with -the rosamination of the Trust Col:pi:11y of
- 10
Ae-3erica to a point where re could give a more finished opinion tc teits1;olvcricy
prid. condition.. Wo resumed our work: right tray, or responsibility being to furnith
information, Harry, meantime, being actively engaged with hie other asenclates
fcmulating the plan upon vMch Mr. Yiorgan and the others yore to act.
at the upte.
I w,:s to
office. of the. Union Tract Colpany at rxine o'clock that night,
t34)(2;3*report
.tben Mr, Morgan, Mr. Baker and Mr. Stillman expected to discuss the situation rith
the trast colipany presidents.
I arrived a little late, finding Harry snd Mr. Perkins azaiting me, an
.
re at down in a little oounon room in the basement to go over the roeult of our
day.es tfork.'
My opinion VMS unchanged that the equity behind the creditors of the
trust company of America was probably $20000,000.
Earry. re.e very insictent that
.
any rep" ort made ehmld contain every ncedod. qualification in case of any poseible
mis,Indr.me,nt. ofvelues. Ur. Perkins we.e ineletcnt upon knowing whether the company
vie solvent or not. I recal1. that my answer to Mr. Perkins was- that that was a4
question Alith no one cculd answer unless ore firet kner .he.ther the company was to
be liquidated or saved. I told him that wore the company placed in capable bends
to li'uidkte T felt confident that ultimttoly every creditor mold be raid in full
and an equity scAted for the stockholders, but if the panic continued and valueo
became impaired by lack of public confidence as was possible, etc., that mrgin
sight easily be eeptrued; but my on belief was exactly as Nr. Morgan had expressed
it
thM the eity de.; ended uyon k.coping the company going.
EY rry vas boIiy r;ticfied Idtb that foric of expression tad ve thea joined
the meeting upstairs -thicb
crowed Into P aiali meeting room largely occupied
by a tc:olo in the middle of the room.
him c.,,n
r. organ asked me to sit on a bench behind
rhile general dincusolon took lace, I outlined to Mr. Morgan briefly
at
the paiult of our altocs,rether too haety cxemination e.ppeared to be and that :ay belief
titata af4
to the value of the equity end rihat was neccuilary to prevent its disappearing.
He had Tory little to Bay, but I r.oticed the vigorous nod of hie head from time to
- 10 America to a point where we could give a pore finished opinion an to its solvency
sand condition.
We resumed our work right awa,y, our responsibility being to furnish
information, Harry, meantime, being actively engaged with his other associates in
foraulatirz the plan upon clic.h Mr. Morgan and. the others wore to act. I
to
joIroport at -the upth. rxg office of the Union Tract Compsny t nine o'clock that night,
cs,
'then Mr. Morgan, Mr.aker and Mr. Stillme.n expected to discuss the situation 'with
the trust collparly presidents.
I arrived a little /ate., finding Harry snd Lr. Perkins araiting me, end
re sat down in a little coupon room in the hasent to go over the remilt of our
day! s work. My opinion Wa3 unchongeci that the equity behind the creditors of the
trust company of America 1ms prehabl:y- $2,000,000. Farry rae very insistent that
any r4ort made should contain every needed oudification in case of any possible
misjildgment of vauer.
r. ?erkilis is incintof.t iron knowing whether the cortr,..any
wass selvent or not. I recF.11 that my answer to Mr. Perkins was that that was
question Thic,h no one eculci mer unless one firet knell ,lhether the company was to
to liquidated or eaves'. if told him that wore the corpany placed in cavble hands
to liquidkte I felt confident that ultimf,tely every creditor maid be paid in full
and an equity saved for the stockholders, but if the panic continued and values
becaIT>e impaired by lack of public confidence as as possible, etc., that msrgin
ria,,ht easily be destroyed; but my on belief as exactly as Nr. Morgan had expressed
it
that the eity de2ended upon ko7ping the company going.
Virzi vas 1:,holly sr,tisficd rd.th that fem of expression and re thei joined
the meeting upstairs hIch
eroded into
crall meeting room largely occupied
by a tthle in the middle of the room. Mr. ,!,!orgen asked me to sit on a bench behind
him and ;thile genor.d discuenion took place, I outlined to Mr. Yorgan briefly r,44at
the reT It of our altogether too haoty examination appeared to be and that lay belief
Ida,e aa to the value of the equity and .7,-hat was neocuilary to prevent its disappearing.
He had very little to ciay, but I noticed the vigorous nod of hie head from time to
tits indicating assent.
..The meeting was not partic41Erly inspirin.g.
TerlaCti
hand, and there 19!:-...fi general rellketbmott to make any comcdtments.
obvious en every
gr. llorgan made a
statement to the committee thick expresec,d in a fex wrd s what he had gathered from
Harry and from. me end told.the Trust eozsany presidents that.-'a loan or ;I:io,000,oc..*
that Er. Cortelyou, the
ve.c. required, End that it must be ready the next moraina
Scoretary of the Treaeury, vas coming to IRA York and that erranseeents vould be
ye), made for some overement deposite in national brrtk dpoitarie inUow York City
thich tould aid the furniehing of funds for tbc relief of the Trust Cony of
tmerica;
that it woe distinctly the responsibility of t
Oust co:111-41es to save
that company and that the clearing hOUZ0 beuize and his firm toad do that they could
teciet the trust oottypanieo in doing co.
Prior to the meetini; liaviy had told me ihat Lt the proper time I should
tak dth Ur. Bbker during the Reeting sad that Er. Deler would cit net to
tie
Wr. Converse, pre-silent of the Bankers Trust Company, E.nd explain his petition. After
a lot or !pito futile discussion; r stepped over to r. Br, who -sae sittin,43 next
to Er. Converem, arld asked him that ZIZI.6 next to be done. He said something must be,
donc to induce thet;e gentlea.en to pledge the neceseary mount of money. He thought
the
liere Trurst Compeny Eight Well offer to lend its proportion of any loan made
End
thate could count upon the First NationN1 Banr_ to stand behind ue for every-
thing that vas required up to 10030,00). rr. Converse then said that the Hankers
Trust Company would sib-scribe half E., million dollars to a loan and Eould increase it
to a million dollars if necessary. Even then no great enthusi&a7 developed, and I
resumed ny eseA back of Jar. Morgeza with a hopeless feeling that nothing von:id be
done.
It w-. 1.s easy to see that, !Ir. itergan
v.-2,w hi a
he
drop forward and he finally vent to sleep.
have passed when Er. Vorgan wetted z-lth
wzhaustod.
stifxt;
lie vas naoking,
274r: d
Possibly h::.1f an hour !nay
turned and aeked ale for e. pencil
-
end eheet of paper. Unless I rim mieteken, he had he'd little of the converoAtion
°ale:: had ttkiin p1ce, nd I V sure sae becomingf.,uito lizyttlent with the delay. Ile
said, ":1e11, 4zent1euest, the rite;cers Trent Company h
agreed to tJ:ke ita ehare Lod
more of t4 loan. Mr. ncroton, kddrcesing the president of the Femora Isom and
--
*Trust Company). hetw Duch, Tim the Farmers Loan and Trust Company eubaoribe?"
Er.
.Vrk;ton replied that he would do exactly uhat the Bankers had clones, euba-cribe: taai'
4 million, or, up to
been plc ,TsNfk for
S
t
llion if requirod. In a
nr-t time about 1:13,2a-,,frio heat
oast and by then it. was getting on tonards midnight. Er. Hort:an
id that the Firet Nationd Bank, t
f=1 d
c.
ion?..a City fh!..z.lk--ezid the 144:toyer
thtiond -Bank 4ould temporarily be reoponsible for the, bniance of the loan of
tIO OCia,,000, tut thet they vould expect the trust conpani ne to- relieve thee of their
coutritution just as con all the
urmr,:zeci,
loith other t
could be organized lind the eurity cti1d be
compenicre not repr-eaented at the ME^otirig, partielpAting.
Vr.Thorne had beta waiting outeide with 011.6 of hie di reztor, Er. Johu
Dsurne, to jet the rewlt of the confercac-o.!.0.orgsz st.ted Vast I ;weld gotoUr. Thorne' s house ands.rransz.., for the security t4- the loc,n; that N.r. King 'touid
tate oharze
handline- the sermritics at the Union Truet Company 6tonal
and.
that I tqlf) to report to hi El Ic the r_orriing. I had errt-mi,cd to tr.tke ono of the
clerks from theBasnkare Trust Compeny to check over the uite f,zei arrange about the
socority, and Mr. Stillrari asked rse if I would al-se take with ne hr. ilorne, one
of the vice president:, of the r, ti oriU City .13srik,aa ho ty-f,nted to be azeured that
the so:I...Lteral vas ccincruate.
I took 4 fe
inute-r.,. to go over the mattsr asain with
mnd raeked him if he could not join tie 'at r. Thorn& s houve. Le u4,id that
he a:ulei not peeelhAy do co, AZ- he had other-weft to do end mast iw.vo to
be ready for the next day-Te
rest ..od
the wholo organization Led to be set up and
put In motion. Ur. Porkine. be.cl.left to moot the nevep&par reporters at the Manhattan
Rotel, where 'no tas to give theia
etrstemsnt of conditione for the r-orrting kvora.
liarry'e le,:et No rd to mo u.as to eiti;', that the escurity WaS
that it *--.
and eepecialy
ready On time the next morning, as there vse no ctieh 'eft t aU. in the
Tr4st Company-of &aeriea end he and the others sere grevely doubtful of the redom of
e_ke pir-g open unions the loan utto ready promptly at ten o'clock.
Ve had very little
time, as it itl.e then approrxhing one oteloak, *nd, us I left the building, putting on
my overcoat allot- w=7.,e fillod with papere, all the data end
o rAm dr.- dropped out of ry
pocket. It WWI a. cold, windy night, and the records of the Trust Company of Anerica
blowin
dorm Fifth Avenue with a ctring of ton or fifteennotti,paper reporters
danhing after them to gather tb
up.
e finally recovered the papers, and I must, say
those news boys were decent enough in helping no to do o then every scrap of infotrAe-
tion uhloh they or keen to. have for the morning iseues was literally in their bends.
?dr. Kilhorne and I rbikej up Fifth Avenue vith the newspaper men trailing don,: beside
ne esting questions. In order to eet rid of thez, w a sent into the 4nd litre,et entrance
of the Eelmont Eotta, eayins g, 0 odnibt, en4:: then went out of the side eatnanee on Ftut
Avenue and on to Mr. ihornets house.
On arriving at Mr. Thornets house, 1,1r. Bourne, Mr. Thorne, Kr. Kilborne end
one of the clerks from the Trust Conpany of Americ, as well as one from thebc
Trust Compay, set dos-u with no to B elect, w!lit,t, should be delivered to the Union Trust
Company as security. Along towards four o'ciock in the morning Kilborne became
tinetly anxious tbout the ade,;us.ey of the collateral which I was eel voting, and
finally said that he watted to cal his wife to fnclain that he would not be at home
at all that, night. The telepiono tan in the pantry, and a- 3 we rent into the dining
room Kilhorne said to ze that he was redly -too enxious to be willing to sprrove the
lean upon his on reap-en/Ability.rnetbing m4.do e suspect that he needed aesuranco
that he was going to cell hr. ttllaen, s.,-) I rent into the ppntri tith him.
He
did in fact cell his Idfe to tell her not to ,rorry, that he would not be hone. I bevene.,ver felt willing to z.sk Mn just flat ta in his mind, but have ,t1ways sus-pected
that he would like very mob to have had a talk with tr. Stillma,e before going further. I pointed, out to bin th,.t be tan taking a greater rerponsibility in cusot/on-
ing the lcen than he would take in pazdng the collateral;
that the reg.]. decision
- 14 s to select the beet
*security available end net to take e.ny stops vada would defeat the loan ittelf, to
had been made at the meeting, and our cole reaporAnibiiity
which ho finally agreed.
At abiziat sio.. o'clock in the morning, or later, we had prepared a schealle
of al the collateral to be delivered Arid I left to fro.,.then rip e bit before the next
i.547:4:
deg
but without opportunity for any deep.
work'
On arriving at. the Union Trditt.
Company at about 8:1;0 I found that Vr.. King had nct retched hit office. Ur. Thorne
wee to have the vaulte open c.trly end eatembic the- collateral. Finally then Mr. King
-
erze in, some tine after P:00 o'clock, 1 fonnd that he 11. :d expected that the collateral touId E',etually bc dtlivered at hie offices be -chocked up by hie cm metn, end
that the dire-eters of the Trust (taps:1y of Arierica would have
eaeda reach:tic:1
tuthorizling the loan. Of courte tine htd not permitted any such procedure.
After
offerinF, to go to the Tract C-oratany, ofkmerict.% myet-lf and take charge of the collet-
eral, and finding that that was net agreeable to hitt, I woo advised that the collateral wee juf.7.t then coming into the Union Trust Comtany and that the metbere of the
E.iecutive Conmittec of the trutt company wore there.
` e mot in the directors room, and I explained to the ienbers of the co At-
tee that hr. Eng would require a resolution and verification of the collaterzzi, hut
that haste VA.5 abscluttly essential as the Ettchinery for getting the funds together
h,-14 not yet been sot tip, end / most ask them to alga a certificate on the schedules
which tere in y poese3eion that every item' of collateral wee there in the boxes.
They ell eigned Euell a certificate end I then reported to tir. King that collateral
rela there and. he,d been verified, that the Eiecutive Cottmittee bad. authority to sr renge
the lotn and that the committee, tosether with the CQUE: ea of the Tract Comptny of
America were there to do ec. Eut etill there g:fts not tine to get the cash that was
needed for it ;s ac then about e. quarter to ten.
St I &ached don to Idoreente where I found Harry and Mr. Perkin a waiting
anxicurly for y report. i;her: the situation tee explLincd to them they gave directions
to Mr. liemiiton, tr. Joyce end others to Eo
the Morgan vault and got together be
- 15 of the
SOcurittes %:hich hsel
Am adca.
been left there the dz,.y before by the Trutt Company of
Harry waled up Vice Free Ulan RIitten of the tationq City
zz.d .told
him that se had to have tome cash at once. 'tie ran down Vial Street to the Nk.tional
City Bank with some millions of sscurities, the street being thronged with sightseers aad a long line of tmitin.; dopesite-Nre flao extending don Ulla= Street from
merieft office end into Exchange Place.
the Trust Compeny o
A very haety examina-
tion of the collateral 7US r0:de at the Nation:a City Bank, and I remember eiving Mr.
Vaitson a pencil receipt for h bluleae of gold eertific,,tes,
wl,ethe, it w.m1 t603,000 or
csnnot no
rec-11
- but I put the in my pocket, rtn dean Wall
Street, and at almost exactly ten o'clock tound Ur. Theme w3.1kins up and don the
gral cry overlooking the bsnkine, room in the utmost an.tiety le-.t he was to he dip-
pointed in the loan. The minutehe she me he tad tht.t the trust C-OZ,VErtif:e had
f.4.1ed hi, the money was not forthcoming, and that ho expecte4 to close
tution promptly at ten. The lock of. relief on hie face when I handed him the firet.
eArr.L*st money I ehall never forgot.
Uy memory of this incicent is retreeled by the fact that I net Mr. Thorne
not lone azzo in rieW lork, - the firt. tine I had seen hiT: in eel:en:teen yearn, since
the panic, - and he explained how well he ream:bored that enzieue cement.
I think lihrryte BEtt160 of humor was bet-ter exhibited to me in the next few
minutes than on any occasion thst I c=4n recall,. for, when I got bP:ck. to Vorgante
office and told him that the program wart moving and. that had happened., heren.red
Ith ltcughter and eald that they had just discovered that the Securities which :piz-1
had taken to the Vationel City Bank for thie. temporry loon were the mme securities.
which had been used the day before to teoure the losn that the LAten:-...-1 City Bank,
the Firet N'rltiOnta
on
End the.linover Nation.4.1 Bank had made to tide the Trust
Com?my over that afternoon. If anyone should ever doubtrryt a courage in an
iwtergency, this incident, I think, illustrated it better than almeet anything that
can be cited. Of course the mistake vas etraighttened out later.
From, that time until the feacue meeting in. Mr. orgon'a library, EOLIC to
- 16 70
later, the -11olo city vas in tho throne of a finanoiel panic end banking
c)dioastor tuch. 0,2, no
of lie 1;c4. ever experienced. One institution after ilnother
appeacti for help.Th little emir-anointed co;mtittes of ban*cers Ittov-ere deziling
oith the situation ooneisted quite generelly of men vh.o were in one tiny
-s.nother
aosociated with the Iker Tro,F4 Coreptaly. Mr. Edvard ring of the Union Trust Com;
peny was chtirrun of the trust cozpany orpnizstion bAstily .forval for tho purrpoeo
of desling with thitee...catter. The Clearing House Committee vas acting for it
tleohwe, and behind the ithriou s intc,reete vere Veasre. Vorgan,
`roodward, thore find decision me geno.rf4ly controlling.
Stillnen end
The tork of enotions
wao largely done by the etzte1itUt comittoe, of Phi eh Itat= the, chsirrien r_nd.. that
tort
confoted utthr Harryta genorell direction end vith d_tdly reports to tin tnd
to I-Tr. PaeKirit.
I sbell not reeount the Ca ea et-.1 incidents, &Ati.
VOIR 0 bilITSIrCII
zaE,t`iY of them -exciting or de?reeeing,. rhith elii,racterintod those for reeks of strain
and i l-!:,,z1oty.
te. you 141.1 rccall, in order that all a.spectc of the eituttion. sight
be broul.:Iht together end diecuee-ed -every dsy, ve erwag'ed a private dining mon
Union Leszue Club ehere vo were all cuppotedto rpert for dinnor at about
tte
:
every niEht, end there Herryte geolue tild, ledcrMp, U ccurz.ge--d resourcefulneez- proved to be the Eitrmsth of the little ergrztizz-,tion of 1
urcd, n 7.1.0U
end exheuoted ner.t.
Following the aiazte crisis. of tho 'opening days of the panic, there had
developed
1or dr&in by u poeitorc upo.zany of the New York City and Brooklyn
inutitutione.Itich threetened to force E general euspeneion, sz;.d it 711-$ IZZ.,7Q
to be cure of cound. judgeent inrany qutrtera *lea r.-;nts tnd
tak',
ere zubjected to the.
influencee of mat panicky curroundita,s arttl he days tInd nioghte en end althout rest
.pir
dgment snd tezkened cournie.
Th:rou6,-hit ail I nevv e
F.urry lot3o his
ftith in the outcome.
I .rtmembor ens duy be
http://fraser.stlouisfed.org/
Federal
Reserve Bank of St. Louis
-)1704.)-0.0ei..
es went into the Lin-aln 'Trutt Covany to d.,311 vitt
a very difficult situation there. The futds tere 11 gone, .the dirDotort rere
Wcd2a12.6
the institution. Nem"- cRiledr. Perkint; on the
,oourd61111 eeretout to
hed ltx;ked thinga over and they twv.., porecnelly, ple&l.od $50C.),00-0
coming from; but it did
think 4.1thout. 5.:.,ny very cleit-r ithl. of where the meaty Imo
teltilone afturcoP 0.
had the ca550 of- the liorth Side fisnk of Brooklyn, one Friday night,
11,..;r1" four dez:ioeit accounta in different inetitutiont, three of ehi ell had
coz
them.
unava.ilable botau4to the institutione were cl,ored or not- rooting dea.-ids upon
till 4rvallablo vlAs at the 13.P..nkers Trust Compg:ny. You roc41
Tba ono aocouat
rtported the eitultion at the Union Le,,,,tle Club at dinner that night end you had
.2Totteed the prof,71.4ent thst te vn-Vld do _everything re could,. but Could not decidd
the= the money even if it io
until thr.t erninr2ectin,7,.
And v1116, ea a. ntAter of fact, wo did vend th.em wive currency, it prinei-
ottenge.
dollars
contlettiOf V.,ree or four trucs!x. en d Automebilte loaded with
ehic14.
.in
1,:-J got from the f)-ib-tre3..aeuxy,
Tko inetitvtion 1.1:L & in good .1.tbtpe,
There were no sm.il bills availttle in the city.
E.e.d WM; kept cl)e.n. I stood on the steps oe the
albtriat:sury er, e :CO o'clock the. not rornim, arid tit,..tobed the proceszlon,'
eith in-
cluded try on autotzottile, st.:art over the -Brooldyr,
1$0 president of the bkr0'.: subr,equemtly tiet3e.1:ih-cd,t/3 me an rt.-uzing
Aft k,r thiu1th hcsi fornecl 5 fa the wain orrice and zion.e*f the brenchea Saturday mn.-
in
theepsc
cf ilvr tlir
rrivad.
Nobody know eht,ther they were golAl or
Th(1-7 W,re - 1)12 to pay evorydy nithout resorting to the zilver until an
Irligmert .re,v.thed tb
indow vith s ohiolz for e. few hundred d.ellara, and they had to
e could t eFzry it ave,..y tithout a bag, ro to took off hie
TdIde a rtic.k of It hih he filled itb the Falvr donate snd sittlkod off eith
iyny biz/ silver dol art
eol.t,
th.oeilvr duover
or hie ehoulder.
10) 1'3
The red criele of the panic
oecn:Irred on a. t;:z..t.urdly .. hen it becte*knorn
troutle had ecycloz.ted in ce_rrying
larJf..s.-aount of the stock of the Tennessee
Clor .11,vd Iron Criany.
it for dye before, that it had .lee become apparcnt tb.z.lt the
o fg.r lot.ned to the TyuntC-c-JrqyAny ofA.E.Wica Va not go nvi..
0 rIty
to uf1ee
.
comiBittvs.- to rilAothrerAezda.b.t1 On
I -.re tv....rned tLero ;4tZ..
0ptr,rted.,-1--,
rooCtl, or.
Ituvins; tLe butiellag
xd-iorkei.i 'without taeep
Teridzy.
t tt tir, Ltd
until E4turdf.7 afternoon.ry
triper.,,olly to euoure
laromation from. w
uflrwlero It tii.o needed la rtlipen..30: tO v
tiatnation
After- t1
'Xuree
-
513t
-rt eolIploted 1 k,- .At''ts mutt him ts,t, the
Es.lzent Ectel tad co er-&x. tloa rocult,4, before pr,Iceo;Uni-; to Mr. Vorgmlw 1ibr4ry to
tr nineOC1OCk aturdw niAto
mtke 4a:-.-thor ro2ort,
Itero
of.,rtzln matr6 in con
solt
Cry ltvyz;i
..kmerintr3. atrountly3. to bu 4 t'S,"Z,QM.
but
lonz_ t..11t the
ralty la tl:o Trur..-A, Company c.f
e
Qotolbok I muit dova to the Library sz<.'i t1:Era foundt.t-,woztbled
0-X, wad regre:::_enta.tivet of
represeattA.tverot -the Cie:Axing nou50 tc-,...n7&5 la ths
1,Ellt In I
the tra&t. corc*rile,:t Izth weat room.
Cc! i
Mr.
E.a.rry, I
1t4.1...,tion,
told te thlt Ur. It-...trzoz
the ft >IQ r es to vMc
tbIj hW.
th.3tt
73e
reiulred to <11 sith
ld tkanotler
othz..r Imtter
dyt5),a)o,3a3 1ouA cry 1ir
Aa>.! ta
lad,aee. in aoatrmat ;Att.-
arz, :Loou
Finally,
Mr.It4r.ston *.vla
fr:gw
r room to .;36:ar.
113thlas- tut dtztultori conv,Dratlerk hz.,1trt pies evp to th4t t4. X 1.1.;.A.
r. lonr
tdk
,RSt1 Mr.
Ldyr
another loan to the Trazt
ncIntlz, Shc rt
rut
that
ez-,-avi.-.1o,Jd that---?,2Z51),-)0,000
Vte trast c.-.1"t1;orly Eitustion 4o3,a,
tforga-o.
tfjc
I fEat
tiao rzat..rrica.,_-e of ,1416courazcleat.
'tcr t114,,
Llii
Gary, 2r. ,Filbeat .and
CZ,
the &,-.11.11 room la tb6 rt-.6r to jAn r.1.1orswl. Knowing
&c
of the le.r,,ncv.,-,;r, et.g tad Iro3
vr)as;.
frahidot. 'through
tho rvort. tols.GthEir._
b ii.
Itarry wt1.3 cz,nYI,Ief:.',
ropc:il to allke- a D EN
r.arnez.1. and he arrived with Harry at about
Tiloz,at; F. Eyaa w
la 4111
kn
th
Lt
17
zd..tud,r;s, 0131-lea aa
same of Vats laza' sa,,porte of
of .4aerita,
it
Mad ialeat eg./1..) IA the tru, t,
prlof,1;:ding.e by _my ora..1.1tor at ...ay tiizc,eap.seially e-
http://fraser.stlouisfed.org/
col
Federal Reserve Bank of St. Louis
fe,ArP4 zould prole to
say to
ok-
-tho polloy of tho mat
dbeen to keep mazimovzie: in lin.o...w4lting before paying cbtoke,-,...zmettaea .
- 19
1i dyan(4 .fr,ra dey to
0
y, poscibly p-eyin.g
Le pr'f.pvnteds irgea.ao/.1nt of ite-,to.
s
then one no eender in a, d.4.y if
Ifeeze wore suzgoated for dolling, sfith this.
thich ecer.ed toaatili.ty fr. Ledyard, but still nothlrq;:.
kita kria%/1
ea to
Aloronef: dehes end to protroes could be made tovird ratting the nefi:
fincily rt-Aurood after al. itbseasz of ri4iy an hour, looilne
Ivory graiop And aftld tt h hed been ea:monad by Mr. Yorzento lieten to exp.lenation
11.r.
x'eto
of .tether eltuation tlich had all eon, -,hich he was not at 11brty to disoloe, thich
zinuld rei',uire the use of at least .t.,25,000,0n, that Er. Worgt4n had made arrengemento
to hnndlo the eituktion contingent, however, upon the trust company presidents ezrec-
ing t reive not Isse than $25,000,000 xoke to adequ&tely protect the truet company
tuvtion. Re W1.4 unrilling to prooeed tith. the other matter sath the possibility of'
a cowl ote tanking collapse vilich vould render his efforte futito. 'al eitlitiztzt, by
r.re ton %filled the room %ith consteraztion.
I PA$ atked to Mf,k0 o r.eport on the result 0: th--.; l5st.ev..-.aination;
ht.d dotec." of
to sloop sittth on r, lounge next toUr. Stillman. I rt3cell
asking me. when I h.1.41 lest ben in bed and theal I told him Ii.uredey night, he said
the tountry trasn't going to Eirafieb if I vont he.1.o to bed.
to
Sn I Ltle then celled on
n,..port Oat I found to be the eituetion in the Trust Company of l's.u,erica 11.1ch
for the firet time I felt hed hem gained from fiinfie,thing like accur&te figure's.
!Tust ht.ve been three. o'clock in the morning,
it
or thercatoutr, and still the ln
not hsen --raiacd; but, ho.tviur; wade Ey report, I u-ent to the front door to E,o, hoele
found it looked.
The etory indeed is only to true thet e. orr, hevingaseembled the men
to deal ;4ith. a p'e,riloue situation he,d had the door to the libr4ry locked and the key
vas- in hie bun pocket. The re.allt wae that the doors tacro not finelly opened until
vatrielent esirealoce h.' been given tet,..t the loAi Would be forthconing, an,-,1 I left to
riAk
Eadison AvelVIS itb te Bekor at exactly a i:parter -to fire .f.tuday morning,.
I had o oir,ortunity then to discuss the lock.ed. door incident Id th Egrr.y, tut
tIteri I did, 4gair, it ctruck lairl'e,o a ot hulorcua exhibition of tr. iiorg.nt- a peculi.%r
ineight into huraui nathro.
There wasn't going to be any miet,kke that night. lie
'anded that ell otould stay to the end of the party.
By thst time the ori-3anization dvtling with therso matters had been protty
ell perfected; the tvachinery vt.e orin
oothly;
expert eccountente were rut
tho book r of the Trust Company of' America bC.'d other institutiono to make El, fin-
Ishe-d sudit extminstion end report. And the bl-mkere wort &head by ttie method of
dealing vith these matters so as to form 5c0,1 rate judgments, ea dietinguidted from
hasty oonclutione. The tork of rry little comi, ttes, cnd to some extsat, Earryro
tot tapersd off. The lova rt.bich was handled by the Union Trust Company became lergely
a matter of mutioe.
ixproasiontr. of Earrite rork during v11 of tat anxious period ire almost
vivid todey as they were seventeen years a,e;o. He vas the comtnending gmerta over
the forces in the fiel. . Behind him sae the g enerei etaff, principally Mr. Vergan,
Ur. Baker and Mr. Stillman. fivorry WaS threanz his force, that is the veriot115 dostoats in the OrgtaiNtItion at one task after a-nother and liteoing to the rowilts of
the eiction 1hate-yen it might have been. There tore at least twelve Institutions being
specially adminlitereAl in one ay or another during r.3.1 of that period.
Ea.oh one pro-
seltiuki problems, the most serious of which, indeed, wore tot along quotations of secur-
ity, but those of pareonality, prejudice end 6cisa,times Safi zhness and timidity;
was in dealing rith the human equation that Ilarrite suorate ttavat IfY e,t3 ehorn.
reconciled difference of view, calmed the, uneasy end anxious;
it
He
he Inspired the timid,
sometince diSol pii n cc.' the cowardly. but with it v.11 his courage never flagged, his
industry Nan uncefAeing ana hie good temper- never failed him.
Recalling what you and I knov of the organization and administration of the
Bealmrs Trust Company under his inspiration, that he did in 1907, the vigor with which
he undertook the .-tzork: es advisor to the. Aldrich Cem74asicn, and finally his attitude
in reopeot of the Federal Reserve Bank and the Federal Reserve:7-istem, E.?..10:4 it easy
indeed for us to refute every cuggeetion that has been mado by critics that the inapiring motive in Barry's life wts other than public oervios. His 'fortune wesAZ aC00172-
0
-
ent hit meant lees to him thxtri other end bigger things. The powy.ibilities of
amasei ng 6 gr vAer fortune then he left were limited, only by h.ie otzt allingnece or
unan in&n*esa to continue mating Loney:
makiniz
The minute the
r brota out all thought of
lueinese career legJed from Ilarryte mind.
money or continuing
Wany tiee in tsaking att, him I cf.,.0 hozi his mind tas mring in the diroction o f mue further public torvice.
That he did t4s e. partner in your fin) in the
ncEoti atione for furnishing alpplie-G to the ellie4 governments before the Vatted States
tntored the u-Er
The mi. cute
ti o (tone su much in the epirit of public eervice
te entered the
U4
tny not of Me life.
r he laid overythir4g tieldo for the greateet accomplichment
of hie life.. The detail5 of tt:at cIli be developed by othero.
You viii recall that
once we declared tmr It bee mo noceeec.ry to develop
in Ore, enization for the conduct of" the Treacuryto financial operations.
The kel-eme vas
tentatively :tad out and lierry hapi.,:tmocci to be in tc.ehinston then Ssorets.-ry MoAcif>o fing
no hin vpproval of that I had eagbebted for ou.i district.
I tecd him at
once i f he could not do hie share in the Liberty Loan Orsani4ation in come effective
mey.
I kne.q; that he uas over th;re at that very nomont ditonsaing the Ike Cro
irk
tith the PreElocnt. be. fin:My net et the l'.etropolitan Club, una, tith little preIron!. U.
on of aat
thfmid of him, I cadclvered to parcuade him thc,A. with hie vast
expert aloe _Qvd capacity for lemderehip in tnnee it seemed a ehare th.:.t.t he hould
under ,a.ko ned Cross eork end net give the country the benefit of vtut.he tee co pre-
minently ale to do in tar finenco. I. explained to him in detail the typo of or-ganization which te taro contpintinj, discuesed the nemce of that:0 sle might be
coneidered bvallrAbio and ueeful, and told him that I could not siillingly ace hie name
ittcd from the Het. Ee acid the natter tf,13 in the hando of the PreAdent, and
That I ebould take it up vith his. e I wrote Provident aleon the beet explanation'
that I could mke of the need for litlrrr servic&a. I have bie reply Odell atated
that no doubt ferry wuld be available much of the time for advice in thoac rattere,
tut
at he had et greater cork ahead of List frora tlich he could not be releaaed.
retlly the conoluGion of Py eareociation dthliarr7.
Thst meeting
trtoolc.lous mIriz and rezpondbility rreting upou b
s he.a.ia of the Fi.e.d. Cross t3s4o
for him to undertel;e ciny of our .eork. Pie pb.rtnerozdta,pecindly
41,0t,iD120ea.ble
JicSoron
The
ramred thtt iturclm slith ur, vith that not&151
Tid le-et tirio
tmceen you know.
s,sti Furry w?-44 clottly before hia deAb ielenito vt.e
iNe.V6 ray otrickem -nd eo oheztff,ed.
htei a nioD ttAk about old tizoo, but
culty of his eceech 6,nci the exertion rhich it roziuirod rii,sde it ntoorsrily a very
thort virit. A-a I left, he
id, bt leart thc-.Te tl,reto thing. that you and I till
never rezrc.:t, one that you did. thq; Fedtirfil Reserve job eind th.v. other tMat
Red Crors jobs
it cost ur our r.:3 0itt.tion, intin4te fold happy tr it uclr, tvt it
aid."
pordbl
addi tion s
;lid the
Ceinoidezer in regt.rd to Readinsr, Ittrzys.n-4 I having clegroor
Propnration forc,...Ifsninp,tion by the Pejo Cori tte-al.
Self.
Bank of England,
London, May 8, 1926.
Dear Tom:
Following a
call
this morning from Parmentier, who flew over
from Paris to see me at the request of the Minister of Finance, I have
despatched a cable to New York of which the enclosed rough draft is a
copy, and which I am sure you will understand.
Norman and Whigham have
both seen it.
As Winston is arriving in Paris today, I am relying on your
getting in touch with him (even though I am unable to give you his hotel
address), so that you may also show it to him.
After talking with Norman
and Whigham, the situation impresses me as follows.
The decline in the franc is probably due more largely to French
selling than to withdrawal of strictly foreign balances from Paris, and is
probably induced by fright occasioned by Herriot's repeated public utterances in regard to a capital levy under a Eocialist government.
Aside from our natural reluctance to enter into a transaction
which we believe in principle is wrong and which we would regard as simply
patch-work, I feel that the time has arrived when. if anything Ht all is to
be done, it must be comprehensive, must include
all
French interests, and
must be of such a character as to invite foreign cooperation, rather than
to choke it.
The one reason for my suggestion about any gold transaction is
the status of the debt settlement.
It would .seem to be a fair assumption
that it woulci be very difficult for the present French Government to secure
ratification of the American debt settlement at a time when the franc is
suffering a calamitous fall, and especially if it were known in political
circles that assistance from America had been declined.
fortunately
As Winston is
in Paris, it seems to be most desirable that you and he and I
May 8, 1926.
Mr. Lamont
2.
should discuss matters together and have opportunity at the same time of
some joint discussion with some of our French friends.
Of course there is danger in any meeting with officials, or even
with the Bank of France, being given the appearance of a "full dress" affair
and being used for some sentimental advantage in dealing with the exchange.
This will need to be carefully safeguarded if I am to participate.
Whigham is telegraphing you today suggesting that, if you do decide
to come over on Wednesday, it will be equally desirable to return to Paris
on Saturday for the purpose of this meeting.
It may be that Winston will
feel like coming over with you and returning with us on Saturday.
It also
occurs to me that, as some proposals have been or will be made to Gilbert
for converting deliveries in kind into cash payments, he may be interested
in such a discussion.
I leave the whole thing for arrangement by you and Winston, but
hope you will understand that I really must get away for a rest as soon as
possible, and that I should not remain in London longer than Saturday nor in
Paris more than a few days after reaching there.
Please telegraph me fully
if that is necessary, and I suggest using your awn office, as I shall be
locked up with the Indian Currency Commission Monday morning and Tuesday
morning, and Whigham will be able to reach me through the Bank.
It will be fine to see you and talk matters over.
make my apologies to Winston for keeping him waiting.
Won't you
I was ill all
the way over on the boat and unable to make any preparation for the
hearings in London, and so had to delay matters for a week until I could
get ready, but I am feeling better now and ripe for a holiday.
Best regards to you and to him,
Sincerely yours,
Mr. T. W. Lamont,
c/o Morgan, Harjes & Company,
14, Place Vendome,
Paris, France.
3
1W
ee4
(?)Vt,&(-.."-)YA94
December 2, 1927.
Dear Ben:
Here is some nice North Altantic winterweather reading for you on the subject of Japan:
letter addressed to the firm was signed by myself.
Governor Benjamin Strong,
Federal Reserve Bank,
33 Liberty Street,
New York City.
The
b
iz9//
i/all _46-e e
/0-4
P
September 22, 1927
Dear Tom:
Really I don't feel at all competent to express an
opinion about the time and the manner of Japan's return to the
gold standard.
About the desirability of her return to the gold
standard there can of course be no two opinions.
Nothing can be
more disconcerting to trade, foreign and domestic, or more predictive of social discontent than an unstable currency.
When instability is the result of force majeure, as it
was in the case of the EUropean belligerents during and after the
war, there is no more to be said; and indeed a falling currency,
.
while it is falling, does have some temporary compensation in the
reduction of production costs and the stimulation of exports.
In
the case of Japan, however, there does not seem to have been any
lack of gold cover to maintain the full gold standard if desired,
and the fluctuations of exchange, while sufficient undoubtedly
to disturb trade, have not been sufficient to stimulate it even
temporarily.
The yen, par of which is 49.84, reached a high of
52 1/8 in 1918, fell to a low of 38 1/2 in 1924 and 1925, and rose
again as high as 49 3/8 in March of this year, while the present
quotation, in spite of the banking panics early in the year, is
46 5/8.
In 1924 the exchange fluctuated. between 48 1/4 and 38 1/2,
in 1925 between 43 1/2 and 38 1/2, in 1926 between 48 3/4 and
43 1/2, and so far this year between 49 34/8 and 46.
Such oscilla-
tions as these in the value of her currency can only do harm to
http://fraser.stlouisfed.org/Japan
Federal Reserve Bank of St. Louis
and to her people.
(L'D
2.
The total note issue of the Government, the Bank of Japan,
the Bank of Chosen and the Bank of Taiwan at the end of 1926 was
1,715,714,000 yen.
The total gold holdings of the Government and
the Bank of Japan were 1,357,000,000 yen, or say 79%.
The gold
cover, if figured against circulation alone, would therefore appear
to be very much more than ample.
But that is not the whole story.
Itself, nor the
I do not forget the war
Chinese boycott of ALpsnese goods which followed
the Treaty of Peace, nor the subsequent chaos in China, nor the
disastrous Equip in shipping profits, nor the earthquake.
All these
have had their repercussion upon Japanese economy.
But giving due Weight to political and economic factors,
and matters affecting the world at large, over which Japan had little
or no control, the recent banking difficulties and much that went
before them require still further explanation.
The explanation
seems to be in monetary policies and praotices.
In 1914 the total circulation was 417 million yen and
the total gold holding was 341 million yen.
During the war and the
period of inflation immediately following it, Japan made immense
sales to the Allies and kept her exchange down by selling yen for
gold or gold assets abroad.
This resulted in immense stimulation
of Japanese exports, increase of her note issue at home, and accumulation of gold at home and abroad.
By 1921 her total circulation
amounted to 1,914,000,000 yen and her total gold holdings in 1919,
1920 and 1921 exceeded 2 billion yen.
The war period, including
two or three years after armistice, was a period of gold inflation
for Japan.
3.
At the end of 1926, however, the total stock of gold had
shrunk to 1,357,000,000 yen, or say by one third, while the total
note issue stood at 1,716,000,000 or a reduction of only one tenth.
The index of wholesale prices, taking July, 1914, at 100,
rose as high as 303 in 1919, fell to 192 in 1922, but rose again above
220 in 1923, 1924 and 1925, falling gradually to 178 in December, 1926.
The inflation during the war period seems to have been greater in Japan
than in the United States.
The
deflation in 1920, 3,921 and 1922 seems
to have been less complete than in the United States.
There was a
considerable measure of reinflation, due no doubt to the Government's
intervention made necessary by the earthquake, in 1923, 1924 and 1925;
and the deflation which took place in 1926 appears to have been still
incomplete and to have left the price level in Japan relatively speaking 30 points above the price level in the United States.
Reading wholesale prices and the circulation and gold figures
together, it seems that prices went up with the circulation during
the war period, when both were supported by more than ample ac-
quisitions of gold; but that during the post-war period prices
have been prevented from falling commensurately with the fall in
world prices by keeping the circulation up somewhat near the war
level.
This was inflation; for to maintain prices and circulation
in one country while world prices and currencies are being deflated
has the same effect as to increase prices and circulation when
world prices and currencies are stable.
This relative, if not
aotual, inflation in Japan during the post-war period was bound to
result in depressing the foreign exchange value of the yen or in
forcing exports of gold.
The former was on the Whole prevented by
4.
conceding the latter, and gold holdings of the Government, though
not
of the Bank, shrunk as above indicated.
When considering the return of Japan to the gold standard,
it is obviously not sufficient to note what her gold holdings amount
to.
It is necessary to know what the gold movement has been, and
it is a very significant fact, which must give us pause, that her
gold holdings have shrlink one third in the last seven years.
Naturally that cannot go on forever.
Indeed it canna
go on, one would think, more than two or three years longer, for
the gold holdings of the Government (part of the total gold holdings
above referred to) have shrunk from more than a billion yen to a
quarter of a billion yen in the same seven years, while the bank's
holdings have not changed. much.
Presumably, therefore, when the
Government's gold holdinep are exhausted, the Bank of Japan will have
to take up the task of protecting the yen in foreign exchange.
It
can only do that then by shipping its own gold (and that not indefinitely) or by adopting the classic remedy of dear money.
To be sure an improvement in the external situation, such
as would turn the balance of trade and payments in Japan's favor,
might occur.
But no one can confidently predict the end of chaos
in China, or of the shipping slump, or of the fall in the price
of silver, or the limits of the competition of artificial silk.
It would be reckless to rely on external events, the course af
which is beyond Japan's control, to stem the outflow of gold.
Dear money would reduce prices and wages, reduce imports
of goods, and ultimately increase exports, attract money into the
country and curtail its outflow.
Will the Bank of Japan be given the
5.
political freedom necessary to enable it to do this?
banking machinery of Japan strong enough to stand it?
Is the
Is the
industrial and social situation such as to permit it?
I think the answer is that all this must be done. Japan
has been living on her war fat.
In
spite of
an adverse balance of
trade, in spite of the Chinese boycott and then of Chinese chaos
closing her most important market, in spite of the shipping slump
and in spite of the earthquake she has maintained a relatively
high level of prices.
She has as yet avoided full deflation and
has protected the yen by shipping gold, rather than by the bank
rate.
The question is whether Japan will adopt the gold standard
promptly, while she still has a big margin of safety in gold, Which
was a war windfall, or whether she will go on dribbling it out, and,
when it is gone, then with borrowed money and credits, by Herculean
efforts, and probably a far more drastic deflation, try to force
herself back to the position of financial strength which the war
gave her.
There can be no doubt that Japan should return to the
gold standard promptly and with a whole heart.
Equally there can
be no doubt that before she does she must face the facts and take the
necessary to insure that, having adopted the gold standard,
she will be able to maintain it.
Imeasures
I don't know enough about the situation to attempt to be
_
either exact or comprehensive in outlining what need's to be done.
The best I can hope is to be suggestive.
6.
The Bank of Japan would naturally need to be free of
political interference.
That means simply, and with all proper
qualifications and reserves, freedom to raise the discount rate
to protect its gold from fading away as the Government's gold has
faded, even though the consequence be deflation.
This involves a question not merely for the political
authorities, but also for the business and banking interests.
Are the private banks loaded up with stocks and loans, and are the
industries and business houses loaded up with inventories?
Is the
banking, business, social and political structure capable of standing
the deflation which may result if the Bank of Japan is obliged to use
its discount rate effectively to prevent the outflow of gold?
Very much depends upon the level at which they stabilize.
I have assumed that they will stabilize at par if they can safely.
Does the banking machinery, as distinguished from the
business and banking situation, require modification in order to
function in an orderly way to meet the requirements of business
and commerce under the gold standard?
Should not the great private banks be required to carry
reserve deposits with the Bank of Japan (I see no indication that
they now do), and should not the Bank of Japan calculate its aNn
reserve against these deposits and its note issue combined?
Doesn't sOmething require to be done to the end that
great business and industry should obtain their capital from the
Investment public rather than from the banks, and that the banks'
loans should be temporary and liquid, and that markets for bills
7.
and commercial paper should be developed, and that the Bank of
Japan should deal with the money market through purchases and sales
of these bills and perhaps loans on them automatically instead of
by way of forced and frozen loans when a crisis occurs?
From what I see of the situation and from reading the
reports of the Bank of Japan, the whole banking structure both
of the Bank itself and the private banks leaves much to be desired
if the gold standard is to be adopted.
I don't pretend to be an
expert in this field, and I am certainly not an expert on the
banking situation in Japan, but I think if I were Governor of the
Bank of Japan and were about to adopt the gold standard what I
should want to do would be to ask Governor Strong not only for
financial credit, but fgr the loan also of the best man he could.
give me to study the banking situation in Japan and make suggestions.
Monetary problems in every country are intimately associated with governmental and financial problems.
In Japan the
ordinary budget is well balanced, but the extraordinary budget is
such that in spite of sinking funds the total government debt goes
on steadily increasing.
Japan could not, of course, have made the
amazing progress which she has in the sixty years since she em-
braced western civilization without the most active participation
of the government in everything, and that to an extent which to my
laissex faire prejudices is rather shocking.
It would be idle to cavil at government ownership of
railroads, etc. in Japan.
But I don't think it idle to say that,
granting-government ownership of such enterprises, they should be
independently incorporated and forced to live on their own credit
and resources, thus leaving the credit of the Government for
8.
strictly governmental purposes.
It means little to say that the
Government's budget is balanced if its debt is increasing.
If Japan is to be perfectly safe in returning to the
gold staniard it should I think embrace this principle and definitely eschew all borrowing in the name or with the guaranty of the
Government for the account of railway, shipping or business enterprises, whether or not owned by the Government.
Then the sinking
funds would begin to decrease the public debt, and there would be
real assurance that the central bank would not be forced to print
paper money to protect the Government credit.
I hope you have had a pleasant trip and are not working
too hard.
Faithfuliy
//1414/41
T. Ws
Lamont,
Esa.
c/o American Embassy
Tokio, Japan
On board U.S. Prooidoot norm,
izoiroato Son Francioe° from Yokoh
Novombor 1* 1927
To -
ECooro. JO P. braa6 Co.
At the invitation of 1.,:ro f.i.onsto tot% formorly adh ComMiocioner
of Flamm for the japanooe Governnont in London, Porto and Now York,
I opent from October third antil October ninotoonth in Jopon accompoulied by 14*. Jeromiah Smith, formarly Commisoioner General for
Ilungory, and bo moOboro of the Lbroan staff. As it so hammed., the
heavy banking panic of the Spring or 1927, which aroasod mach eon-
corn and come diotruot of the Japaneoe cituotion in financial quarters in gsw York and London, lent pothapo a peculior timelineao to
this visit ao affording opportunity for us to mako Inquiry anana loadin o non of Japan an exchange viawn with tham in reanrd to the oituao
tion.
2.
eworo afforded ovary opportunity for invootioation, and our ino
quirios Ohich wore at tinoo brutally frank wore anoworod with apparent
roadin000 and candor. 'Jo not mid diocuosod mettoro vith moot of the
on who owe in a position boot to be informod an to the oituation.
Tho Aoiro Anistor cove uo a private luncheon to hi oh ho had invited
the monboro of his Cabinet and prominmot nombors of the proviooe Gov.amolonts. I had a fairly motendod oonvoreation with the Orin° Ziniotor
who volunteered the otatoront that the bankina pante had been vary had;
that he wan dotorninod however that It ohoold Tao thoroaahly-olenned ap;
that he had eatruotod the took to the able hands of Governor Inooyo of
the 2an1 of Japan, and that ho intended to book him up to the Unit.
Tho Oriooilimistor hod Very Mar boon coached to mako those oboorvoo.
tions to no, but at any rate ho node then with areal earnostnoso.
Amono others at the Innohoon I diseassol the oituntion with Finanoe
lanister Jhazo Oltouohi, and Koroklyo 7:akahashi, fovoorly rinanoe and
also ,.rimo :oiniotor. Thoir oboorirrliwic, though nothing like oo
portant, were olona the oamo linen as those of the ?rineLnliotero In
order to onin viewoof the so-oallod Oppooltion, 1 had extended talks
with Takejiro Tdkonani ad aoijiro Viakationci, formorlyollme Anistor.
!hen I quoted to Vakatouki the pronont krimelliziotorcs statmoat, he
smilod mid declared that if the proseat Govoranent felt lioo that, the
Opposition felt even more strongly along the lions of 4101'0= matures..
Our detailed dincussiono on thou° and kindreatOpico with lending
bankoro is touched upon later in this report.'
3.
In order that we might 000 the work of r000notruotion aocomplizhod
after the earthquake we sit one afternoon in being condeted by
to
sky,or of Tokyo ana hio staff throuOhout al000t every part of Tokyo.
The Japoneo0 thomoolvos exoreseal crienppoIntuant with to/ extent of the
rootoration, but no ototod in !:r. amithos momorandumo attached hortto,
to the untrained observer it scomod as if Tokyo had boon restored to a
marvolouo extent; and the nano can be mold or the ourroundino country
tOroaoh which wo notorod, posoino throaoh reaiono that had boon badly
Shnhen to pieces by the onrthqoakea The iaoyor oi okohama who at groat poosonol oaorifice had acooptod the job of r000nstruction for hi o city alarmed un the au11030 of
rostoration already well undor my, with better dooko nna harbor fazilitioa planned than
over before.
in addition to going 47 motor alOAT the Uouthern coast and throud4 the distriot
surroundina Lowzt rujiama, batter known porhaps by the names of anmakora, Vlontonhita
and okono, oe proceeded by train -on a ton-hoor journey to 4yoto and theme to Osaka
the Wolof connoroial city of the Lropiro. Thia realon had boon virtually untouched by
the oortaqmnko, and Osaka itoolf inpromod UA a thriving nal arooporous cantor* Valk
44,1
voro taaen for a trig by otoanor down the harbor to impact the new harbor facilities.
The dismosionathat we had with Governor /novo of Was aank of Jaoan and with hio
follou dirootoral with Aresidont Kodana of the Yokohama apeole Dank and with his auTakama oan, the active head of Uitsui Company and the
oiato dirootorovwith
5,
ailiod hoods or the varied. Litoui corporations; with the heado also of the aitsubishi
Vakao, the aeado of the aroot
interostoo with 1.1r. Y. Latonnoaaa Baron Goh and hr.
electric and power indostrica; and with various other suhordinato offiolals of tho
Treasory,Foreian Affairs etc., inprooscal uo on the whole favorablo as to the funda,
=tan clam/atm:am and More outlook or japan* Perhaps the moot oncournaing itoatoro
of all yao the tranknono with watch those lenders aoknoolodoed defects of policy and
the woolowso of the bankino adniniatration which Oad led up to the banking patio.
irlor to our deaortoro after many private and in0..ividnal convorsaUono, aavornor /novo
nado a opecial request that after his loonhoon to oo at the Bank or Japan we ahould
hold a nrivato round-table diocusoion with him and with about a dozen of madh persona
as havo boon nontIoned in thio report. In the coorae of that dincuosion we eachanood
violin with tae utmoot fronl0000s and in roar:ono° to their oequeet for criticism and
savico wo wore entirely froo in our otameetions.
G.
'Prior to this mooting, we had oubnitted to the Jank of Japan and to hr. Kongo acal
a rouah oueotionnaire made up b our statistical aepartnent, copy of which to attached
hereto, labelled 'aOchibit "A" Thio auostionnaire wan baood upon a memorandum also proherewith. To this in &Iola apoonaed a
:Arad b our otatintioa/ depart:lent, axhibit
copy of the Bank of Japan/a writtcon ansooas to our qmootionnr4rea BxhIbit "C" herewith.
Also ar. Eonao flOrils annoorn to nano, thxhibit "a" attached. alno a social aenorandum
properod for us an the °abject of oarthaantal roconstraotion, axhibit
At the roond-tablo meeting in (location9 maoh toolco wore discuosod a0
Cauoos oftlo)banking panic.
- Lack or offiolent bankina oxaminntion end ouporvieioa.
G. - Lack of naffiolont bankina coordination.
D. - Zanaaamont of corporate induotral is it auffloiently soiontifio?
Ea - Lack of adequate publio necoontinr araottoe.
P. a Status of public utility corporations, _especially power and oloetrio.
G. - 'Axcessive dividoads Txlid by both banks one cooporations.
Ho - jarronoy question and return to cad standard.
I. - Too roach Governaont suporvioion in boolman.
Moo, ate.
The obeervationn in the foroaolna oarnarapha are amoral and explanatory. The
7.
gist of our viowo is contained in a spocial monorondum oroparod by 1. Joroclah Omitaa
attochod hereto, narked axhibit "F". 2hio memorandum of otatemonts and conolasions
in whiOh I rally concur, was prepared by Lan Zinith as a sunnary, no to speak, of doouaants heretoforo nentioned and attaohed hereto as exhibit°, ond no a rooult of the
various conversations and discussions alluded to. In this memorandum I call particular
attention to Mr. Smith's statements on the Bank of Japan; on the currency situation;
Government budget, etc. I need hardly say that Ur. Smith's experience and conservative observations have been of incalculable benefit. It should of course be added
that neither of as is a trained or expert observer and that, in any event, time did not
serve for first hand investigation. Our statements are obtained from the best sources
immediately available; and as to our judgments, they are based upon the opinions expressed to us by men long known to us, in whose sincerity we have confidence.
S.
9.
The action of the firm in undertaking the so-called Earthquake Loan of 0.50,000,CCO
in February,1924, and its subsequent action in issuing the Tokyo and Yokohama loans
guaranteed by the Imperial Government apparently created a profound impression throughout all Japan. The public press made frequent allusion to this action and at almost
every function the Government or banking loaders, as the case might be, alluded in almost touching terms to the incalculable service rendered by the firm at the time of
Japan's great emergency.
It should be added that the situation in China causes the greatest concern in
Japan and must be a matter of discussion by all Americans who, for reasons of trade
or otherwise, are interested in the future of China. An important part of Japan's
trade is of course with China, and Japan's interests on the mainland of Asia are vital
to her. The Japanese leaders all expressed to us this grave concern of which I speak
and they frequently added the hope that the Americans, the Japanese and the British
could sit down together and try to work out some constructive policy vie-a,vis China,
even though recognizing the difficulties of any programme.
Submitted:
EXHIBIT
"A"
'
1.
&;212,;;STIONS
';Ihy have the Japanese, both in public and private finance not
pursued a policy of retrenchment of expenditures, r-ther th-n one of
expansion end relatiVe extrevag-nce?
For instarice, why not limit the
annual c-pital expenditures for the railways to the net profits of the
systen, -vhich are substantitl, rather than borrow in excess of thet
amount?
Why not inaugurate economies in ordin-ry and extraordinary
budgets of the government, rether than keep piling, up debt and consequent interest charges?
Why embark on such broad developmentel programs, such as widening gunge of r:ilways, electrification thereof,
harbors, subways, etc, etc, many of whicd my be good programs in
(themselves, but not to be indulged in at times when financial conditions
are not f-voreble?
(i)
How much more earthquake reconstruction work remains to be done
and hod much will it cost?
Our cir-:111-r re the $150,000,000
Loan
sold in February 1924 stating "this loan together with the existing
foreign balances mentioned, will, therefore, provide not only for the de
retirement ef substantially the whole of the Japanese Government -xternal
maturing prior to 1931, but also to the Japanese Government's entire
estim-ted fin-nciel requirements in open markat 4'or reconstruction work".
Since that time there have b4en external loans far the cities of Tokio and
Yokoh-ma, to provide funds Cor reconstruction purposes.
How much more
aill it be necessary to borrow?
CI
=ly subsidize so many undertakings rether than let them stand or
fall en their own Merits?
laay so much government in business?
Grented
that many of the projects are economically sound, would it not be much
better to let the development be done (except in the case of rail:reys)
by private companies rather than by the government or quasi-governmental
institutions?
Is there any evidence of there being any change in policy in regard
to this paternalistic attitude of the Bank of Japan and the Government
to banks and industry?
To what extent is the government spending money or subsidizing
business in China?
Have military expenditures been increased appreciably 7S a result
of the disturbances in China?
FOREIGN TRADE
What are the conditions of Japanese export trade in -
b
Shantung
The Yangtze Valley
r1Manchuria.
(d
South China
s.
Are there any boycotts of Japanese products which are now effective?
Has the failing off in the export trade in cotton textiles caused
such a b7,cking up of products in Japan that the loans of the bank have
become frozen, and in cses bad?
Is the Japanese Government committed to a high tariff policy, and
if so, how can the Japanese explain it in view of the fact that Japtim
naturally should be the commercial gateway of Asia?
3ankinF:
Have the .Government bonds to care or the emerp..ency or earthouake
bills been sold and the proceeds turned over to the banks so that the
assets of the banks are iiruid to that extent, and has d.nc,:er of further
TUL12 been thereby eliminsted? iill the banks be able to realize anythin- on the eIrthrucke bills? ..ill the banks be able in any way to find
funds to re-pay:the Jovernment /-14 will it be the Government or the 3Enks
who will have t suffer the loss.
tre there not still entirely too many banks in japan and is the
Government's avowed iLtention to force consolidation really being carried
out?
Are the banks actually restricting credit or are they still carry-
along industry witll loans which have forcedly become long-term ob-
:)
too large a proportion of the assets of
It is not true
nose ti nks consist of frozen loans and long-term securities?
Is not the collateral value behind many of the loans actually less
than the loans?
What is the bad loan percentace o2 some of the leading banks?
Des not actual experience show that it would have been better for
the Ja:danose to havetaken their medicine4and acknowledged their losses
in 1920 or 1921 as we did in the United States instead of carrying along
unsound situations by artificial aid from the big banks End from the
Bank o:7 .7-.,oan and the Government?
.:1xchange:
What is the intention of the Ja){_nese Government in respect to
oing back on a gold br:sis?
Rice:
ihat are the prospects for this year's rice crop? Will the import.
reruiraments be more or less in the coming year?
3aoA on:
4
ilave tLe mills curtailed production or ETC inventories still rising?
iire trade channels opening again in china or has the Eationalistic movement there absolutely disrupted trade? Can the Japanese hope to' compete
with the Indian mills for Indian trade or is it not more likely that the
Indian mills will prove more of a competitive factor in the Chinese
market?
Shipping:
Lre many of the banks E,re tied up '.7ith loans against ships in excess
of their tonnage v-lues? Is Japanese shipping fully occupied? Are the
Japanese buyin',- more shins and if so are they old one or new ones to be
constructed in Japan? Is there any chEnce of a pickup in the shipbuilding industry?
EXHIBIT
September 16, 1927.
Memorandum for Mr. Lamont:
Lttched hereto is a memorandum on Japan
)
and
list of r,uestions dealing mostly with ouestion-
iilc acts or policies of the Japanese.
---...
(
0,...0;,T44,4
A. U. J.
-s
JAP AL
urea and 2opulation:
,
firea
(snuare miles)
Japan proper
Taiwan (2ormosa) etc.
.:arafuto (Saghalien)
Chosen {ore)
147,657
65,226
13,688
13,934
260,707
Population
(Oct., 1925 census)
59,736,704
19,519,927
3,994,236
203,504
63,454,171
The area of Japan proper is somewhat loss than that of Lew England,
rew York Elp- 2ennsylvania combined. Its area is only one .trarter arable
and so its population s turned to commerce, manufacture and the development of the continent. The area of 1:orea is about the same as that of
lannesota.
Governiaent-2inance:
Revenues and Expenditures
.
The fello,:ing table shows the audited accounts of revenues and expenditures for the 15 years ended March ;1, 1926 and bud:et estimates
for the yers ended :larch 51, 1927 and :-.reL 51, 1926. The official
fic,..ures have been ilterod in tht there has been eliminated from extrt.ordinar& revenues the items of loan proceeds and the carry-forward
of surplus from the precediucs. year. loan proceeds nave peen eliminated
's not properly buin:. curlent revenue, '_lthouph there have been included in expenditures certain expenditures from lo_n proceeds which
mir7ht be considered as cpitEl rather than current expenditures. The
c rry-for-Jard of surplus has been eliminated so that the results of
each year ma:, stand OD their oan feet.
?iseal Years.
2nded ar.31
.:cv.
Ordinary
xpen.
Surplus
:!Ixtraordinary
Rev.
Expen.
Deficit
ret
Surplus(
OT
t)
Deficit (-)
(in millions of yen)
.
1903-04
224
170
54
28
60
52
1911-12
1912-15
1913-14
1914-15
1915-16
1916-17
509
552
575
536
539
622
764
912
1063
410
417
416
399
387
34
45
175
141
177
40
438
526
82
168
158
249
197
205
297
527
132
118
386
99
135
159
137
152
236
A217-18
l,....,916-19
1919-20
1920-21
1921-22
1922-23
1175
490.
503
709
1264
1428
1304
1439
961
1051
1926-27
1437
1373
1016
1067
1927-28
1456
1175
1923-24
1924-25
1925-26
642
691
422
560
288
442
537
.30
79
63
-73
116
142
+34
215
+111
+94
359
+63
406
539
+154
670
56
473
646
+41
.210
264
114
88
651
-42
+3
560
482
-251
-118
5437
49
421
368
37
.36
538
560
574
509
286
186
552
366
-60
283
48
555
507
-224
+55
511
-168
537
-149
-52
he figures show that the position of finances in respect to
0
ordinary revenues F_nd expenditures is sound, ordimr, revenues having
exceeded ordinar
expenditures in ever, ;,ear since 1681-62.
be noted, however, that instead of an
/
It is to
retrenchment having been effected
in recent years, ordinary expenditures have increased each year (except
the year
iin
1925-26).
Details of orainar,
Ere shown in Exhibit
a
and extraordinary revenues and expenditures
hereto attached.
In respect to the extraordinary budget, it is to be noted that
the expenditures jumped ouite sharply in 1918-19 and have remained at
such a level that the surpluses of the ordinary budget have not been
sufficient to meet the deficits in the extraordinary budget.
necessitated borrowing.
This has
-
3
Mile certain of the expenditures may have been such as it was
proper to borrow to provide funds therefor, and while it is true that
--in gene'l- 1 the Jovernment's indebtedness has arisen, not from e series
of recurring budget deficits but
apart from the expenses of the laisso-
Japnese iar and Jarthouake 1-.econstruction, principally from the purchase and improvement of economic undertakings such as the railway,
telegraph and telephone systems and the development of new territory,
1
still it is doubtful whether in the face of economic conditions as
they hove existed in the past few years in Japan, .t
0
it has been
the wise policy to spend so much for development and reconstruction
work.
There hfivo been huge programs
for'
naval, railway (including
and
broadening guage,tunnels and electrification) harbor, colonialv/edu-
cEtionl development.
ilxhibits 3, C, D, _lid .; show expenditures for
ravy, Communications, Home 1-2±Eirs (includes _Jartheuake
and .eublic Instruction.
econstruction)
These figures show the tremendous jump in
these various classes of expenditures in the past ten years.
It is
true, however, thet nFv'l expenditures have fallen off since the
,ashington conference.
()
The increase in expenditures for public in-
struction is a good thing but it is at least doubtful whether or not
co:.Llunic_tions and reconstruction expenditures have been extravagant.
The accounts for the State Railwa:s, Lorea and 2ormosa are izept
se-,-,artely from the gonercl budget of Japan.
of revenue and channels for expenditure.
__Iach has its own sources
There are other less important
social L.ccounts.
Government Debt:
The debt o° the Japanese Government h,2.s arisen largely from
asso-Japanese ,ET (1904-5) expenses, nationalization of r:lilmays
(1906 and 1907), 1orld
ar (1914-1b) expenses, and since 191b from railway
and other expenditures for economic undertakings, from colonial develop-
http://fraser.stlouisfed.org/
ment
Federal Reserve
Bank of St. Louis
4
r:ilitr
-'nent, fro
-nd navul 0],enditures
constru.ction.
selected dates, the national debt has stood as
Internal
March 31
External
Debt
.
Debt
Total
(in millions of -en)
98
t39
Add special
Excheruer
Eotes
(Internal)
C;rand
Total
1904
441
1907
1,050
1,146
2,196
2,196
1(314
1915
1916
1,055
991
1,529
2,564
2,506
2,564
1,515
1,461
1,370
1,339
1,311
1,026
1,096
1,160
1,269
1917
1916
k_,
.ncl from earthruake re-
1919
1920
1921
1,462
'
1,610
((i) 1,424
2,364
2,556
2,694
3,065
1,359
1,320
(b) 1,514
1,500
1926
75,444
1,476
1,461
,470
1927
2,506
2,469
2,469
2,468
2,499
2,560
2,794
3,234
3,723
3,676
1,311
1922
1923
1924
1925
539
4,206
4,565
i
.
4,922
4,931
2,468
2,699
3,052
3,278
3,610
200
472
484
576
533
533
4,256
4,409
4,701
5,025
533
440
240
5,162
5,171
240
Increse due solel to inc lusion, for the first time, of the bonds
of the South ::anchurian
Co.,
bich are aaranteed by the :;overnment.
Increse duo to issue of 150,000,000 61-dBonds
of :_merica and 125,000,000 6d Bonds in ingland.-
(b)
in
the -nited States
The prosperity engendered by the war and the balances accumulated
abroad during the
to
WE.a'
-)eriod enabled Japan to reduce her debt
from 1914
191d, foreign loans.being reduced from 1,529,000,000 yen as of Larch
1914 to 1,339,0C,0,000 yen as of ...:Lrch -31, 191.
Since 1916 the debt
hias
i51,
increased every year.
The debt outstanding as of ---,arch
following purposes:
31, 1925
had been raised for the
5
Larch 31, 1925
Per
Caita1iztion of
euda 1 Pensions
conomic- Undertakings
construction
Harb ours, dr i nage, steel1,7O5,
telephones ,
Rai
1,336,107,314
etc
220 ,607,692
;construction works in the dis'7rict
(31
1.1E. C70 CI by the earth rualtc
ilffairs
'1728riSiOn Of armaments
00 , 956
rs
aper money
Conversion of oló lotns
Tobacco and salt monopo li es .
T)loitr:.tion of i:ew Teri it ory
Chosen. (orea)
i
-.lien)
:::vv.. i it ung Pro vine 0
(-fuer
271,122,362
6
1,775,137,128
37
40,948,586
7
) 9,733,177
71
440;201 ,000
4,770 ,013,177
9
21,306,305
1,067,669
otes" , for refund-
While the a eove fimros do not
ole the-, indicate the 'ourposes fo
would be surmised from a StUL
centr-cted, t
33
227,300 ,420
ing , rai lit ar-. pur-oo3es, communication,
earthr,.u_.ke I. -.3011: -17 i'uctioii iid colonial
(love lopment
woi
1,550,715,006
',3,970,625
10,571,572
229,271,433
12,066,570
Total
tdd - "Spe ci
2
6,690,200
01,194,192
Ta.i.aan (2orraosv )
1.-.: retuto ( Ja-n mese
,233
97,119,485
1,694,176,695
2inancia1 .djusteirt
-dministrative readjustmeLt
and 1iiitt ion of armaments. . . .
_.ede:nition of
Cent.
Yen
..
100
:roe with those shown in the debt
:filch the loans ',7ere raised.
of the objects for
h loans
ovnioiit is importait assets as offsets to its
ross debt. The most i- _)ort_.nt of t ..ese asets is t he State Itailways
s:s tern .
Of the J-oveniment I s debt as of :Jec ember ._51, 1926, 1, 334,000 ,000
yen .o r over one -ruarter ef tjU tot 1 is chargea le agF: inst railway account,
having bee-h incurred in connection viith the construction purchase and
improvement of the State I1vis E-hd as such is self-supporting, inasmuch - s in each of the past 15 ears the State ilways have earned sub
-6mtial_ofits after the payment of all expenses and interest charges
on the Government debt allocated to the rEilwey department.
The State Railways, comprising over 7,800 miles of line out of a
total of some 10,900 miles of railway in Japan proper, were valued on
the Jovernmont's books (at cost of construction or purchase) at over
2,500,000,000 -,en .S of ::s.rch 31, 1925.
The net profits after interest in the year ended March 31, 1925
were 1;0,000,000 ;en, and for the year ended March 31, 1926 are estimate hEvi euen approximately 221,000,000 idon.
let profits of the
railw:s are )plied to capitll expenditures for railways.
of :,ocember 51, 1926 the Government debt was charged ag.,.inst
various accounts as follows:
Yen
General .ccount
SPecial account for St.te ..e:ilwte
Special accounts for Meson, Ti:.-ii,
1-_arE.futo, i:wangtung end l'anyo
Total deb
moteel debt o" LI.
JL
i
3,465,483,000
1,333,626,000
363,144,000
5,162,253,000
anese Govern.lent was eruivAeent to 61.85 yen
per capita. In addition, local deit amounted to some 15 you per capita.
1:ftional debt, 3::cludin: deb' for the account of the State Railways, :is
7)
iv lent to 45.e7 yen per cE2itE. The debt of the United StFtes is
_ro::imatol;, 41156 per cite.
1
In addition to tho St .t I'..il.._s t..iLd. as t further offset against
debt, the Govern2.1ent owns Stte forests, harbor worts, the telegraph
nd tele-Phone sze'cfls, -ublic build in-F, ublic aorks in :orea and formesa, all invustmolit in the South 1.:anchurie ilailway, special funds, etc.,
all of which, according to our circular printed in 2ebruary, 1924, then
had an estimate( v .lue of over 1.;,000,000,000 yen.
The same eirculer
stated that tl.e totel wealth of the Japanese people at the end of 1921,
including public wealth, wes estimated by the Government at close to
100 billion yen.
- 7 -
In addition to its direct debt, the Japanese Government guarantees
certain municipal debt, dividends on the stock of the South Llanchuria
Railway; dividends and/or profits on certain subsidized industries, certain banking operations, etc.
We do not have figures showing the extent
of these guarantOes, but it is quite likely that the Government has been
itoo free in its guarantees either direct or implied.
An example of the
danger of this policy is shown in the fact that the Government had to
become responsible for the infamous rishihara loans to China, although
they were not directly guaranteed.
1
'2ecent talk of guaranteeing profits
to an aviation company is another example of the Government's policy of
looking at problems from political or nationalistic viewpoints rather
Ithan from
an economic standpoint.
New Sinking Fund:
The Government 3111, which embodies the establishment of the rew
Sinking Fund, and which provides for the alTlication of a sum ecTuivalent
to at least 25 per cent, of the net surplus of each financial year to the
redemption of the rational Debt in the second following year, has been
passed by the Imperial Diet.
'
)
The net surplus of the financial year
1925-1926 having been 176,046,963 yen in the official accounts, the sum
of 44,511,741 yen is to be aypplied to debt redemption, as aforesaid, in
addition to the old Sinking Fund allocation which will amount to
54,043,197 yen in the year 1927-1928.
The total anount avaLlable for the redemption of the rational Debt
In the coming financial year will
ihus be
98,554,938 yen which is nearly
double that applied in 1926-1927 to the sEme purpose.
The amounts of debt redeemed out of the rational Debt Consolidation
Fund in each of the 10 years from 1917 to 1926 were as follows:
8
Financial
Year
Yen
1916-17
1917-18
39,327,591
24,115,508
26,218,708
496,101
4,239,669
65,128,946
629,569
44,088,340
45,510,410
50,579,719
1918-19..
1919-20
1920-21 '
1921-22
1922-23
1923-24
1924-25
1925-26
Nevertheless, the Government created more new debt than it retired
in each of these yeErs. Now that it has established an additional sink-
1 ing fund, it is to be hoped that the policy will be reversed and that
f1 sinking fund redemptions will exceed new borrowings.
Foreign Trade:
Exports and Imports of me,rchandise (Japan proper withorea and
Formosa included) have been es follows in the past 15 years:
OalendEr
Excess of Excess of
Years
Total Trade
Exports
Imports
Exports
Imnorts
(in thousands of yen)
1911
*1912
*1913
I-) 1914
i 1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
061,240
1,145,974
1,361,892
1,242,819
1,295,223,
1,966,813
2,456,125
3,755,212
4,467,772
4,496,531
3,027,750
3,708,531
3,616,985
4,469,591
5,112,433
4,662,256
7 months ended
July, 1926 2,740,696
July, 1927 2,470,500
447,434
526,962
632,460
609,885
732,328
1,172,958
1,662,270
2,012,478
2,154,311
2,006,145
1,297,263
1,685,504
1,497,304
1,o71,989
2,377,698
2,118,630
513,606
618,992
729,432
632,934
562,895
793,855
1,067,101
1,742,734
2,333,461
2,492,386
1,730,487
2,023,027
2,119,680
2,597,602
2,734,535
2,563,426
1,155,761
1,110,060
1,564,935
1,360,420
*Excludes Korea and Formosa.
.
169,432
379,103
575,169
269,744
66,372
92,010
96,972
23,048
179,149
46,240
433,224
337,522
622,373
725,612
356,637
444,596
429,174
250,340
7hile Japan has normally had a so-cLlled unfavorable balance of
trade, which norMal condition was reversed during the 71erld "far, it is
to be noted that the unfavorable balance has been unduly large in recent years. In 1925 exports reached their maximum figure of
2,377,535,000 yen, but that level was not reached by, a steady advance.
On tho Contrary, since 1920 the value of export trade has jumped erratically, due to varying causes such as bad world industrial conditions in
1921 and- low silk prices; the earthruake of September 1923; boycotts of
Japanese goods in China; -generally bad trde comlitions in China,Japan's chief outlet for her cotton goods; unsettled economic conditions
as to prices and wages in Japan; changes in price conditions due to the
rise in the exchange value of the ::en, etc.
..7
0
The effects of some of these are still in evidence - for instance,
i
the curtailment of the 'Chinese market.
This factor, moreover, has had
its repercussions generally in the economic life of the country,for
stocks c)- 7
c-oods have accumulated in Japan, ban: loans have become frozen,
and in certain c ses ruite likely have 'one bad due to, declines in v.lue
the commodities securing the loans. Instead 'o asthorough-going deJrfflation
in 1921 upon which a sound expansion might have been built, the
(
foundation was never- sound,so that business has hEd difficulties in withstanding the shocks of the earthr_uake and Chinese internal conditions.
Shipping, too, has sufferred from the erratic trade conditions
and here again banks have had losses due to rilLking loans against tonnage
in excess of the present value of the tonnage.
The importance of the silk trade with the United States and the
Chinese market generally and particularly for cotton goods is shown by
the following figures for exports:
- 10 (in millions of yen)
Exported to:
UnitedStates....
China
British.India
Other countries
1923
606
272
100
470
1,44d
..
.
1924
745
348
135
1925
1926
1,006
e61
6 mos.
1926
6 mos.
1927
422
156
605
152
130
579
468
173
658
_
_
1,807
2,305
2,044
994
-
-
940
While exports have shown their erratic course, the trend of imports
has
been more regularly upwards. The Japanese people have not seen
fit to retrench in their expenditures, but rather have kept on their
spending spree.
The measure of increasing customs tariffs does not seem to have ha-d
0 appreciable effects and at any rate it would seem a ouestionable policy
for Japan to embark on a protective tariff program, inasmuch as she is
situated so as to be a gateway or ontreport to Lisle_ nd primarily a commercial nation.
It .is true that the unfavorable trade situation has improved, in
recent months over the corresponding period of last year. This improvement has been due to a larger decrease in imports than exports. It is
1 to be hoped that the curtailment of expenditures will continuo until
- such time as the export trade can be expanded.
()
i
BANK OF JAPAN AND BAITKING SITUATION:
NOTE CIRCULATION AND STOCK OF GOLD
1$
Dec. 31
Bank of Japan
Note Circulation
Total note
circulation
of Japan inc.
Gov't fractional
currency
and notes of
Bank of Chosen
& Bank of Taiwan
Stock of Gold Owned by
Bank of Japan
Government
H
Total
At home
e
1- d
Abroad
Ratio
Gold of Bank
of Japan to
its note circulation
(in thousands of yen)
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926, Mar.31
June 30
Sept.30
Dec.31
1927, Mar.31
Apr. 23
30
7
May
21
Sept. 2
49,402
416,664
335,589
153,423
472,774
430,138
261,814
658,921
601,224
386,169
917,297
831,371
854,568
1,336,129
1,144,739
1,050,794
1,874,012
1,555,100
886,989
1,754,732
1,439,240
790,908
1,914,295
1,546,545
666,958
1,830,956
1,558,402
525,482
1,893,936
1,703,596
1,832,164
1,662 315
343,000
1,790,433
1,631,783
303,000
1,408,746
1,276,349
293,000
1,509,301
1,388,010
259,000
1,364,440
1,246,197
283,000
1,715,714
1,569,708
1,310,196
2,333,623 (collapse of tuzuki & Co., Ltd.)
2,037,060
1,631,543
1,386,613
1,287,000
291,717
362,659
452,630
718,668
733,102
994,354
1,291,636
1,289,536
1,163,234
1,127,327
-
1,070,000
1,070,000
1,072,000
1,074,000
1,074,000
341,119
516,082
714,444
1,104,837
1,587,670
2,045,148
2,178,625
2,080,444
1,830,192
1,652,810
-
1,413,000
1,373,000
1,365,000
1,333,000
1,357,000
128,509
136,785
227,504
461,345
452,602
.702,048
1,116,298
1,225,319
1,214,709
1,208,311
-
1,155,000
1,143,000
1,143,000
1,143,000
1,127,000
212,609
379,297
486,940
643,492
1,135,068
1,343,099
1,062,326
855,125
615,483
444,499
75.7
84.3
75.3
86.4
64.0
63.9
89.7
83.4
74.6
66.2
-
257,000
230,000
222,000
190,000
230,000
65.6
83.8
77.2
86.2
68.4
;I
- 12 -
issue its
reserve ce gold
The 3ani: of Japan may
an eruivalent specie
bank notes to any amount against
and
silver,
provided that the
value of silver shall not exceed 1/4 of te total.
The Bark is also
authorized to make fiduciary issuos against Government bonds
specified
securiti-is up to yen 120,000,C00.
or
other
Issues in excess of this
limit may be rx_de -.2.ainst such securities upon the a.pprov!.,1 of the
V:i1A.ster of ?inane° and the payment of a tax on this excess
issue
at
a rate of not less than 5,; per annum to be fixed Oh each occasion by
Minister of 7inance.
Thu amount of such
104,000,A0 yen as of the end of
ithe
excess issue was
ugust, 1927.
The gold cover of the Bank of Japah has continually been high.
Advances to the .;overnment amounted to 22 million yen on December 31,
1926.
yen
This amount is relatively small, but the item of 159 million
or "Emergency bills discounted" is rel-tively hill.
This item
f
which has moved as follows:
Dec.
51, 1923
June 30, 1924
Dec. 31, 1924
June 30, 1925
Dec.
51, 1925
Juno 50, 1926
Dec. 51, 1926
133,529,922
66,060,016
144,640,274
96,616,710
14U,091,331
149,579,056
159,034,609
originates from the Imperial Ordinancd of 1(;_;,
s
accor:rnee uith
which the Bari: of Japan undertook to discount cert. in specified bills
that were efCeci-cd b: the c,:re_t earthruCze of that yer. cn1 the Govern-
ment is to indemnify the Bank for any loss up to but not exceeding
100 million yen that might be incurred in these transactions.
The
petiod of the discounting of such emergency bills was to terminate on
September' 30, 1925, but was extended until September 30, 1927.
Doubt as to whether the
bills could
be -paid up or written off before
that date was again voiced by the 1?inane Minister in the Diet last
January.
He introduced a measure (subseruently enacted) providing for
an issue of 5 Der cent. Government bonds for the estimated full amount
-l
of the bills,
-
7,000,000 ::en.
Of this mount 100,000, 00 :or r7o 4-o
the Bank of Japan as a guaranty agfiinst losses on elrth-uake bills.
_The banks are to repay the loans in inst11ments .Jithin 10 yers.
This bill was approved by the _Jiet during the last cli:s of its
session, and is to become effective on October 1, 1927. The necessary
relief was this provided, but the parliamentary debEtes..,2luded to the
difficulties of various banks and caused a run on them.
The modern banking systoi. dates from 1672. The principal aanks
of ja)an are the rippon Ginko (Bank of Japan), the 'Irokohame Specie .a.nk,
the Hypothee Bank, the Industrial Bank of Japan, the hokkaido Colonisaand
tion 3ank, the Bank of Chosen (erea),/the 23am of :_iwan (A)Tmosa).
There are also (1925) 33 agricultural and industriLl banks, 1537 ordinary banks, and 153 savings banks. The condition of the banks (ordinary
savings and special, includin, the branch o2fice of the Bank of :Meson
in Japan proper)for five years (Dec. 51st) is shown by the following
figures:
(in millions of yen)
No.of
1921
1922
1923
1924
1925
._.
Banks
Deposits
2,016
1,961
1,874
1,799
1,704
11,415
11,166
11,627
12,000
12,246
Avances
%iscounts
(a)
11,201
11,704
12,745
13,060
13,564
Invest-
Cash
.in
ments
:and
2,576
2,601
2,768
3,141
1,039
3,409
983
1,032
1,120
1,100
Capital Reserve
Paid-up hinds
1,766
1,919
1,972
1,996
1,955
633
726
606
873
916
(a) Including advances to the Government.
The total number of banks is stated to have declined to 1,600 in
1926 (from 2,160 in 1914). Several banks have failed during 1927 and it
may be regarded as certain that one result of these failures ,not due
to conditions whici-. have suddenly developed, nor even entirely to the
censeouences of the earthquake in 1925, but to losses incurred in the
terrific slump of 1920, will be the hastening of the movement to bring
about the elimination of the second grade banks, either by their at
-
71-
14 -
.sorption by leadinp. b_nks, or by the amalgamation of series of second
rate banks.
The liJ' ban.: bill to amend the bank act, as passed by the
last Diet, and which becomes effective January 1, 192,
for
such a progrem and also establishes more rigid supervision of banks
by the Ministry of Finance.
The policy pursued by the Bank of Taiwan in financing the Suzuki
concern '(see separate memo. - Exhibit 2) is a. classical example of the
unfortunate policy adopted by the Japanese banks in general.
The gains
made by industrial and commercial concerns were lost during the depressioa
and numerous banks were left with huge amounts of frozen credits.
cessive loans te single concerns have in man
Ex-
cPses proved fetal - in the
Bank of Taiwan-Suzuki Case, modtt an amount lost which was several times
the total capital of the bank. Too many funds have been tied up in
and
mortgages, in long-term loans4(in shipping loans based on tonnage values
in excess of market value of the tonnage.
ILL
many instancos it would
seem that the management of the bLnks has been in the hands of men,
of
not sufficiently trained as bankers °I/insufficient capacity.
Since
the 1923 earthguake, Japan's industries have been affected by losses
C.)
-
in the China market owing to military activities thee, as well as to
the boycott of Japanese goods in 1925.
More recently, there has been a
rather serious decline in the prices for ryi sth, due somewhat to the
competition of rayon, but perhaps more to conditions in the industry
itself.
Lll these factors have very much weakened the banking structure
in Japan.
It would appear that it would have been a better policy to
have taken losses in 1921 and so have had a sound foundation on -Mich
to build-rather than to have nursed the unsound condition eiong for so
long a time.
Foreign ,Zcchange Rate:
15 191721n :_::change Rae:
Yew York parity: 100 yen = :_49.64 U. S. cold
t100 = 200.64 yen
(Quotation's on Lew York (t per 100yen)
iliol
Low
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
49-1/2
49-3/4
50-3/8
50-7/8
52-1/8
51-7/8
50-5/8
46-1/4
48-1/2
'
(Jan.-JU1y)
...c.1...-- .
49
46
46-1/4
43-1/2
48-3/4
49-3/4
50-3/6
50-7/8
49-7/6
47-3/4
47-7/8
47-1/2
46-1/2
38-1/2
38-1/2
43-1/2
49.219
48.858
50.031
50.545
51.344
50.662
49.655
48.023
48.350
48,816
41,976
40,804
46,856
49-3/8
46.17
48.009
49
.
iverPo.e
._...
Jan., 1926
44-1/4
43-1/2
43.935
July, 1926
47
46-3/4
46.846
Jan., 1927
48.95
46.70
48.811
July, 1927
47.37
46.60
47.131
The rate of exchange reached its high in 1916 (4.3,, above par) and
its law point in 1924-25 (22.8% below par). Tol:io cables are today
(September 16, 1927) ruoted at N7.00 in Yew Yor'4-., or 5.7,J below par;
has
thus the yen exchange/remained at about the level to which it dropped
of
in May-June/this year conser7uent upon the finsncial crisis in Japan
at that time.
The gold position of the Bank of Japan today is such as may allow
a resumption of the gold-standard as soon as financial conditions get
settled.
Rice:
Rice is the great staple food product of Japan and nearly one-half
of the total cultivated erea is under rice.
On the average, domestic production has been sufficient to supply
about 95:i of consumption, as is shown in the following table:
31
- 16 -
1925
1924
1923
1922
(in ru.intals - 1 oaint,:11 = 220.46 lbs.)
:.omestic ::roduction 109,757,546 100,263,962 103,365,631 107,34,663
2,607,319
7,30_9919
'4,636,398
,793,656
D3t imports
Total'consumption 113,551,404
1..2,671,301
106,222,229
115,265,602
poor one. Daports of rico from 1,ovember 30,
1926 to April 30, 1027 slor:ied an increase of 176,/.,;4 bushels (about
1,800,000 r'uihtLls) gv:L the corresDoliding period of the procudincyear.
Silk:
The 192._; crop was
Ja)au is the 1 rgest producer of ny sil: in the world. The ahnurl
v lue of the si1: )rodrIctio- :for tLe Zive ,ers ending 11_23 aver___ed
about Q00,000,000 yen.
Sil: it3 the chief export commodi% of Jan; the United St:4-es is
in the
the LI-.
consumer Of 12';/
and on the vere' 6
over 70 of Japan's al:ports.
A recent official estim- o- this :Tear's sfrinT cocoon cror predicts a drop of 5.23 per ccht. below the ae-cl 1 crop of last :o-r. The
silk mer;:et shows sins oi!
and shipments of r sil= ve declined for every ilontli of this yer.
sidlaterils o2
The folloJinj table shots the vlue of the rc.-y! silyi out u_t
o±ports for the five yet.rs ending'in 1925:
,orts
7a1ue-of
-Raw silk
,1+ at of
Yarns
6ilk
::!_terials, etc.
,
0
(in yen)
1920
1921
1022
1923
1924
1925
'
606,605,000
731,976,000
613,626,000
659,634,000
966,359,000
665,657,733
523,114,335
799,612,466
673,972,799
842,165,918
1,036,263,974
3z/
'(4*
- 17 .."]otton Industry:
The follawin table shows the exceptional crowth of the Japanese
cotton industry:
1913
manufcturers
Paid up capital (1,000 yen)..
factories....
looms
In
1926
with
1,089,900
textiles was
with
0
5
70
3,227,676
40,391
1,936,904
1,603,866
416,725
466,736
656,935
421,512
64
1,000,706
234,754
months of
203,507
1027 was
in the corresp9nding period
bles
of 1926.
382,714
223,531
243
5,447,164
73,561
2,622,000
2,456,763
1,179,524
293,000
432,650
Production of
.
1,102,700
bales compared
Production of cotton
yards in the first 5 months of
yards in the first 5 months of 1926.
549,300,000
529,900,000
1925
76,272
217,407
241
4,436,796
64,460
2,362,739
2,171,153
92,426!
177
2,414,499
24,224
1,631,007
1,517,961
exports of cotton yarn were
cotton yarns in the first
43
13'6,494
152
Consumption cotton-bdes
Production cotton yarn-bales
Production cotton cloth (1000
yards)
_]xport cotton yarn-bales
_Ixport cotton goods-yen
1923
44
86,444
33,608
Reserves(1,000 yen)
o. spindles
1916
1927
compared
The following table shows the number of spindles and the cotton
consumption of the leading cotton textile countries:
Country
Spindles
500 pound bales
Jonsumption Cotton
Jan.,
1925
to Jan.,
1926
(000 omitted)
2ngland
57,404
37,644
3,318
Germany
10,300
1,290
1,156
United States
Irrance
'India
Japan
China
9,446
6,510
5,477
3,350
6,360*
2,175
2,622
1,754
Inasmuch as spindles in Japan run day and night, averaging 21 hours
out of the 24, it is evident that the Japanese spindle is oruivalent to
between two and three spindles in the United States or _Ingland. Ls a
result, Japan is now the third largest consumer of raw cotton (an6 he
presumably the third largest producer of cotton yarns and textiles) in
- 18 the vtorld, being surpassed only by the United States and -ingland.
Japan, with tot._-.1 population of over 83,000,000, is a vast market
'or cotton textiles. lioughl-L7 speaking, 60% of the total production is
for the domestic market and the rest is exported to China, India, Straits
Settlements and otIn r countries. Cotton products occupy the second
largest, item entering Japan's export trade. In 1926, exports of cotton
yarns and cloth were about 22% of total exports, being exceeded only by
raw siL: and sir: :7:br1cs, which amou.nted to about 45; of exports in the
.
same year.
The troubled situation in china has been a source of greet uneasiness to the Japanese cotton industry, inasmuch as China is the chief ex-port
market for cotton products and Chinese purchases have been fallin off
as shown heretofore under J'o r i on Trade.
In addition to the cotton mills in Japan, the Japanese control
about 40) of the cotton spindles in China.
T3y reason of its geogr -)hic situation and the necessities of its
feign oomirlerce, Japan has developed into one of. the chi ef maratirae La-
'jells of the world and carries by far the greatest share of t.le seatraffic of the Pacific. _:anking sixth among the nations of the ,;orld
in tonnage owned in 1914, Japan today stands 47iiird, being outranked
on-_, by t he
ted
ora
nd thtf Uni ted States. On Jul 1, 1926,
Japan had a fleet of -;,967,617 tons. This fleet is vor iell occufded.
It was reported thet idle stemers in ports of Jan on uly 1E, 1927
totaled 244 with tot1 cross tonnage of 26,000- tons. If thii figure is
correct, it would appear that prLctic,ally none of C7 hic al:- 'Cole steam-
ers are idle.
The income derived from the shippin--: business is of great ':Jenefit to
Japan in its international bala,nco ofpa:,
It has boon estim-ted
that Japanese shipping has earned on intern._ tion.. 1
lance 165,000,000 yen
- 19
in. 1923, 185,000,000 yen in 1924 and 196,000,000 yen in 1925.
The Japanese shipbuilding industry had phenomenal development
,-_-
JaAder Wgrr conditions.
Prior to 1914 there were in Japan but six pri-
vate shipyards, with a tott,-;1 of 17 doc;:s, ca.-:)able of building ships of
more than 1,000 tons. By 1919, the number of yards hed increased to 57
with 157 doc:cs, turning out a total of 622,000 tons 'for the year and
employing over 100,000 worlanen, or about four times as many as before
the war. The world-wide glut of tonnage following the war, together
with the ratificF:tion o: the dashington ,":"onference caused a steEdy decline in Japanese shipbuildik-:, from 437,427 tons in 1920 to 217,200
in 1921, to 59,000 in 1922, to 64,000 in 1923, to 66,200 in 1924,
to 55,355 in 1925, and to 52,405 in 1926.
The decline in shipbuilding has caused serious trouble with the
shipbuilding:companies, the most notable fl lure havin7 been that of
the .:Tawasaki Dockyards.
It is sLid that all plans for the rescue of
this concern have been abandoned and that the ravy is t alcIng over the
building of such naval boats as were under construction.
Many of the loans arinst shipping are based on Prices for tonnages
in excess of market values. In the pest few years, Japanese shipping
companies have bought some old tonnage in the world mari:et at prices.
far below present cost of construction in Japan.
It
t3"
7-.14 --
15
TAhLE .2. TABLE 11
SOURCES OF RE ENUE.
-
536,312
343,708
71,925
37.137
48,594
(fidinary
Taxes
Land tax
Ineunit. tax.
Business tax
338,999
312,74.1
73,602
37,567
21,155
642,032
318,q72
73,271
51.281
22,833
703,760
130.601
73,178
91,619
26,391
ST \ TE REVENUE (in thousand en
RECETTES DE L'ETAT en mailers de en).
..1
ANNEE
F1NANCIERE.
FISCAL
1 EA R.
1911-13.11915 16.11916-17. 1917-18.11918 19.11919-20.11920-21i
911,579 1,063,120! 1,174.677
319,292 672,383 696,237
73 754
73,011
73.527
190,311
122,817 193,118
62,992
31,375
11,075
-
=11.
N al RE DES RECF.TTES.
1921-22. 1922-23.11923--2'l. I92,-25.1925--26. 1926-27. 1927-28.1
1.983.812 1,128,206 1,303.832 1.138.640 1,113.231 1.373,115 1,158,118 Ord io
hop4ts
785.851
890,103 787.203 887,2371 891,808 812.6211 883,2571
71.130
900.938
68.133
73.134
163.816
35.837
71.325!
229.132
17,132
71,069'
299.992!
61.9131
71.614
231,971
65.791
65,091
207,073
39.177
66,941
221,1591
a
I
Mining tat
Tax on issue of bank notes
Tax on liquor.
Table waters duty
Tat on sm.
Sugar excise.
Consumption tax on textile fabrics
Tax in bourses
Custom duties
"[nonage does
Consumption tax on kerosene oil
Other taw
Stamp receipts
Ri ceipts from public undertakings and State proPostal telegraph and telephone services
F. west,
Profit of monopoly.
Other receipts
Miscellaneous receipts
Transferred from peril accounts
t raordt
ry .
Proceeds t'd. sale of State prorrtx.
Local contributions to expenses incurred by State for
the benefit of certain prefect ur,
Fund belonging to special areounis transferred
pis from the issue of public loans
/I
11
a
3,317
4,736
3,038
1,138
95,781
3,357
1,838
3,207
962
81.619
ft
1,934
43.384
111,946
3.034
11,228
663
L533
268
28,775
135,829
38.096
10,275
51,387
12,863
3,650
24,378
198,305
6,291
.39
4,077
1,597
3,231
1,033
1,330
6,273
5,917
399
106.738
89,637
2,231
120,635
5,312
8,830
10.321!
8,2131
137,626,
II
1,939
5,313
22.675,
27,1%2
15.524.
16,760
9.306
5,405,
32,163
35,918
603
372
1.576
1,155
241
235
38,698
32.076
168.114 207,708
61,239
76,030
12,636
11,308
67.127
.68,803
51,912
23,789
5,778
3,712
22,291
21,193
169,616 191,256
27,513
10,811
2,310
11
j
3,289
29,812
19.153
3,330
36,353
23,307
9.1165
13,1811
IN.t137
608
1.039
242
52,763
108
979
258
03.312
288.099
106.626
25,611
89,513
250,1169
90,089
17,527
77,592
61,258
3,980
91,312
321,198
8,609
5,101
3,8911
16.168 !
1,301;
222,585
11.150
11.138
3.834
6,814
221.197
310
6,347
72,905
61.190
12.573'
10801 '1
6.856
64.751
62,591
12,803
89.309
1.011
1,1191
822
334
86.327
918
351
1,275
139
189
86,854
26,388
360.185
162,111
333,781
155.089
36,141
121,289
18,239
34,957
3.631
5.173
22.090
53,032
26.925
33,011
3,000
1,000
22,000
81,589
319,901
08.613
11
162,263
162,080
49,971
34,296
636,301
51,838
813,308 1,084,958 1,499,115 1,808,033 '),000,654
U
5,086
640,671
51,870
1,431
Impot stir remission des billei de !soigne.
hoissons-alcooliqii,.
jot sin.
71.857
35.291
14.659
105,381
1.329
1003
76.1761
33,847
11.951
127.113
1.131
1
.
ft
1
It
131
916
575,855 657.655
23.998 211.437
94,7201
a
eA2,162
152,212
22,128
18,787
11,018
'266,237
eau% gamenses.
ImpOt sum
stir le t.Slioxu..
14.131
7.813
15,872
111.160
238,1131)
209.618
44.972
153,020
21.992
20.733
8.329
628,134
6,665
53,631
781,898
.7,539
63,8371
11.8031
119,638
1,329
Droits de surcesslosi.
Taxi. sur les voyages.
207.261
3.711
1.113
161.736
11,088
148,231
21,083
22,721
54,893
688,751
5,663
6,975
42.891
80.200
6,930
76,726
56.093
11.118
!flirt stir Finteret du capital.
hurt sur les ruines.
119.631
12,952
40,295
129,670 130,157
19,910
283061
33,2051
31,901
51,556' 32,653
659.1391 711,466
6,203
11.5491
16.820
16.262!
36,112
825,973
6,416
-
7.171
I mrt sur les benefices induIriels it commerciatix.
1,517
163,751
210,548
41,920
160,507
20,771
31,113
567,336
6.121
6,059
ft
el rummer-
5,130
446,938
230,131
30,83;
19,000
les all'aires
1 .397
383.134 427,613
12,273
27,997
713,512
36,812
7,662
11,181
I url stir
4,758
312,686
7,1111
28,355
3,463
3.137
414,638
6.974
221,57;
81,464
28,091
16,981
17.131
12,365
50.961
15,930
18.157
83,7811
11,391
1,376
11.183
11.318
5,298
13.536
15,500
970
91.530
66,31 I
1,705
708,615
5:0
98,901! 83.379
251,559 3')7,760
132,799! 139,1180
32. 90
33,863
71,167! 124,124
10,689
734,648
61,736
11,196
100.911,
13.396
--
GRAND TOrAL
6,39;
51,966,
10,39.!
..171)
'1,834
222,313
61,326
176.985
11.788
I 0,48 I
5,965
a
I .115,
282!
3,659
125,346
39,511
9,608
6,463
908
111.1,371
10,637
86,227
17,951
9,181
9,493
8,333
163,896
81,135;
839
23,217
118,311
6,657
9,311
'll,333'
26,283
ft
7.1132
36.3001
19,110!
7.600
uiporar. loans
War profit tax.
Surplus of preceding year irans11.1.red
Oflit.r receipt
4,618
7,387
.8,838
Impnt sur le resenti.
riales.
1
Business profit tax
Capital interests dutx
Succession tax
Travelling tax
Iii i1ut hincier.
18,571
11,073
Artist. sur le sucre.
l'axe de eonsonornation sur les tissus.
sin. les equ'rations d bolloc.
Droiis de douane.
Droits de lonnage.
Taxi. de ronsommation stir les petrol,.
Autres unpUts.
Reventi du timbre.
Beret, prmenant des exploitations ei donutine de
[Etat.
Servio, I eslauS lelegraphiques et telephoniques.
Forks.
Profits du monopole.
Autres rerettes.
Rerettes diverse.s.
Virement s des rumples sr...16am.
'1,716
271,910
4,947
13,065
11.082
13,219
Extranrdinairrs
Produit de la reale des biens &Etat.
Participation des administratious locales au x de-
3,8/37
28,121
:7.986
18,776
tain, prefectures.
Fonds apparienani :tux couples Till/III, et trans-
127,969
16.589
80.0(0
61,000
Recettes provenant it,' [emission des einitruitis
I
Emprunts temporaires.
beno".6ces de goer..,
Impot sur
a
127
524,2'17
12.721
502.318
31,042
p.., encourues par [Hat an profit de cer-
156.366
3.086
160,330
1.666
2,065,711 2,087.345 2,015.298 2,127,391 2,071.369 1,639,382 1,730,058
iremen1 tI l'excedent de Fexereice
ulres rerettes.
TOTAL GiRiRNL.
1.
17
-I6-
TABLE 3. -
-
-ITEMS.
----
FINANCIAL YEAR.
-
.
1915-16.
1916-17.
1917-18.
1918-19.
1919-20.
1920-21.
339,225
386.516
386,065
137,821
190,167
502,785
709,313
Imperial Household.
1 ,500
4.500
4,500
4,500
1,500
1,500
1.500
Foreign Affairs ..
3,810
3,477
4,105
4.319
4,820
6,066
10,517
11,289
12,271
11,718
12,985
17,927
21,597
36,918
186,568
163,937
150,873
176,390
187,159
173,169
174,758
Army.
72,237
70,651
73,384
88,313
94,918
100,552
159,494
Navy
30,398
38,996
45,285
48.528
54,602
58,175
111,076
12,533
15,898
18,700
24,418
9,771
20,656
21,762
27,661
Home Affairs.
Finance
Justice.
Public Instruction
11,606
11,125
9,559
9,581
11,161
9,723
DEPENSES DE L'ETAT,(en milliers de yen
--
-- --
1911-15.
Ordinary
'
-
T OILEAU 3. -
A N N EE
6,823
6,850
8,183
7,428
7,142
8,968
NATURE DES DEPENSF:S.
1921-22.
1922-23.
811,749
891,257
4,500
1923-21
1924-25.
1925-26.
1926-27.
1927-28.
960,593
1,051,010
1-,016,289
1,087,401
1,171,910
4,500
4,500
4,500
4,500
4,500
4.500
16,597
17,611
17,322
17,466
15,373
15.911
16,191
41,816
11,517
11,337
43,636
12,522
41,807
43,889
-
de l'Interieur..
195,017
210,116
256,181
299,970
271,073
298,030
339,664
--
des Finances.
169,070
178,713
176,223
179,331
170,760
168,435
173,614
140,718
130,379
121,831
121,628
122,241
126,672
135,978
28,056
29,428
'29,181
30,922
31,008
29,171
31,119
33,662
37,911
11,151
71,118
79,198
113,757
110,217
62,430
65,091
67,871
81,199
89,292
141,929
669,542
650,664
219,195
196,753
404,729
297,202
526,868
3,686
2,937
925
2,550
6,072
16,855
8,046
18,238
39,251
15,817
17,612
31,117
16,928
78,518
96,079
57,066
65,820
. 66,420
151,124
25,096
67,007
Army.
15,462
27,139
21,429
35,093
57,153
119,715
87,062
Navy
52,861
15,380
'71.3311
113,906
161,300
258,243
292,125
751
557
985
1,177
3,945
8,346
5,237
3,890
11,186
16,402
Extraordinary
Foreign Affairs
Home Affairs.
Finance
.
Justice
Public Instruction
1,241
981 -
856
2,281
30,275
29,581
21,1196
25,256
26,429
i)
3,195
3,429
4,171.
27,656
12,987
10,149
61,674
33,413
11,860
116,871
207,270
' 218,718
254,717
260,420
279,563
648,105
538,132
560,156
574,011
508,099
551,980
555,118
.9,136
7.592
6,732
3,539
4,504
3,637
2,868
80,076
90,951
143,963
166,188
179,984
207,670
213,529
32,140
37,992
78,414
51,220
38,130
55,216
59,599
77,907
54,191
47.793
27,403
11,011
32,366
38,450
243,512
150.309
123,829
106,761
112,397
119,448
312,870
2,556
2,917
4,119
17,532
18,138
29,137
Communications
17,886
13,287
15,691
24,417
47,578
65,994
64,552
618 420
583,269
590 795
735,024
1,017,035
1,172,328
1,359,978
end Department of Industry and Commerce.
----
i
tic', namely
i - Department of Agriculture and Forestry,
3,580
6,242
21,190
21,061
21,083
( i) 22,380
19,736
22,881
9,575
7,169
86,738
63,841
29;147
95,971.
(i)
-
de In Guerre.
-
dale Marine.
de la Justice.
---
de l'Instruction publique.
de rAgriculture et des
56,827
68,287
Forets.
68,717
7,820
81,122
-
merce.
Nlinistere des Communications.
Exiraordinaires :
Ministere des Affaires etrangeres.
-
de l'Interieur.
-
des Finances.
de la Guerre.
de la Marine.
°
de la Justice.
de !Instruction publique.
de l'Agriculture et des
Forks.
NI inistere de l'Industrie et du Cornmerce.
Nlinistere des Communications.
i
1,429,689
1,521,050
1,625,024
1.521,988
1,639,382
1,730,058
TOTAL GiNINAL.
I
I,.
N. II -
Depuis l'esercire 19/11,6 to MillilIGTO de Citgri. ulture et du Commerce a etc 'rind.. en den, sevoir : - le Miniorre do l'Agrirulture et deo Forks, et
Stinist,,e de 'Industrie et du Commerce.
(t)
(a) NOTE. -- Since the eer I 93,,6 the Department of Avicultura an I (:,iinm,re has liced divide I int
31,488
2,462
1,693
31,681
1,489,855
.GRAND TOTAL
27,703
....
Alinistere de !Industrie et du Com-
207,799
51,897
'
.
192,631
31,007
Agriculture and Commerce
Maison Imperiale.
Ministere des Allaires etrangeres.
(I(
15,037
73,017
Ordinaires
--
(
Communications
.
FINANCIEIRE.
-
19.615
Agriculture and Commerce
--
STATE EXPENDITURE (in thousand yen).
1
-37-)
EXHIBIT B
-
v")
NLVAL ":-.XPENDITURES
Year
1915-16
1917-13
1913-19
1919-20
1920.21
1921-22
1922-23
1923-24
1924-25
1925-26
1926-27
1927-28
Or
39,000
48,500
54,600
58,175
111,076:
141,000
130,300
125,000
125,000
122,000
126,700
136,000
Extraordinary
(In thousands of Yen)
45,380
114,000
161,300
258,214
292,125
343,000
244,000
150,300
124,000
106,700
112,000
120,000
Tot1
84,3E
162,500
215,900
316,119
403,201
484,000
374,300
275,300
249,000
228,700'
238,700
256,000
.EXHI3IT C ck)
COMMUNICATION FXP7NDITUEES
0
Year
1915-16
1917-18
1919-20
1921-22
1923-24
1925-26
1926-27
1927-28
Ordirrry
65,091
73,017
89,292
192,634
207,270
254,717
260,429
279,563
ExtraordinflrY
(In thousands of Yen)
,
13,287
24,417
65,994
51,897
68,287
81,122
86,738
63,841
Tot:1
73,378
97,431
155,286
244,531
,?75,557
335,839
347,167
343,404
EXHIBIT D
HOME 1.1PFAIRS EXPENDITURES
Year
Ordinary
1915-16
1920-21
1921-22
1923-24
1925-26
1926-27
1927-28
11,289
36,918
41,846
44,337
42,522
43,807
43,890
ExtrLordinary
(In thousands of Yen)
48,238
78,548
80,076
143,963
179,982
207,670
213,530
Total
59,527
115,466
121,922
188,300
222,504
249,477
257,420
EXHIBIT E
PUBLIC INSTRUCTION EXPENDITURES
Year
Ordinary
Extraordinary
Total
(In thousands of Yell)
1915-16
1919-20
1921-22
1923-24
1925-26
1926-27
1927-28
9,585
21,762
33,662
71,154
79,198
113,757
119,217
1,000
11,486
17,532
29,137
21,190
21,000
21,100
f
10,585
33,248
51,194
100,291
100,388
134,857
140,317
414.1:d- F.
SUZUKI & CO., LTD.
JAPAN
(The following information is colated entirely from various newspapers and
financial magazines)
On April 6, 1927 Messrs. Suzuki & Co., Ltd., one of the largest
Japanese merchanting firms, with a head office at Kobe, found it necessary
tPmporarily to suspend business.
Suzuki & Co., whose head is Mme. Yone Suzuki, is a holing
company owning shares in some thirty (30) large subsidiaries with brcnches
in New York, London and elsewhere.
The parent concern, which grertly
extended its business during the the war, has a paid-up capital of fifty
million (50,000,000) yen ($25,000,000 U.S.).
Through the affiliated
companies the Suzuki group represents nearly every phase of business and
industry, including rayon, sugar, cotton, coal
mining, machinery, brewing;
wireless and hydro-electric power.
Suzuki & Co. were in difficulties about six years, their troubles
going back to the post-war slump and the earthquake period.
Heavy losses
were suffered in 1920-21 and in 1922 and the organization would have collapsed then had it not received large bank accommodations.
Incidentally,
the losses suffered by Suzuki as a result of the earthquake were only a
small percentage of the firm's total obligations, which had their main
origin in the heavy stocks of commodities with which Suzuki found itself
at the termination of the war.
The group maintained a close financial con,ection with the Bank
of Taiwan (Formosa) from whom N. Kaneko; general manager of Suzuki& Co.
.,nd fifty
succeed in borrowing
U.S.).
two hundred/million (250,000,000) yen ($125,000,000
The government of Japan proposed to compensate the Bank of Japan
1
in accepting th-e notes of the Bank of Taiwan, which plan, however, was
relect-d by the Privy Council thus forcing the Wakatsuki cabinet to resign.
The Bank of Taiwan then found itself obliged to close its branch offices
in Japan proper and abroad temporarily, keeping open only the offices in
Formosa', where it acts as the central bank and issues notes which are the
general currency in circulation on the island.
These events, naturally, were followed by a heavy drop in prices
on the Tokio stock market and several banks had to close their doors on
account of runs by depositors.
The Tanaka cabinet (with Korekiyo Takahashi
former premier, as finance minister) then instructed the Bank of Japan to
aid reputable and established banks as far as possible, and up to April
22, the Bank of Japan made loans to marious banks totalling almost one
hundred and fifty million (150,000,000) yen ($75,000,000 U.S.)
Upon the
application of the Bankers' Association of Japan, the Government announced
a moratorium of twenty (20) days; the banks of the entire country closed
their doors for two days, April 22 and 23.
As regards origin and nature, the downfall of the Suzuki firm
with losses aggregating $250,000,000 U.S.1i(equalttone-third of the total
budget of the Japanese government) is indeed not without parallels in postwar financial history.
It is in some respects similar to the Stinnes
collapse in Germany, and the banking difficulties in Japan are not very
much different from those experienced in Denmark following the collapse
of the Landmandsbank, the foremost banking establishment in Scandinavia,
and one of the leading banking institutions in Europe.
During the period
of high commodity prices following the armistice the Landmandsbank, already
heavily committed to the Danish industry, financed the purchase .of commodi-
ties, eventually necessitating a five year governmental guaranty of the
-3-
from the series of failures of prominent banks in Norway some three
years ago where it was found necessary for the government to extend aid
or place the banks affected under state administration.
BA:LW
Stat. 99
6/30/27
THE BANK OF JAPAN
TOKYO
October 17th, 1927.
Dear Mr. Lamont,
At the request of Mr. Inouye, I bring you
herewith the written replies to your questionnaires.
This is the note I prepared to leave together with
the document in case I miss you.
With kind regards
Yours sincerely
^
:\
-
\\\`'
The need of a policy of retrenchment in public and
private finance has been recognized in principle for some
years past.
Indeed, successive Governments were not unmindfu:
of the principle, and the curtailment of expenditures was
often attempted and actually effected in some cases.
But
financial resources accumulated during the war still largely
remained with us when the reaction came, and it was difficult
under the circumstance to practise economy at once, the
weakness of human nature as it is.
Besides, we were anxious
to lay out the foundation of our future development, and
enterprises started for that purpose could not be easily
relinquished.
Thus the recognized principle of retrenchment
has not been carried out in practice to a satisfactory extent.
It may be said, however, that the late monetary disturbance
has turned out to be a wholesome lesson in this respect.
The expenditures for reconstruction works are as follows:Estimates
346,192,000
Disbursements
up to Sept., 1927
151,516,000
Remainder
194,676,000
378,919,000
178,890,000
200,029,000
Yen 725,112,000
330,406,000
394,706,000
Government
Local
...
Total
More than 60 per cent, of the projected reconstruction
works have been completed.
Of the estimated local expenditures, Yen 140,746,000 is
to be granted in aid by the Government and Yen 67,804,000 is
2
to be lent by the Government.
Along with the execution of the plans, some increase over
the original estimates may be needed.
At any rate, further
borrowing will be necessary, but it is the intention of the
Government to borrow in the home market what is necessary.
As to Government subsidy and control of business undertakings, the preceding observations in regard to the policy
of retrenchment hold true.
The success of Government aid
and guidance in the early stages of our economic development
still lingers in our memory.
Before the Russo-Japanese War,
private resources were not plentiful, financially and otherwise.
So the Government had to take the initiative or to give
assistance in opening new lines of economic activity.
result was advantageous on the whole.
The
Thus, undertaking or
control of business by the Government still remains as a habit.
Especially, in the case of chartered banks, it is but natural
that, if they have been created at all, the Government should
exhaust all means to straighten them out of difficulties in
which they have become involved.
There is a limit, however,
in the means at the disposal of the Government.
In fact,
we are learning by experience, that, in the face of changed
conditions, the propping up of business by the Government must
be gradually dispensed with.
The paternalistic attitude of the Government and the
Pank of Japan has been an object of criticism even at home
in recent, years.
The imposition of strict restrictions on
the employment of Post Office deposits is certainly a sign
The
of the change in policy on the part of the Government.
Bank of Japan has had sometimes to give special aid to banks
in trouble in order to tide over a delicate situation.
But
we have urged, and are urging now more than ever, sound
adjustment on their part as the condition of our aid.
The
drastic reorganization of the Bank of Taiwan and the curtailment of its business is a notable example.
Apart from the Government property and funds contributed
to the capital of the South Manchuria Railway Company amounting.
to Yen 217,156,000, Government investments in connection with
China outstanding at the end of 1926 were Yen 192,365,000.
A
major portion of the amount consists of the so-called "Nishihara
loans" taken over from the banks originally concerned.
Loans
made through banking channels to the Han-Yeh-Ping mining
interests and loans made to the Oriental Development Company
and other institutions in aid of their business in Qhina are
all included in it.
In the past, Post Office deposits were
used for making investments of this nature; but such employment
of the funds will be difficult in the future in consequence of
the above-mentioned restrictions.
There is no subsidy or other aid of a recurring character
in connection with China.
The military and naval expenditures in connection with
and, Manchuria are annually from Yen 6,000,000 to
Yen 7,000 000.
The special increase as results of the present
disturbances in China, such as the despatch of troops to
Shantung and the landing of marines in the Yang-tze-kiang
districts, is estimated to amount to some few millions.
The following figures may be taken as indicative of the
condition of Japanese trade with various parts of China.
With China as a whole.
Exports
Imports
'Yen
Yen
1926
574,441,000
397,870,000
Jan. to Aug.,1926
359,572,000
190,398,000
Jan. to Aug.,1927
295,923,000
155,293,000
63,649,000
35,105,000
Decrease in 1927
With Manchuria.
Exports
Imports
Yen
Yen
1926
67,981,000
36,095,000
Jan. to Aug.,1926
47,882,000
11,596,000
Jan. to Aug. ,1927
34,833,000
15,647,000
Decrease in 1927
13,049,000 (Increase
in 1927)
4,051,000
With Kwantung.
Exports
1926
Imports
Yen
99,606,000
...
Yen
157,033,000
Jan. to Aug. ,1926
64,385,000
76,678,000
Jan. to Aug.,1927
53,366,000
63,554,000
Decrease in 1927
11,019,000
13,124,000
Note
There may be some overlapping between the
figures of Manchuria and Kwantung.
With North China.
Exports
Imports
Yen
1926
Yen
101,292,000
72,333,000
Jan. to Aug. ,1926
68,397,000
40,942,000
Jan. to Aug.,1927
73,621,000
43,016,000
5,224,000
2,074,000
Increase in 1927
With Central China.
Exports
Imports
Yen
Yen
1926
E26,041,000
99,796,000
Jan. to Aug.,1926
138,433,000
55,440,000
Jan. to Aug. ,1927
90,905,000
30,368,000
Decrease in 1927
47,528,000
25,072,000
With South Uhina.
Exports
Imports
Yen
1926
21,310,000
Yen
7,918,000
Jan. to Aug.,1926
14,737,000
4,730,000
Jan. to Aug.,1927
3,516,000
5,625,000
Decrease in 1927
11,221,000 (Increase
in 1927)
895,000
With Hongkong.
Exports
Imports
Yen
Yen
1926
52,973,000
1,426,000
Jan. to Aug.,1926
25,738,000
823,000
Jan. to Aug. ,1927
39,682,000
1,111,000
Increase in 1927
13,944,000
288,000
Note --- Figures in exact accordance with the classification
in the questionnaires are not available. --- There are some
discrepancies between totals and detailed items, because
the figures are taken from various sources.
There are now boycotts against Japanese products in
Mukden and some districts in Kirin.
Strikes in the Japanese
cotton mills in Shanghai may be mentioned in the same category.
According to past experience, anti-Japanese boycotts in China
become active from time to time, but they subside before long.
The present seems to be already in the subsiding stage.
The financing of cotton industry and trade is generally
sound., because in the first place the fall in the export of
cotton yarns has been covered, partially at any rate, by the
increase in the export of cotton textiles, and in the second
place cotton manufacturers and dealers have retained
comparatively ample resources out of the profits of the
past.
It is only in the case of spinning companies on small
scales and weavers catering mainly to internal consumers that
'V,there
is.
some difficulty.
The figures of the export of cotton textiles are as follows:Yards
Jan. to Aug., 1926 ...
1927
Increase
642,777,000
...
.
656,191,000
13,414,000
The export of cotton textiles to China is depressed, but
the same to India and farther west is making fair progress.
The
decrease in the money value of our export of cotton goods is
partly a result of the fall in the price of raw cotton and. does
not accurately reflect the condition of our trade.
Bills for
financing the import of cotton by spinning companies and bills
for financing the export of cOtton goods are generally welcomed
by bankers as good. liquid assets.
It would not be fair to say that the Japanese
is committed to a high tariff policy.
sovernment
There are opposing
currents in public opinion in regard to the question, and they
are reflected in the legislative measures of the country.
In
the case of some industries, the acceleration of their developMent by means of tariff is eagerly advocated.
But it is
recognized, on the other hand, that the position of our country
as the commercial gateway must be taken advantage of, by means
of free exchange and passage of commodities.
The Government bonds to care for the earthquake bills have
onot yet been delivered to the banks.
The delivery is to be
considered in respect of earthquake bills held in rediscount
by the Bank of Japan on the 30th of September.
to conform to certain conditions.
.
They have also
Applications are now coming
After due consideration, bonds will be delivered to banks
concerned, mostly by the end of November.
The banks receiving
the bonds may sell them subject to the approval of the Government
or may use them as security for getting accommodation from the
Bank of Japan or other quarters.
The assets of the banks will
become liquid in that sense.
It is expected the banks will be able to realize largely
in the ten year period on the earthquake bills against which
they receive the bonds from the Government.
If, however, there
be any loss, it will be suffered by the banks.
It must be remembered in this connection that the advance
to be made by the Government in the form of bonds is not the
only measure to deal with the earthquake bills.
In the case of
unrealizable bills, the banks without sufficient resource of
their own are to be relieved of their liability under certain
conditions, and the Bank of Japan-is to be indemnified by the
Government to the extent of Yen 100,000,000 in respect of those
bills.
It is against earthquake bills not dealt with in this
way that the delivery of bonds
is to be considered.
The number of banks at the end of 1923 was 2,122.
reduced to
It was
1,704 by the end of 1926, and to 1,619 by the end
of September last.
o
The number is certainly still too many.
nie Government is urging by all means the amalgamation of
banks.
At the same time, it must be remembered that it is not
well-advised to push the matter recklessly and that amalgamation
must be accompanied by sound adjustment of banks concerned.
Mere amalgamation of unsound banks will amplify the evils and
be prejudicial to the general situation.
It is expected that
the reduction of the number of banks will be accelerated after
the operation of the new banking law which provides, among
other things, for closer official supervision of banks and
The law is to become
the minimum limits of a bank's capital.
effective on January 1st, 1928.
It is not to be hoped that old loans which have forcedly
become long term obligations will be liquidated all at once
or in a short period of time.
But bankers are now very
circumspect in making new loans and take caution to avoid
freezing up their assets.
This is the main reason of the
present easiness of the money market.
For some time after
the recent monetary disturbance, it may be said that bankers
were too timid in making new commitments.
Their attitude
has been, and is, gradually undergoing a change.
But caution
is the prevailing note.
It was a practice with our bankers to give accommodation
of a really long term character in the form of the discount of
single name bills with explicit or tacit understanding of
renewal.
Both lenders and borrowers of this kind were especially
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10
-
embarrassed after the recent monetary disturbance.
r
Bankers
have taken the lesson to heart, and it is hoped that the
present cautious attitude of bankers will result in a wholesome
change in the banking custom.
While there are a good number of banks which have been,
and are, doing their business on quite sound principles, it can
not be denied that in many oases too large a proportion of the
assets of banks has consisted of frozen loans and long term
obligations.
But the lesson of the recent monetary disturbance
has been taken to heart, and will conduce to improvements.
In view of the scanty supply of good commercial bills, however,
it is perhaps inevitable that banks in this country should
hold a larger proportion of their assets in bonds and other
securities of the similar nature than is common in some other
countries.
If their investments consist of approved securities,
the Bank of Japan will look after banks in case they are in
need of cash to meet seasonal and other temporary requirements.
This is a traditional function of the Bank of Japan.
When loans are newly made, it is the accepted principle
and common practice with our bankers to limit the accommodation
to an amount ranging from 90% to
60
of collateral value.
principle has been adhered to since the recent disturbance
more strictly than ever.
But in some oases, the decrease
The
in collateral value of old loans was not sufficiently replenished
0 by additional collaterals; or, loans originally granted on
credit having become frozen, collaterals were taken in afterwards as partial cover.
This resulted mostly from the economic
depression and falling prices of recent years.
Figures of bad loan percentage of the leading banks are
not available.
The deplorable condition of the banks which
have had to suspend payments is certainly exceptional.
not fair to judge the general situation from them.
It is
It may be
said that, among the banks of considerable size, there is no
question of serious bad loan percentage, except in the case of
two or three which are now arduously proceeding with the
adjustment of their affairs.
It is now recognized that it would have been better
for us to "take our medicine" not long after the reaction of
1920.
But for a country like Japan not rich in resources,
the economic structure grown up during the war was too
valuable an asset to be left lightheartedly to the natural
course of shrinkage.
Then the earthquake struck us, and
extraordinary measures were thought necessary to meet the
critical situation.
Official aids given under these
circumstances could not be withdrawn abruptly.
a turn must be taken in the right direction.
In due time,
12
The intention of returning to a gold basis is unaltered.
Our gold reserves are intact and the balance of trade is
improving.
But it is now impossible to point to Its
consummation in a definite period, say, one year, because
its immediate effects on the monetary and general economic
situation at home must be carefully taken into consideration.
The first official estimate of this year's rice crop
is 61,490,000 koku.
Compared with the previous year, and
the average of the five preceding years, it is greater by
5,910,000 koku and 3,770,000 koku respectively.
On the basis
of this estimate, the import requirements of the coming
year will be considerably less than those of the present
year.
The operation of the spinning mills is now curtailed by
1* The agreement to that effect between the spinning
companies was made effective for six months since the 1st of
last May.
They have lately come to a decision to prolong the
curtailment for another period of six months.
The production
of cotton yarns from January to August of the present year
was 1,707,692 bales, as compared with 1,725,810 bales of the
corresponding period of last year.
At the end of last August,
the stock of cotton yarns in Osaka and Kobe was 36,643 bales
as compared with 17,116 bales of last year.
The production of
-
13
-
cotton textiles in the first eight months of this year shows
a slight increase over that of last year, the figures being
respectively 663,324,674 yards and 845,868,420 yards.
But the
stock in Osaka and Kobe at the end of last August was
125,185 bales, as compared with 91,161 bales of last year.
The increase in the stock of textiles was in a lesser
proportion than in the case of yarns, thus showing the better
trade condition of the former.
Our trade with China has been impeded by the disturbance
there; but there is no disruption of the export of cotton yarns
and textiles, the monthly figures are as follows:Yarns
1927
1926,
Textiles
1926
1927
(bales)
(bales)
...
(bales)
7,124
(bales)
January
4,818
30,293
30,200
February
...
4,684
3,487
45,269
22,931
7,998
3,822
59,249
23,487
...
9,664
2,931
44,042
27,695
... ...
10,854
3,259
38,408
33,336
June
6,275
2,309
30,238
27,506
July
5,501
2,527
33,569
22,955
...
3,273
1,466
25,927
27,727
Total ...
55,373
24,619
306,995
215,837
March ..
April
May
August
The export to India of Japanese cotton yarns of coarse
grades will be obstructed by the new tariff.
Japanese trade
with that country will naturally be directed to yarns of fine
grades and textiles.
In fact, our trade with India is
principally not in yarns, but in textiles.
The prospect of
the export of textiles is fairly good.
From the fact that Indian mills need the high tariff for
55.
-
14
-
its protection in the home market, it may be inferred that
they are not in such a condition as enables them to compete
effectively in the Chinese market.
Indian exports to China
of yarns and textiles are negligible at present.
Most of the loans against ships were made before or
shortly after the conclusion of peace in 1919.
At the outset,
bankers were careful to keep abundant margins in tonnage value.
But, in consequence of the subsequent fall in tonnage value,
the mortgaged ships. became short in value in the case of loans
outstanding from the ,period. of shipping boom.
therein are few in number.
Banks involved
With the aid of the Government ,and
the co-operation of the banks concerned, the Kokusai Kisen
Kwaisha was formed, and ship owners in difficulty transferred
their ships to the company which in effect took over the
obligations to the banks.
The financing of shipping was
consolidated in this way, and the banks are endeavouring to
recover the loans on easy terms, and it is believed that they
will be able to write off necessary amounts, if they have not
done so already, except the Fifteenth Bank which came to grief.
Japanese shipping is almost fully occupied, though the
profits therefrom are scanty.
Of ships of more than 1,000
tons, those remaining unoccupied in last September were only
five in number and 14,096 in tonnage.
Japan is buying more
ships abroad than those to be constructed at home.
number of purchases abroad is decreasing.
a
But the
This is partly
result of the high duty imposed on the import of ships
-
15
-
with the oWect of discouraging the purchases abroad.
C)
Ships
purchased for employment, i.e. not as scraps, were 36 in 1926
and 19 in the first nine months of this year.
There is no doubt
that shipbuilding equipments in Japan are far in excess of
current requirements.
But this feature seems to be more or less
common to all the Gauntries.
How to deal with the situation,
is perhaps a world, rather than national, problem.
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,. 61)
P
:IDIT
(private)
Rough draft Memorandum in answer to
. Ur. Lamont's questions.
(By Mr. Kengo Mori)
1.
Financial Policy.
In the present conditions financial and economical of
Japan there is but one opinion as to the necessity of continuing
the policy of retrenchment and economies both in public and
private finance.
In view of however, the depression and
stagnation from which tne business world of tnie country has
suffered for the last eight long years since the trade panic
of 1920 the greatest problem exacising every mind whether in
the Government or in the Opposition is how Japan could turn the
corner.
On this vital question there exists a difference of
view between the Minseito Party which is now in the Opposition
and the Seiyukai Party in Office in respect of measures to be
taken to accomplish the common end.
The present cabinet which
cALt,..!
stands on 41--aakke4 "Policy of Nation on Industry" as the first
plank of their platform is naturally endeavouring to restore
our economic prosperity by positively promoting industry and
encouraging foreign trade.
under this policy an effort is
being made to extend and improve the railways.
Therefore
spite of the utmost economies now being urged in framing
general Budget for the next financial year a considerable
amount will be required to meet new demands put forward in
order to effect various measures in pursuance of this policy.
2.
Capital Reconstruction expenditure of the Government.
As regarded the expenditure falling on the Government
for "Capital reconstruction" divided into two items ',Capital
Reconstruction Expenditure" and "The Earthquake Restoration
Expenditure "the amount reimbursed up to the last financial
year (1926-27), the amount i;i-oted for the current financial year
(1927-28) and the amount estimated for from the next financial
year and after are shown below with their resources respectively:-
Reimbursed up
V,
to
the financial
year 1926-27
Yen
Noted for tne
financial year
1927-28
Yen
'
Capital
reconstruction
387,857,741
118,489,915
107,820,571
332,026,386
63,852,753
294,116,434
719,884,127
182,342,668
401,937,005
Loans and
temporary
borrowings
446,088,828
64,000,000
83,000,000
Normal receipts
273,795,299
118,342,668
318,93,005
Earthquake
reconstruction
0
Estimated for the
financial year
1928-29 and after
Yen
Total
Resources
3.
Subsidy and Government
While the
in business.
Japaneae industry in the modern sense of
the word was in its enfant stage of development it used to
resort in a large measure to the Government subsidy.
It is
regretable that people have not yet completely shaken off this
enertia obtained in the past years.
But the intelligentia
having fully recognized the necessity of self support independence
of industry the general tendency is now strongly in this di-
rection with the result that Government subsidies except in
special cases are being stopped one by one.
The same applies to the post situation of
government
in
business especially in public utility industry including Post
Office, Telegraph
The nationalization of
and Telephone.
Railways, however, was effected under different circumstances
which are well known.
As regards the Telephone there is now a strong current
opinion for private enterprise.
Tobacco Monopoly, however,
being the one of the most important source of National revenue
can not be dispensed with.
Although for obvious reasons a
greater part of armament industry is still in the Government
hand the tendency is to transfer to private enterprise in cases
where self subsistence is feasible.
Particularly the Government
iron works are a subject of serious discussion in which the
Majority of opinion seems to regard their transfer to private
management is simply question of time.
4.
As for the policy of the Bank of Japan and Government
to banks and industry it is evident that the paternalistic or
interfering. attitude of the two high authorities is becoming
less and less simply on account of the growing influence of
powerful city banks and industrial firms.
however, where
In exceptional cases,
disasters or panics call for emergency measures
that the
of relief or remedy it is natural
Bank of Japan should be compelled
an extraordinary operation.
Government and
the
to act as the center of such
In China ther3is no business undertaking by the
Japanese Government.
,,N4
as subsidies are being granted to
country.
The expenditure incurred
enterprises in that
by the Government as the
result of the disturbance of China is insignificant as shown
in the following figures:-
Navy
Yen 439,000
1926-27
Yen 7,000,000
1927-28
(from April
to
Army
Yen 2,490,000
Sept.)
Export trade with China from January to September
7.
1927 is as follows:-
for the nine months
Compared with the
corresponding period
of last year.
(decrease)
I
104,805,000
25,682,000
83,718,000
4,360,000
Yangtze Valley
111,399,000
57,627,000
Southern China
52,540,000
2,644,000
Other districts
2,117,000
768,000
354,641,000
77,072,000
Uanchuria
Shantung
Total
The total decrease is 181.
felt in
Yangtze Valley as
The most serious effect is
center of disturbance and in
0'
-5Manchuria as the result of the sevfi er fall of currency.
There is no beieort of Japanese goods in China at
present worth mentioning.
Stock of cotton yarns in Osaka and Kobe at the
29,923 bales
end of July 1927 was
as against tne figures of the corresponding period of
14.140 bales
last year
showing a substantial increase.
Advance on this commodities from
the banks in
Osaka and Kobe at the time in question was
as against
Yen 23,710,000
7,555,000
which was the amount for tne corresponding period of last
year.
Thus showing a decrease in banks accomodation.
In
other words notwithstanding the increase of accumulated
stock banking loans do not seem to have become frozen.
The Japanese Government is not wedded to high tariff
policy.
All raw materials are free.
On those manufactured
goods whose industry is regarded to be impossible to subsist
are also exempt from duties.
hopeful of subsistence
For some industries which are
are favoured by protective duties which
is of purely temporary measure.
The proportion of dutiable
articles to the non dutiable as well
as the tariff is rather
lower than in the case of the United States of America..
As
for the luxury tax it is simply a temporary measure justified
by special circumstances.
-6The Bank of Japan having written off the obligations
of the closed banks (including the Bank of Taiwan) arising from
the earthquake bills discounted by the former the latter banks
were enabled to apply their assets thus becoming liquid to their
plan of reconstruction.
The loss thus incurred by the Bank of
Japan is to be indemnified by the national bonds which are to be
handed over to the Bank to the extent of Yen 100,000,000.
As to the balance of Yen 107,000,000 out of the total
earthquake bills the Government is to make a loan of National
Bonds to the banks holding these bills for a period of ten years.
As these banks will be able to,accomodation from the Bank of
Japan on the security of these borrowed bonds the position of the
Bank of Japan in this respect is changed from its advance on the
earthquake bills into that on national bonds.
In the event of these banks proving unable to recover the
proceeds of the bills within the said period of ten years it is
(1)
not yet decided what steps government should take.
Any future contingency of run on banks is to be amply met by
the emergency law passed by the Imperial Diet last May by which
the Bank of Japan is authorized to grant special accomodation and
is to be indemnified to the extent of Yen 500,000,000 for its
eventual loss.
The number** of bank. existing at the end of 1926 is:-
Special banks
Ordinary banks
34.
1.420
Savings banks
total
124
1,578
As it is still felt that banking units are too many the Government
is encouraging to consolidate and its 4e-414.1444 effort is being
rewarded success.
Banks in the light of experience dearly bought through
the panic of 1920 and the recent banking crisis of are now using
utmost caution in their operations.
Whilst good trade bills are
being discounted at such a low rate as approaching that of London
and New York market those industrial firms and traders to whom
advances are considered to become frozen are not now able to
obtain acoomodation even at an extraordinarily high rate.
An
outcry being at present raised in same quarter against the banking
Institution is an evidence of this general contraction of credit.
The fact that the employment of banking fund has been
partial to comparatively long term advance and seCurities is
owing to the lack of circulation of good trade bills.
This defect
is gradually being remedied at the end of August 1927 the following
situation obtained in respect of the clearing banks of the whole
country.
Bills discount
Advance in bills
Yen 1,005,833,000
2,839,136.000
Loans
789,136,000
Overdraft
447,640,000
Securities
2,291,429,000
Call loans
211,998,000
Cash in hand
400,012,000
In the case of leading banks the collateral value dot4
not seem to be less than the loans.
Owing, however, to the
recent financial out burst reacting on the Stock market the
collateral value dropping in many cases and not yet been
replenished there are some banks which have been confronted with
this situation.
The policy of the leading banks is conservative.
The bad debt has been entirely due to circumstances beyond
their control but as it has been written off at each business
year out of its profit it can be safely said that non exists
at present.
Certainly it would have been better for the Japanese
to have itken medicine in 1920 or 1921.
It is our settled policy to return to the gold
standard.
As to the actual time to be chosen, however, we have
to give a mature consideration in the light of experience of last
year when sudden recovery of exchange resulted in unfavourable
effect on business condition.
The presnet attitude of the Government seems first to effect
a fundamental improvement in the foreign payment situation and
arrive at the state of things in which the raising embargo on
gold would not bring about a detrimental influence on the trade
condition before it takes decision on the actual return to gold.
But the question we will have of course to be threshed out when
the political season approaches.
The
crop of
this
year
in estimated ,Koku
61,492,850
Koku
55,582,632
Actual amount of last year
showing an increase
ourselves for
of 161
thus enabling us to
support
the next year.
From the 1st 'Jay this year every spinning mill belonging
to the association having
agreed
on the reduction of operation by
151 is now carrying out this policy.
The Nationalist movement in China is not regarded as
seriously affecting our trade situation which is more affected
by the change in Indian tariff.
No fear is entertained from the competition of Indian spinning
mills in our trade in China in as much as the tariff condition
equally applas.
(P`rictly
ck.
21.
The financing of shipping is limitted to some special
:1-
dential)
banks, the present question is only about Kokusai Risen which
having the gross tonnage of 460,000 has forrowed from the
Industrial Bank of Japan, the Daiichi Bank and the Fifteenth Bank.
Out of resources of the Government Savings Banks Yen 29,200,000
Out of Banking fund
31,031,500
Total
60,231,500
- 10 There seems to be considerable difficulty in straightening
the situation.
At the end of August 1927 the number and tonnage of ships
held up in the principal ports in Japan were as follows:'hips
108
tons
Although compared with the figures of last year namely 83
210,474
ihips and 16,162 tons this was some increase, it is quite in
nignificant in view of the total which numbers 3,259 *lips and
3,673,747 tons respectively.
EXHIBIT
Oct. 3rd, 1927, Tokyo,
My dear Mr. Lamont,
The enclosed is a
document specially
prepared for you, which purports to give you a
picture of the progreso made in the Reconstruction
I thought it
Works of the Capital and Yokohama.
would serve as a form of greetings befitting for
your visitsto our land after what you did in the
most cordial spirit of friendship
and sympathy
for our country to help and promote that great
work wnich our Government and people have undertaken
with
all their energy and resources.
I am, my dear Mr. Lamont,
Very truly yours,
Reconstruction of the Capital and Yokohama
August 31, 1927,Tokio,
The reconstruction works of the City of Tokio and the
City of Yokohama with their adjacent districts (technically
termed "Capital Reconstruction Works") have a very wide scope,
including
the construction of streets, bridges, canals and
the adjustment of land lots as well as the construction of
parks, public markets, sanitary works, supply works of water,
gas and electricity, street railways, sewerages and various
social works.
Among those worke, reconstruction of main streets,
canals and large parks
and a part of land adjustment are under-
taken by the Government and the others by the respective local
authorities
with the financial assistance of the Government.
The estimated expenditures for the works are as follows:.
Works undertaken
by the Government
1 346,192,800
Works undertaken
by the local
Authorities
4 378,919,448
Subsidy.for fire
proof buildings
Y
20,000,000
Interest charges
on the local
government reconstruction loans
to be borne by
the Government.
4
21,694,730
Total
1 766,806,978
(Government subsidies
(Government Advances
To be borne by the
flocal authorities
4 140,746,917
4 67,804,402
4 170,368,129
It will be seen the estimates of the total government
expenditures
amount to 596,438,849 Yen.
Under the present programme the whole works are expected
to be completed in the year 1929-30.
The outline of the reconstruction scheme and its progress
will be explained below.
Reconstruction
works in Tokyo.
Streets and bridges.
The Streets to be build under the reconstruction programme
include 52 main lines and 122 branch lines.
which have
The main lines
than 22 meters each and total
the width of more
length of about 119 kilometers are undertaken by the Government
while the branch lines with
the total length of 139 kilometers,
each being more than eleven meters wide, are to be built by
the municipality, the estimated expenditures being 257,458,400
Yen and 60,852,000 Yen respectively, and 31 per cent of main
lines and 28 per cent of branch lines have already been completed.
The Government have also undertaken to build 112 bridges and the
municipality 308, of which 73 per cent
and 18 per cent re-
spectively have been completed.
Canals.
To facilitate the water trafic construction or improvement
of 13 lines of canals with the total length of about 15 kilometers
have been undertaken by the Government at the estimated cost of
2 ,570,000 Yen.
About 4C per cent of the whole work have now
been finished.
Parks
and open spaces.
In view of the fact that the disaster of 1923 was greatly
aggravated by the
shortage of parks and open speaces, it was
undertaken to construct as many of them as possible scattering
over
the City.
Under tne reconstruction plan three large parks
covering about 55 acres are to be built by the Government and
fifty-two
small parks with the total area of 38 acres by the
municipality, at the aggregate cost of 21,900,000 Yen, twenty-
four per cent of the former and fifty per cent of the latter
having already been completed.
In selecting the site of small
parks the position of primary schools was taken into consider-
ation so as to give tne best facilities to the pupils.
Land Adjustment.
In order to eliminate the great inconvenience caused by
the irregularity of land lots and narrowness of streets in the
City prevailing before the earthquake it was decided to take
drastic measures
to rectify the irregularity and widen the
streets to meet modern requirements.
Under the reconstruction
scheme the land adjustment will be applied
covering about 8580
1923.
to the whole area
acres which was destroyed by the fire in
For the convenience of execution the wnole area is
divided into sixty-five sections, out of wnich fifteen are
conducted by the Government itself and tile rest by the
-
n13icipality, at the estimated cost of 8,750,000 Yen and 49,951,000
Yen respectively.
The land adjustment is
the basic part of the
reconstruction works, as the land required for the construction
of streets canals
and small parks becomes only available after
its settlement.
Though great difficulties were felt in valuing tne interests
of owners and tenants of the lands affected by the adjustment
and in selecting the new
sites to which the tenants should be
removed, the work has made a remarkable progress, and out of
about 201,000 houses and buildings to be removed as a result of
the land adjustment 56,866. i.e. 28.2 per cent have already
been.transferred to tne new sites.
to be completed by
5.
The whole work is expected
the end of the year 1928-29.
Other reconstruction works.
Beside the works already mentioned the following works
are undertaken by the City of Tokyo:
Works
Estimated expenditures
Restoration and reconstruction
of streets and bridges.
16,055,100
Restoration and expansion of
water supply works
4
10,000,000
Restoration and improvement of
sewerages
Y
43,500,000
Construction of garbage and
rubbish clearing station
4
1,850,000
Construction of central
wholesale market
1
15,000,000
crsnstruction of Hospitals etc.
if
3,100,000
Construction of primary schools
1
38,610,000
Various social welfare works
4,525,000
Restoration of electric enterprises
The reconstruction of
40,500,000
1 173,140,100
Total
Reconstruction
1
works in Yokohama
Yokohama was planned in the similar
line to that of Tokyo.
With regard to the streets thirteen lines were to be built
by the Government
and
ten lines by the Municipality at the
estimated costs of 27,782,000 Yen and 6,018,000 Yen respectively.
About 23 per cent of the streets unciertaken by the Government.
and 82 per cent of those undertaken by the municipality have
already been completed.
the Government and
progress
Thirty-five bridges were to be built by
sixty-three by the municipality.
A great
was made in this direction about 60 per cent of the
work by the Government and 76 per cent of the work by the
municipality having been completed already.
The Government is also building two canals with the total
length of about five kilometers
and
three parks covering the
area of about 42 acres at the estimated cost of 7,571,000 Yen,
the percentage of the work finished being 60% and 321 respectively.
Adjustment of land lots in Yokohama is applied to the area:
of 316 acres, about one third of the total area which was
destroyed by the great fire in 1923.
partly
undertaken by
tne Government
As in Tokyo tne work is
and partly by the munici-
pality, at the estimated costs of 4,161,000 yen and 7,179,000
Yen respectively.
The work has made a remarkable progress,
more than 52 per cent of about 19,000 houses and buildings
be removed to new sites
as
to
a result of tne adjustment having
been removed, and the whole work is expected to be completed
by the end of the year 1927-28.
Other reconstruction works undertaken by the municipality
are as follows.
Works
Lstimated expenditures
Restoration and construction of
streets and bridges
7,442,000
Embankment
Y
6,000,000
Restoration of water supply works
I
3,000,000
Restoration of sewerages
1
1,250,000
Construction of Hospitals etc.
Y
1,500,000
Restoration and construction of
schools
1 10,950,000
Various social welfare works
1
750,000
Restoration and improvement of
electric enterprises
Y
8,500,000
Restorations of gas works
1
3,000,000
Construction of Central
wholesale market
1 4,000,000
Total
1 46,392,000
0
The
whole reconstruction works of Yokohama are expected
to be completed by tne
earlier than
end of the year 1928-29, i.e. one year
that of Tokyo.
Reconstruction works in other districts.
Apart from the reconstruction
works of the City of Tokyo
and City of Yokohama, tne Prefecture of Tokyo is undertaking
the reconstruction of roads and schools
of 18,819,000 Yen
and 3,250,000 Yen
at tne estimated cost
respectively and the
Prefecture of Kanagawa is to apply Yen 3,318,000 for
restoration of roads and schools.
the
EXHIBIT
"F"
MEMORANDUM ON JAPANESE CONDITIONS.
1)
Government Finances.
The ordinary budget of the Japanese Government has shown a surplus for many
years, averaging recently about Yen 300,000,000.
In additional there is an extra-
ordinary budget which includes capital expenditures of the Government and of the Government enterprises, promotion of business undertakings, and, more recently, expenditures on account of earthquake restoration.
The extraordinary budget has shown a
deficit averaging around Yen 550,000,000, and after applying the surplus of the ordinary budget this deficit has been met by loans, internal or external.
has existed for many years.
out injuring Japanese credit.
This condition
It is apparent that it cannot continue indefinitely with-
This seems to be recognized by leaders in business, in-
dustry and in governmental circles who agree in principle that in the future the extraordinary budget must be kept within readonable limits.
this will be done for several years.
It is not likely, however, that
The liabilities arising out of "earthquake bills"
and the recent financial panic may result in the issue of a maximum of some 900,900,000
Yen of Government bonds to indemnify the Bank of Japan (and other banks) against losses
incurred by them in making advances for these purposes.
(see paragraph 2, below); and
the Government budget for next year now under consideration includes the issue of an
internal loan of from Yen 100,000,000 to Yen 150,000,000 to cover the deficit in the
extraordinary budget.
While, therefore, the necessity of a policy of retrenchment
seems to be recognized, it is not likely to be undertaken for at least two years.
The
total debt, national and local, is about Yen 75 per capita (including debt contracted
on account of the Government Railways, equal to Yen 15 per capita).
Although the
the United States
country has not the resources or accumulated wealth of Great Britain,
to be excessive
and many European countries, the per capita debt today would not seem
policy of
and the Government finances seem to be in a strong position,- provided a
of the Government is adopted
economy and retrenchment in the extraordinary expenditures
within a reasonable time.
-2(2)
Currency and Banking.
The Bank of Japan has the sole authority to issue notes and is required to
maintain a reserve in gold and silver (of which not more than one-quarter can be silver
er-al to the amount of notes outstanding, plus a fiduciary issue (secured by Government bonds and other approved securities) which is limited to Yen 120,000,000, of
which Yen 107,000,000 are now outstanding.
Any additional issue of fiduciary circu-
lation must pay an annual tax of 6%.
The gold reserve of the Bank of Japan against its circulation is large and
has not diminished at all for some years.
During and immediateWthe
war, however,
the Government accumulated a large gold reserve which it has been using apparently
to protect the Japanese exchange, with the result that this reserve has dwindled
000
000
steadily from approximately Yen 1,000,00q,sin 1919 to Yen 283,009,,on December 31, 1926.
If this condition continues, it is only a question of time until the gold reserve of
the Bank of Japan will be drawn upon.
The Bank and the leading financiers appreciate
this situation fully, and declare that it is the intention of the Government to take
steps to protect the gold reserve of the Bank by restricting imports as far as possible.
The excess of imports will actually be materially reduced during the present year
The exact nature of the plans which it is proposed to take have either not been determined upon or disclosed to us, but the Governor of the Bank is fully alive to the situa
tion and recognizes the necessity of protecting his gold reserve.
The bank failures of last Spring have been second only to the earthquake in
affecting the Japanese banking situation, and both the earthquake and the recent panic
have created conditions the full effect of which have not yet been felt in the currenc,ysituation.
The earthquake was not the cause of the recent banking panic which was due
chiefly to the fact that the Japanese who enjoyed a period of great prosperity during
the war have never gone through a drastic deflation as other countries have done and
taken their losses, but have attempted to carry along all sorts of enterprises which
ought to have been liquidated in 1920 and 1921.
As a result of this, many banks had a
large amount of bad paper and frozen assets, and the situation finally came to a head
last Spring when various disclosures produced a run on the weaker banks resulting in
-3-
the closing of same 240 banks (out of a total of about 1,450) with deposits of Yen
800,000,000.
The stronger banks did not suffer, in fact they benefited through the
withdrawal of depositsfrom the weaker banks.
This situation combined with the "earthquake bills" has resulted in some
legislation of rather startling character.
The Bank of Japan has been authorized to
grant "special accommodations" to banks "for accommodation funds to replenish its reserves for payment of deposits (including fixed reserve funds)" by discounting the
notes of such banks to be redeemed within ten years.
The Bank is guaranteed against
losses incurreduptoYen 500,000,000, indemnification to be made to the Bank through the
issue of 5% Government bonds.
A second law authorizes the Bank of Japan to grant special accommodation
to financial organizations in Taiwan (Formosa) up to Y.2,000,000 for the purpose of
protecting the credit of the Empire abroad, etc.
This is intended for the benefit
of the Bank of Taiwan which is really afGovernment institution with the sole right to
issue notes in Formosa and which closed during the recent panic on account of losses
incurred through scandalously bad management.
against loss by the issue of Government bonds.
under these two laws up to October 10th
The Bank of Japan is again indemnified
Advances made by the Bank of Japan
amount to Yen 290,000,000 of which Yen
185,000,000 was advanced to the Bank of Taiwan under the second law.
There have been
other instances, notably in Europe, of Government support accorded to banks in financial difficulties; but apparently nothing is on the record approaching in extent or
importance this action on the part of the Japanese Government.
Further, the Government has agreed to deliver to the Bank of Japan Yen
100,060,000 of bonds to indemnify it against losses incurred in the past through discounting "earthquake bills" and to loan to other banks bonds up to Yen 107,000,000
for a similar purpose,, this to be repaid in ten years.
It is seen, therefore, that
the Government has guaranteed losses to be incurred through the discounting of "earthquake bills" and of bills of banks which are in difficulties, as a result of the recent crisis, up to a maximum of Yen 907,000,000.
So far as Yen 500,000,000 of this
amount is concerned the question of what banks shall be helped is
practically left
to the Bank of Japan though political pressure will probably be
felt to some extent.
No one can
tell
at present the extent of the advances or the probable recovery of some
p:;Centage of them, and while the salvage may be considerable it seems quite certain
that total losses may be expected to run into large figures.
As the total outstanding internal debt of Japan was on March 31, 1927, Yen
3,470,000,000
(external debt Yen 1,461,000,000) it will be seen that these special
bond issues may mean an increase of one-quarter in the total internal debt of Japan,
and must have an effect upon the currency.
The legislation does not authorize any
change in the law governing currency issues by the Bank of Japan, and Governor Inouye
seems to be hopeful that little inflation will result from it.
It hardly seems poss-
ible, however, that the making of such advances through the Bank of Japan and the
ultimate issue of a large amount of Government bonds cannot fail to produce some inflation of the currency either through 'the issue of additional fiduciary circulation
on whiCh a tax must be paid, or through some relaxation of the law affecting fiduciary
currency.
A confidential memorandum from Governor Inouye relating to the special
advances to be made by the Bank of Japan is attached.
Return to Gold Standard.
All parties declare that Japan is firmly committed to the gold standard and
agree upon the principle of returning to it as soon as possible.
They do not seem to
have resolved definitely upon the time or method of doing so, but it is said that this
will be done as promptly as possible having due regard to caution.
It seems as if the
situation created by the guarantee by the Government of earthquake and banking panic
losses to such an enormous extent must affect the currency situation and would make it
unwise for Japan to attempt to return to the gold standard before the full effect o
is known.
these measures on the currency/
There is no doubt, however, of the firm resolve to
return to the gold standard as soon as possible.
When we asked Governor Inouye his
specific opinion on this point he said that had it not been for the banking panic he
would have thought that the gold embargo would have been already lifted; that now
1
however, it might be one or it might be two years before they would feel perfectly
safe to go ahead.
In this connection he was greatly interested in, and grateful for,
a letter on this subject prepared by R. C. Leffingwell and attached hereto.
(4)
Govdrnment Enterprises.
The Government is engaged in the ownership and subsidizing of enterprises
to an extent quite unknown in Great Britain and The United States
this are historical.
The reasons for
When Japan determined to became a modern nation about 1870 it
seemed necessary for the Government to encourage private industry through various
forms of subsidy and to engage in business itself on a large scale; otherwise the
economic development of Japan would have been much slower.
Further, all Japanese
civilization (for centuries completely feudalized) has a strong tendency to be paternalistic which naturally encourages the people to look to the Government for support
to an extent unknown in many other countries.
The management of the State enterprises
appears to be good with the exception of the telephone which is abominable.
The rail-
ways are said to be profitable, though of course they rely upon the Government to
obtain funds for a large part of their necessary capital expenditures.
The tobacco
monopoly shows a profit of Yen 140,000,000 a year and it is an important source of
revenue. -Government ownership policy however is largely accountable for the increase in
the Japanese public debt.
It seems to be the general opinion in Japan now that the
Government should not undertake any further extension of this policy, but adopt a
policy of retrenchment.
Undoubtedly this will come, but it is extremely difficult
to alter quickly a policy which has existed for so long, and it may be some years before an obvious change takes place.
For example,
it is now being urged in some quar-
ters that the Government should acquire the electric power industry and, to same extent, the electric light industry.
crease in Japan's debt.
Any such action would result in an enormous in-
On the whole, however, it seems clear that serious doubts
exist in Japan as to the wisdom of any extension of the Government business activities
and that in time this opinion will become effective.
The group of responsible bankers
opposed to
and men of affairs with whom we talked declared themselves as vigorously
proposal just
Digitized the
for FRASER
of their influence
mentioned and as prepared to lend all the weight
against it.
Earthquake Reconstruction.
About 60% of the reconstruction is said to be completed.
The balance of
thA,prorgamme estimates an expenditure of Yen 400,000,000which it is hoped will be met
partly by taxation and partly from internal borrowings.
any part of this by external loans.
It is not intended to meet
The work has been effectively done and the re-
sults in the 'districts of Tokyo, Yokohama and surroundings are to the view of the
foreign visitor remarkable.
Few effects of the disaster are noticable in Tokyo, and
probably in another year the same statement will hold true of Yokohama.
Trade and Commerce.
The recent financial panic has naturally resulted in some slowing down in
trade and commerce.
It has not affected it as much as might have been expected.
The
most serious problem for Japan is to reduce its adverse visible trade balance which
has been steadily against the country since 1918, varying from a low point of Yen
337,000,000 to as high as Yen 725,000,000 in 1924.
The excess of imports is now
being materially cut down and for the current calendar year may be as low as Yen
300,000,000, a reduction of Yen 144,000,000 over 1926.
in advance.
This is a considerable step
The effect of the disturbances due to the war in China has resulted in
a general reduction in Japanese trade with China of about 20%, the loss occurring
chiefly in the Yangtse Valley.
If the excess of imports can be materially reduced
during next year, Japan's foreign trade position should be fairly sound.
The estimate
of the rice harvest for this year is above the average, amounting to over 61,000,000
koku and is sufficient to provide for all Japan's requirements, though there
will
probably be some import of the lower grades of rice to balance the export by Japan of
the higher grades.
Japanese Opinion.
The opinion of banking and industrial leaders in Japan
i8
sound.
They feel
that the country should have gone thrcugh a period of drastic deflation in 1921; that
as stated, the failure to do so was the chief cause of the banking troubles; now, however, that the worst of the banking panic is over they believe that the situation is
http://fraser.stlouisfed.org/
well in hand, and
Federal Reserve Bank of St. Louis
that under the leadership of the Bank of Japan sound conditions
-7-
will be established.
They realize fully the problems that must be
met and agree in
principle t at retrenchment in
Government expenditures is necessary; that restriction
of Government enterprises and subsidies is most
desirable; that Japan should return to
the cold standard as soon as possible.
Whether the views of these leaders will prevail over political necessities is another question.
Probably they have the influence
to secure the adoption of their views in large part; indeed
the leaders of the political
parties profess to agree with these views in principle.
Party politics, however, may
Induce the Government to adopt measures for political effect which they
know to be unsound, but in the long run it seems likely that the sound views of
the leading men of
Japan aught to prevail, although as in most countries they seem to have a certain
timidity in fighting even unsound Government measures.
jniversal Suffrage.
Liany of the men to whom we talked expressed some concern as to the domestic pol-
itical outlook because at the forthcominghational election Japan will finally pass
from closely restricted to wide popular suffrage.
They fear that the change may bring
into political control men experienced in neither administration nor business to supplant the experienced and conservative governing class.
An encouraging circumstance
however is that elections in prefectures under the new electoral law have shown no
radical or abnormal tendencies.
Manifestly the country is changing rapidly from a
feudal empire to a modern democracy, but the unity at
these people of one blood en-
courages one to believe that the chance will be effected without serious class strife.
General Observations.
Undoubtedly there are weak spots in the Japanese situation.
Principally the
added expenditure by the Government in the recent financial crisis and the tendency
on the part of the Government to over-borrow for the purpose of the extraordinary bud-
get, and certainly the country cannot repeat the experiment of guaranteeing commercial
losses.
It seems, however, that if the Government adopts a cautious policy, reduces
the expenditures of the extri=ordinary budget, and restricts its activities in owning
and subsidizing enterprises, the situation is sound at bottom.
worst effects of the
It is believed that the
recent financial panic have been experienced and that the situation
Is now in hand, and certainly it is in the best hands in Japan under the leadership of
Covernor Inouye.
over:
No doubt some future setbacks will occur, but the worst seems to be
The population of Japan is industrious, courageous and patriotic. Few countries
have experienced in so short a time two such disasters as the great earthquake and the
recent financial panic, aria a people which can meet both these situations in the spirit
in which the Japanese have met them has great possibilities.
And their ability to sur-
vive them even though some unsound methods may have been adopted to meet the situation
is proof of the
toughness of the national economic life.
'
X1AM.A.
o
Pt/t,,
t,
Special Advances by the Bank of Japan
under Government Guaranty.
Of the two laws relating to special advances by the Bank of
Japan under Government guaranty to meet the situation caused by
the panic this spring, the first provides that when any bank
applies to the Bank of Japan for advances of funds needed for
meeting the payment of deposits, the latter for the period of
one year from the date of promulgation of the law is authorized
to grant the required accommodations, even if the securities
offered be otherwise than regularly admitted, and the Government
guarantees to indemnify the Bank to the extent of 500 million yen,
if any loss be incurred through such operations.
The second
provides that should it be deemed necessary by the Government
for the purpose of preserving order in Taiwan or for the
upholding of the country's credit abroad, financiAllinstitutions
in Taiwan, whether banks or not, are allowed to approach the
Bank of Japan for special accommodations during the next one
year; such advances shall be made regardless of the securities,
and if the Bank of Japan incur any loss through such operations
the Government guarantees to indemnify the Bank up to the extent
of 200 million yen.
Thus, through the enactment of these two laws the Government
undertook to compensate the Bank of Japan for the possible loss
up to the total of 700 million yen in all.
It was not, however,
meant that these 700 million yen shall actually be lent out by
the Bank, and if it should, it does not follow that there shall
2
-
be an inflation of the currency to that same extent.
This may
be seen.-in the movements of the advances by the Bank of Japan
and the note circulation in the following Bank return.
The
highest mark was attained on April 25, then the figures steadily
declined, and to-day the circulation is brought down very close
to the level of the same period of last year, mainly because of
big deposits maintained with us, both Government and private.
Included in the loans and discounts are our special advances
under the said two laws, which amounted to some 290 million yen
on October 10, 185 million yen having been advanced to the
Bank of Taiwan under the second of the said laws.
(In millions of yen.)
Government
Deposits.
Private
Deposits.
234
320
41
1,355
538
338
68
2,659
2,095
410
227
Apr. 25
2,037
1,484
436
226
30
10
1,599
1,223
476
368
May
1,392
1,049
378
20
492
11
31
1,426
991
488
233
11
1,266
868
447
290
June 10
20
1,329
841
434
231
11
30
1,464
810
394
130
IS
1,263
775
417
211
July 11
1,217
761
245
20
411
"
it
1,332
874
400
217
30
1,230
869
532
204
Aug. 10
1,162
854
522
257
20
1,287
864
514
151
31
1,125
838
503
299
Sept.10
1,119
630
294
20
504
"
1,270
479
197
.30
862
"
1,185
847
492
259
Oct. 10
/927
Circulation.
Loans
&
Discounts.
Mar. 15
1,095
31
11
11
11
"
Note
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NORTH HAVEN, MAINE
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40.
Dear Ton:
I did not write you from abroad bout your Inencage to Dean. Jay bocatioe, I was getting home so soon and W,If.1 doing ae littas letter-titri-ting
peezible; also I wwiteci to find out ift..rnt what to
in regt,rd to that French decoration.
i:.f"tcr Dean comu.nicated the
y to you z).1-..:out
moss%.80
ct& to rie I got tbe whole etory in
Partstnd found that unlef.-,e there tz:as trerieue scruple:: at home it ,xould be .a
voy unpolitio thing, for Ill 0 to deFfur or delay accpti.n.;-; it. I: ctz. explain nll
of this more reaiIy vhe:-: I see you than in kritinc z,.e it :IAA, 1..ppef.::- to be
dose of ritttery to my c'hu ego. 11-le fact is, tbe.." have attributed much or
the succees of the progrsm to Lh. dv1c that I /gave them .,0 ye.r E,,,e;0 and
to our cooperation here t the, ibara:. I have told them tht I thouht Uiy,
ov;ed you and your colleagues
LtEi
in.1 Oh if not vore than an; one in the world,
and I think they a1e6 feel that that 5.e true.
lievvrtholeeL, the prosi.Cent
or the Council determined to Co this and appeari-d to 1-..e kcen to co it. rib I
am- writing you donee, if courz:e, wits confidentialy, to let you know that
you can do vlatever you thth vile° ahout
inquired of you.
thir finnl arten.'or to '44'0 u7 0 r
I much appro:ciato that you lire a diecTeot and c_.,:-0Z,21.e,
uch Flatten:, and an grateful for the tact nith elich you have
and I know till handle it all.
5.zbass6,6or in
Ely best regards to you and Florence and to al tbo
. you will havo a good rest.
Sincerely yours,
LT. Thom,g
North L.,1
hope
\
.1
.4.
\
e
cP
kriA
't C-6
September 14, 1925
Dear Ben:
I am starting off for a
little
holiday in the Adirondacks
with my wife and daughter, and am wondering how you are getting on.
Tom showed me a letter from your daughter saying that you were looking
and acting very well and thinking of coming back in October.
come sooner than is wise and sensible.
Don't
You are needed here, right
enough, but needed so much that it isn't right for you to come until
you are quite recovered.
I have been
having a
grand time these two months and a half
of
playing at being a banker.
Everybody,t just as kind as kind
A
helping ma to learn something about my new job.
when you are back.
Benjamin Strong, Esq.
Cragmora Sanatorium
Colorado Springs
Colo.
itiala,be
It will he great fun
February 15, 1924.
Dear Russell:
'
You have doubtless received John Pratt's letter of February 14, la
regard to the engineering societies being associated with the activities of
the Ludget Committee.
Before replying I would like to ask your 1it4 of the pro
similar suggestion or suggestions srose sometime ago,snd at the time
1.
A
ay
opinion vas that the EuOget Committee was organized to devote its kAtention
entirely to the es-curing of' sound budget legislation, Knd in tht connection
possibly advocating a reorganization oz COvernment oepartments, but that it
would not !sasociate itusli necessasily with any particular appeal or repre-
sent :my particular interest.
I cannot say thst my views about thet hsve changed, for it la undoubtedly the case *hat at once the bu4get organization becQmse associated
either in the in of the ;ublic or of Congress sita th6 iatereem OT
activitiss or Vitariii of any particular class or' business or of uny
it subjects itself to the possibility of e misconstruction of its purses.
Vion't you let me no frankly 4uot how you feel tbout it, and I
will taen write John.
Icurs sincerely,
'tr. L. C. Leffingwell,
c/) MOdZ76. O. P. Aor8an 1 Co.,
25 Wall St., Nie York, N. Y.
BS. NN
2,5
Yeez
e/
February 18, 1924
Dear Ben:
I received your letter of Pebruary 15th.
I feel
as you indicate you do about John Pratt's plan to associate
the engineering societies with the Budget Committee.
I hae asked him to let me drop off the Board of
Trustees of the Budget Committee because I do not feel that
i can gi-re him either the time or the financial assistance
which he ought to
have from his trustees.
As I am not in
a position to help him carry on along the present lines, I
do not feel much inclined to oppose any program which he has
for solving his problem.
Sincerely yours
Benjamin Strong, Esq.
15 Nassau Street
New York City
'
/
?MOM
February 19, 1924.
Deer Eueeell:
It wee e eurioue coincidence that imeedittely after our talk
eesterday, Mr. McAdoo should have announced the plstform on which he would
run fol the Freeidency, end that it should contain the following statement:
*The Federel Feeerve plank readet
'To take the grip of Well Street off the Treteury
Depertment and off the Federal Reserve eyetem;
to
restore to the people democratic, control of these
greet finencia inetrueentelitiee an6 to have them
oeerated in the intereet of the people, inEtetd of
iv the intereet of privilege, as has been notoriously done for the pest four years.
'No eeli Street repreeentative, by resident or
proxy, will be eut et the head of the Treeoury
Depertment, er t the heed of the Federei Feeerve
Board.' *
Is this simply a. etatemeet of a demegogue oteo to eilline to lay
aside his cenvictione in order to gain votes? Or ie Yr. Icedoo honestly
convinced thet Sell Street hes secured 8 grip upon the Treasury Department
and the Federal Feeerve System, ,ndthet they ere being operated in the
interest of privilege?
No one is so able to judge of this !As you ere. The roittions of
this bunk /71A the Treceury Department, with the exception of a short period
at the commencement of the war, ethen Mr. Crosby wee in charge, *ere almost
entirely with you personally doen to the date of your resignation, end since
that time until a very recent date, they eere entirely with your former
etsociete to the Treesury, Mr. Gilbert.
The implicatione of this etetement are ta-t since the commencement of the Republica Aminietretion-,of
the Treaeury Department, Wall Street has domimted the Treasury end the
Federal Reeerve Syetem;
that the head of the Treteury Department it e
.Wall Street repreeentAive; end thet the ctuel head of the Federal Reserve
Board ie either a. Wall Street repreeentative or is dominnted by Tell Street.
The implication is thet sore conspiracy or understanding has been arrived
at beteeen soee of the men who have been administering the affairs of the
Treasury and of the Federal Feeerve System since the Republican edministration took office, end CIA the affairs of both the Treesury end the Federal
February 19 1924.
No. 2
Reserve System have been prostituted "in the interest of privilege". Of
course, there is no point at least at the present time in entering into
h newspaper controversy because of these statements and implications. I
hate that sort of thing just ae muoh as you do, but I would be right glad
indeed to learn from you what your reaction is to this public statement by
Mr. McAdoo, and whether you feel that it exhibits such qualifications as
would entitle either you or me to vote for Mr. McAdoo to become President
of the United Stated.
Yours very truly,
Mr. E. C. Leffing%ell,
c/o Xeeare. J. P. Morgan & Co.,
23
all St., Nec Iork, N. Y.
BS.M10
a,23
Ytr,e,e,1-
February 20,1924
Dear Ben:
I received your letter of February 19th
quoting from the McAdoo platform about the Treasury
and the Federal Reserve system.
I cannot believe
that McAdoo personally is responsible for this utterance.
Of course, it is buncombe, and would come with
peculiarly bad gr&ce from McAdoo who himself put Wall
Street men at the head of the Federal Reserve Board
and the Treasury.
/
Ver
Benjamin Strong, Esq.
15 Nassau_ Street
New York City
truly yours
ACkNOW I ,EDOED
MINI-9-1994
rl
March 6, 1924
Dear Ben:
I do not now favor the plan to set aside, or to report,
100% of the reserves as against Federal Reserve notes and the balance as against deposit liabilities -- although I did two years and
a half ago.
The best argument for this plan is that it would furnish
a more sensitive index of the expansion and contraction of credit.
But the plan suggests a distinction which is archaic and
contrary to the weight of the enlightened economic opinion of the
day, between the notes and the deposit liabilites of the Federal Reserve banks.
Deposits are potential currency; and indeed, at least
in this country where the system of payment by check has reached so
high a development, deposits are currency.
As a practical matter, if 100% gold cover were actually
segregated against the notes, and, subsequently heavy demands were
made upon our resources for requirements at home an
abroad, with
resulting expansion of credit, the ability of the Federal Reserve
system to meet these demands might be seriously impaired.
Expanding
credit serves as a force-pump to draw out increased currency, (just
as currency expansion increases deposits).
If there were a high and
rigid limitation on the note issue in relation to gold, it might
become necessary to create emergency currency.
I have no such love
2.
for the old-fashioned expedient here of issuing clearing house
certificates, nor for the old-fashioned expedient in England of
issuing Bradburys, as to desire to see ourselves put in such a
position.
The war time experience in England and America furnishes
a strong argument in favor of the American over the English method.
Because of the practice of keeping nearly 100% reserve against Bank
of England notes and leaving little margin for Bank of England de-
posits, it was necessary for the British Treasury to issue currency
notes or Bradburys.
These have been sticking out like a sore thumb
ever since, notwithstanding the progress which has latterly been made
towards giving them substantial gold cover.
It is desirable that
the central banks should furnish an elastic currency.
Elasticity
means both ability to expand and ability to contract.
It is a mis-
fortune to have a situation such that when an emergency arises, the
elasticity must be provided by an Act of Parliament or Congress.
In
England, in consequence, or partly in consequence of the habit of
requiring substantially 100% gold cover for Bank of England notes,
both the ability to expand to meet the needs of the war, and the
ability to contract after the war, depended upon Acts of Parliament.
In this country expansion and contraction were automatic.
I gather, however, that it is not now intended really to
segregate 100% gold against the notes, but merely to furnish a statement showing what the position would be if the gold were so segregated.
The simple answer to that is that such a statement would not correctlzi
reflect the facts or the law in respect to the reserves.
It ought not
3.
to need argument to show that banks should avoid issuing misleading financial statements.
The assets of the Federal Reserve banks in fact should be
available to respond to the demands made upon them whether for the
redemption of currency or for the payment of deposit liabilities,
indiscriminately.
The statements of these banks should correctly
reflect the facts in that respect and not falsify them.
Very trul y"rs
Benjamin Strong, Esq.
15 Nassau Street
New York City
I
4.
-
4946101t
444
1P417.
Ofr
44>
March 7, 1924.
Dear Suesell:
Thank you very much for your letter of the 8th.
I was
convinced that you would see this matter exactly as I had and am
delighted that you do.
The copy of the leiter addressed to Dr. Miller that I
loaned you is one of only twc or three spare copies that we have
and as I need to use them occasionally I am gang to trouble you
to return it.to me.
With best regards,
Yours sincerely,
Mr. R. C. Leffingwell,
c/o Messrs. J. P: !Wean & Co.,
23 Wall St., New York City.
BS.MM
,e5
34://
ACKNOWI EDGED
LIAR
0 1994
vi S.
March 8, 1924
Dear Ben:
.1 received your letter of March 7th, and
return herewith the copy of your letter to Dr. Miller.
Many thanks for letting me see it.
Very truly yrs
Benjamin Strong, Esq.
15 Nassau Street
New York City
Enc.
CuAL
.
_
.
March 10, 1924.
Dear Russell:
Thank you for the return of copy of my letter to
Dr. Miller, Which accompanied your note of March 8.
Yours very truly,
Mr, R. C. Leffingwell,
23 Wall street,
Now York Cit.
idtxe
Jsnuary 8, 125.
Personals
My dear Ru,4se1l:
I think it eies you uho ,.,sked me in regard to the status
of the ruline, by the Comptroller of the Currency bit', to whether
Section b200 of the l'x,vieedt tut.te a.pplied Ix) a nationai bank' e
ouiner4hip of the ob1ittions of foreign governments,.
Inquiry is being ra e in the bulk a S to what our records
shots, but it mv.),
necee.ry for moto LtiC e inquiry of the
Coml,troller of the Currency when I sr next in 1,ieenington, ittic h *ill
be on ::itt.turday :.)f this
Tould ,±rouialind t:.dvininis me whether your request included
a. request for me to maie inquiry.
'lours Finoer y,
Mr. Ruteell /C. Leffingwell,
23 Wall Street,
New Yoric Ci
January 8, It)25.
Pereonals
My dear 1:c.use1l:
I think it fi,aa you uho asked me in regard to the status
of the ruling by the Comptroller of the Currency 6 to hether
Section S230 of the e,.-,viced i.itatuttis awdlied 'au a national, bank' e
tione of foreign governments.
owner.tip of the
Inquiry is being made in the bauk ae to what our records
Oh° St, hut it mny be !lee t3 8 11.L.,1- y for me to zake inquiry of the
Ccmptrollsr of the Currency when I er next in lisshington, wrich will
be on Saturday of thts
Tonic/ yt,u 111 ii
a. request for ime to make inquiry.
ale whether
.yOUT
Toure sincerely,
Mr. iiur:eell IC. Laffingwell,
23 Wall Strept,
New TIM City.
request included
February 23, 1925.
Dear Busseli:
Some years ago I proposed Mr. Guy Emerson for membership in the Down Town Acne:dation, t.he proposal 'being seconded
by Mr. nerffiann Kinnicutt.
The time seems to have arrived when it is desirable
to tom QO lottors of encernenent on filo tith the secretary,
and I am xriting to avic *hether you know Mr. Emerson %ell euough
and are willing to %rite a letter ia his behalf.
Yo.1 will recall that h ciii very notable
for ue
during the %ar in the Liberty Loan Organization. He was for
some tie a vice presic:ent of tLe ctior.a1Earn: of Commerce, and
is now a vice prssident of the Bankers Trust ComT)any.
nankin' you, I beg to remain,
Sinoerely yours,
Russell U. Leffingeell, Esq.,
40 J. P. Morgan Co.,
23 Mall Street, Sztiv York.
B8.1.4
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Dear Ben:
I received your letter of February
20th and have had pleasure in writing to the
Down Town Club on behalf-of Guy Emerson.
Sincere'
ydurs
(e1.9-1
Benjamin Strong, Esq.
33 Liberty Street
New York City
.6a.
rf)
March 31, 195.
Dear aueeell:
just received a note froll Stettiniva
which I thought -pu might enjof reading.
!Anoarely yours,
C. Leffingwell, Eq.,
ke, tall Ur-bet,
R.
New fork City.
C.
B5.6
23 'r/Z,cr/a
ee
GY),-;?-d
April 1, 1925
Dear Ben:
Many thanks for letting me see Ed's letter,
which I return herewith.
Also many thanks for the most amusing newspape'r paragraphs which came in from you a week ago.
I
had a good chuckle over them,and should hare acknowledged
them before.
Benjamin Strong, Esq.
33 Liberty Street
New York City
Eric.
Go
3OVERNOR'S OFFICE
I
I
ty?2 1925
RECEIVED
I
1, I IA I I /
"
4a_tc:
cet
11,11--r%
4
Confidential
April 21, 1925.
-40
THE SITUATION IN FRANCE
There are in this world many curious things, and one of them is this:
Before the War the internal debt of France amounted to a little over
34,000 millions, or, as we say, 34 "billions," offrancs, the equivalent in our
money of a little under 7 "billions" of dollars.
debt of France is about 280 billions of francs;
-
At the present time the internal
and, stated this wise, this seems
a colossal increase.
But these 280 billions are in paper francs, worth today in gold only a
little over five cents, or in round figures something like 14 billions of our gold
dollars.
On this basis then the actual internal debt of France, in consequence
the War and the vast expenditure since the War, has only just about doubled.
of
In
the same period the debt of the United States Federal Government has risen from
around one billion dollars to about 22 billions of dollars, or somewhat more than
twenty times.
And to all this is to be addeA an enormous increase, especially
since the War, of local debt, municipal, county, and State.
But all this is speaking as if the gold dollar of today meant the gold
dollar of 1913.
As a matter of fact, our index of the General Price Level, or
average of all payments, is now 80 per cent above the 1913 base, or at an index
figure of 180;
which means that the average purchasing power of gold now as con-
pared with 1913 has depreciated 45 per cent.
The gold dollar of then
is worth
55 cents now.
Let us apply this to the figures of French debt.
If this dett on July 31,
1914, three days before the War broke, was worth in gold something like 6,800
millions of dollars, this would correspond to a debt in gold of about 12 billions
now.
On a gold basis then, taking the present value of gold in countries like the
United States and Great Britain, the internal debt of France now is only a slihtly greater relative burden. than when the War broke out.
2
be
But perhaps this is too severe a test.
France.
about
Let us take the internal value in
The average purchasing power of the franc in France today is reckoned at
1/5
of what it was before the War.
In other words, the average of all kinds
of prices is about five times that of 1913.
On this basis the 34 billion francs
of internal debt of France in 1914 would be the equivalent of about 170 billions of
paper francs now.
If we reckon the present actual total at 280 billions, then in
terms of the average purchasing power of the franc the burden of the present
internal debt is a little more than 1/3 higher than when the War broke out,
lind it
is to be noted that it is the internal debt alone which has given the Uovernment of
France any difficulties.
Thus far it has not been concerned in the least with its
external debt.
But in the ten years and more that have intervened since the War started,
arid especially in the six and a half years since the War closed, the commercial
and industrial situation of France has greatly changed, and for the betters
The
generous partitions of the victorious statesmen awarded to her rich domains of iron
ore, potash, and other valuable materials so that in so-called natural wealth
France is today much better off than before.
Foreover, these six and a half years have been for France a time of unquestioned if somewhat forced general prosperity.
It has expended enormous sums
in rebuilding so that as a whole it is estimated that the destructions of the War
have today been more than made good, especially in the sense that obsolete machinery
and buildings and industrial methods have been replaced by new machinery, new
buildings, and much improved industrial methods.
Taking into consideration her added territories and the wealth they have
brought, the real income of the people of
France, fully employed as they have been,
must be now considerably greater than in 1914;
conceivably by at least one third.
In a sense then even if the present debt in paper francs represents the equivalent
of one third more than the internal debt of 1914, relative to income and taxable
1.)
3
----power apparently the present debt is but little, if it is any, greater than when
the -,dar began.
Nor is this all.
The total internal debt of France at the close of the
War was reckoned at about 177 billions of paper francs, as against about 277 last
July
1, and a little more than that now.
The 100 billions and more that have
been added since the War closed have not gone for uselegs pOwder and cannon or the
support of soldiery, but very largely for reconstruction and improvements. The
huge expenditures have meant full time employment for practically all her people
and in the main this money has been collected from her people as a whole and spent
within her territories for the national benefit.
In these same years practically every other great commercial nation has
undergone a severe and in some cases protracted period of industrial and commercial
stagnation, greatly reducing the income of their peoples.
Great Britain especial-
ly, and the United States and Germany and the Norwegian States and Japan have all
suffered in greater or less degree.
The in-
But practically Franca has had none.
-:rease of her debt has been merely a convenient and easy means of taxation.
It is
true that in this same period her floating debt has considerably increased, from
about 54- billions to around 70 billions.
But this increase would represent only
about 300 million dollars at present rates of exchange.
This is not much more
than 1/(1 of tha total tax collected by our Federal Government each year.
In a word, viewed from the outside, the financial difficulties of the
French Government seem greatly overdra-m,
The difficulty would appear to be main-
ly of the sort described in that vague and beautiful word "psychology."
In the
'last three years tha cost of living in France has been steadily rising, from a
little over three times the :rewar days to something like five times.
While in
other countries the cost of living has been for the most part declining steadily,
in France it has been going up, with the same doe;
social disturbance and bitter
feeling against "profiteers" and other shameless recipients of the public bounty,
IA
I
4
110
that always attend.
inflation.
For inflation it has obviously been, even though
this has not been disclosed in the nominal figures.
The nominal circulation of
the Bank of France had been reduced to 35 billions of francs in March of 1922,
At the last account it was 43 billions or less than 1/4 higher.
but this cannot
disclose the real increase, because the general level of prices does not rise by
66 per cent in three years without a correspondingly powerful leverage underneath.
Meanwhile, a desperate pother has been raised because the Bank of France
since sometime last year has exceeded the legal note issue by some three billions
of francs, or around 150 millions of dollars at current exchange:
It is signifi-
cant of the exaggerated state of nerves that this excess issue should have aroused
so much attention, While apparently little or none is being raid to the real
underlying difficulty.
That difficulty apparently is the shaky condition of Governmental finance,
and this appears
to
be due largely to the inability of the succeeding Ministries
to gain tha support of the French people to an increase in taxation sufficient to
provide for them a solvent government.
And this distrust
in
turn seems to be due
largely to the reckless methods of finance which each successive ministry has
pursued:
In Germany in the short space of much less than a year we have seen the
extraordinary results from the adoption of sane financial methods.
It will be
interesting now to see what may be achieved by a Finance Minister who understands
finance, and who is even reputed to have a working knowledge of bookkeeping and
accountancy,
23 WI/
tc1011)
1A-eW--
3
e/ge-Wo-4
"25
May 26, 1925
Dear Ben:
I return herewith the memorandum you gave me a month
ago about the situation in France.
I am ashamed to have kept it so
long.
The second paragraph of the memorandum states that,
allowing for the depreciation of paper francs, the internal debt of
France has only about doubled in consequence of the war, while the
debt of the United States has increased somewhat more than twenty
times.
One can't take that sort of thing very seriously.
The depreciation of the paper franc, though in one sense
it has cut down her internal debt, has been a calamity, not an advantage for France.
I don't take any stock in the get rich-quick
theory that Germany and France in varying degrees by inflating their
currencies and thus scaling their internal debts, have somehow en1
hanced their financial and economic strength.
To rob French creditors
to relieve French debtors may be social justice, but it is hard to
see how it can add anything to the sum total of French wealth.
Furthermore, the present situation of France is not better,
worse, because of the fact that her debt before the war was very
great and very burdensome.
Ibut
The present situation of the United
States is not worse, but better, because of the fact that her debt
before the war was very small
.
'EDERN
11A925
Fig
GOVERNOR..
10 .1
'OFFICE
2
At the bottom of page two of the memorandum, the statement
^".111
occurs that the real income of the people of France, fully employed
as they have been, must be now considerably greater than in 1914,
conceivably by at least one-third.
What if anything France's
territorial gains may prove to be worth to her, I don't know, and I
guess nobody knows.
But her loss of millions of lives, destroyed
impaired, not to mention the devastation of industrial France, is a
real economic loss'of immeasurable importance.
The conjecture that
Ior
France is richer for the war is contrary to all the probabilities.
The first paragraph of page three conveys the impression
that the fact that French Government expenditures since Armistice
have gone largely into reconstruction in some way inured to her advantage.
But isn't the fact just the other way around?
These ex-
penditures have gone only to replace things destroyed in the war, and
the net gain to France is precisely nil.
People in England and
America and most of the other countries of the world have been at work
since Armistice on new construction and production.
The diversion
of French labor from new construction and production to reconstruction
necessary, but when the job is completed it will only put France
back where she was before and where England and America were on
Armistice day.
Iwas
The argument of the memorandum involves a common
enough economic fallacy.
The same argument would imply that some-
how or other Japan was better off for the earthquake which gave her
people a lotrf work to do in reconstruction; or that our'English
friends have been rather stupid not to burn up their factories and
GOVERNOR'S OFFICE
RECEIVED
JUN1 o I. i144
/
r
'EDERAL RESERVE BANK
3.
CTI
flood their mines.
It offers such a simple soluti'on of the
unemployment problem:
!-)
From all of which you will infer that I do not think
much of the memorandum.
However, I enclose herewith a memoran-
dum which deSanchez has prepared, for me commenting on it in
more detail.
My own opinion is that, though France has suffered
greatly in the war and in an effort to repair the damage done
during the war, she is at last turning the corner, and her
situation now is much better than m st people think.
Ver
Benjamin Strong, Esq.
33 Liberty Street
New York City
Enclosures
tr/ly yours
GOVERNOR'S
RECEIVED
OFFICE
ata
oF
JUN 7!. 1925
I)
BANK
RESERVE
-EDERAL
Memorandum for Mr. Leff ingwel 1
The true measure of any burden of public indebtedness is the
proportion of the citizens' revenue which the State demands in order to meet
the annual service charges on this indebtedness. To say that the French
internal debt in 1913 was $7,000,000,000 and. that at the current rate of
exchange the ores ant debt is equal to only 14,000,000,000 is true.
To
measure the increase of the French public indebtedness by the increase in
the debt of
the
Federal Government of the United States from $1,000,000,000
to $22,000,000,000 in the same period is to make use of false .analot7 since
a public indebtedness of $7,000,000,000 in Frame in 1913 was probably a
'greater burden for the French people than is a debt of $22,000,000,000 for
the people of the United States now.
In attempting to compute the value of the present debt of France
and the United States in terms of gold of the pre-war value use is made of
an index figure of 180. By what pro cess the use of this figure was decided
upon is not stated. The index figure of the United States Labor Board in
1924 averaged only about 155 % of the 1913 level.
The United States Labor
Board index is considered. by most American, English and European economists
to be the most accurate available for the United States and one of the
most accurate in the world. If its index figure be accepted the gold dollar
has suffered not a 45% but about a 34% depreciation. 77hatever method of
calculation be adopted, it is probably a mistake to a.ttervt to prove that
the present paper franc debt in terms of pre-war gold does not represent a
relatively greater burden for the French people than did. the public indebtedness in 1913.
For if the actual tax receipts in 1924 be converted into gold.
-2-
of the pre-war value on the basis of the Labor Board's index it will be
-
seen that the tax burden has increased by 26.1%.
In the meantime the cost
of maintenance of the navy, the var and the civil departments other than
the Department of Finance has been ncluced, the add iti onal revenue being
v/holly devoted to the carrying charges on the public debt.
It is, of course, impossible to measure accurately the national
income of any state.
The average of six estimates made in 1913 by three
French, two English and one German economists* gives a figure of 40 billion
francs for the national income of France in 1912.
Over
of this sum was
then required to carry the burden of public indebtedness. This percentage
did not include provision for adequate sinking funds on the bulk of the
perpetual deb t.
Caillaux's original intention in introducing the income
tax in France was to devote the proceeds derived from this tax to the reduc-
tion of the public debt.
Post-war estimates of the national income of France are /iable to
an even greater margin of error than those made in the pre-war period of
currency and price stability. While it is true that the Versailles Treaty
restored Alsace-Lorraine to the French, it is hardly safe to assume that
this restoration has compensated for the losses suffered by the French
through the destrixtion of plant and property in Northern and Eastern France.
It is necessary to recall the fact that during the four years of actual
hostilities the riches t industrial area of Frarr e (from which was drawn
about 75% of her pre-war industrial output) was occupied by the enemy and
that all inc one formerly derived from this area ceased. Again, in 1913,
although the French had an actual adverse trade balance of nearly $300,000,000,
they invested abroad 4T4')0,000,000 as the result of favorable credit items on
international 1 account.
By far the most important itEm in this account was
* Gide, Thierry, Rauch,- Stamp, Carman and Lichtenberger.
3
the bulk of Intl ich
the income derived from previous foreign 'nye s en ts ,
Prac tic al ly
were in Rtrsi a, Central, Balkan and 'ear-Eas tern Europe.
bad
the whole of these investments must for the present be considered as
The present
debts. They have produced no income for nearly ten years.
$60,000,00C .*-
revenue of the French from investments abroad can hardly exceed
Furthermore recons traction of the devastated areas was only completed
felt in the
vzi thin the past year and its effect cannot yet have been fully
recalled that every
income of the people as a whole. It should also be
a
holder of internal bonds purchased before August 3, 1914, has suffered
Considering
loss of 4/5 of the income which this bond formerly produced.
not
the losses and gains of the French in the past ten years, it does
to accept the estimate of the Financial Secretariat of t he
seem unreasonable
League of 7Tations , an es timate accepted by the experts of the French
a
real
income
of the French people in 1923
of Finance, that the
about equalled their real income in 1913. On the
and
probably
in
1924
I::inistry
the
basis of this estimate the French last year made .a contribution to
gold francs ) of thei r
State of somewha t over 5.5% (2,300 mill ion pre-war
national inc an e for the purpose of carrying the service charges of the
public deb t.
The French public debt has obviously reached proportions which
the part of the taxpayer beyond those which have
require sacrifices on
Considering the large rercentage of the
debt which is floating debt, confidence in the handling of the public
finances is imperative. The lack of confidence which the French people
management of the public
have recently displayed in the Gov eminent ' s
they have
finances is based on their gradual realization of the fact that
already been 'demanded of him.
*Estimate of the French Ministry of Finance.
-4-
not escaped increased taxation but that this increased taxation has
taken the most ineouitable arid destr-xtive form that taxation can take,
that of inflation.
The achievement of a balanced budget, the funding
of the floating debt, and the revaluat ion of the franc are not ins ol vable
problems.
Their solution, however, continues to depend primarily upon
competence and courage in the administration of the 7.Iinistry of Finance.
April 28, 1925.
J. A. '1. de Sanchez.
June 4, t.)25.
Dear iussell:
.1 uia not EA ei.I.11 to burden you with
ritin
a lon,-;
letter t,onaicnttri on that French megic.)randult; nd I do not
now at to burden you with a lune, letter tu eeac. commentin8
on your letter'.
But there are two or three ..-tatemento in your
letter whi ch I think on further no idrutIon you iniht
an*t, vy uol,
t soave:1i en t. o pu ni
rcvie, ,s,ne, t,
to hu,vc another. talk with you about it.
You and your aeaociates are eo coneiderably 14terested
in that situation that I oelive it, kouirlb uuui.O.::
fjti
peruonefly held firaly to the c,onvitLiou that the Loprecistion
n tne 2hpf:r franc aid not very 6,re.i.tly ii..ihten the Lurdan
è1 tte internal debt of the French GO V es r
FAI
Other
iereJ, hut
consequences of infia4loa, 01 oouIsc:, muutb
point of view of the French
ii a, particularly iron,
uruen o. te uowe,:tiu
1
been io.eatly elta66ierateta iu the jub1Iumind.
Sincerely,
23 de11 Street, ,*T1 Y'Yrk.
November 2, 1925
Dem- Mr. Leifingwell:
Confirming my talk with your secretary over the telephone thin morning, I should 1,9-,:rocite your eendin (over your
rir,) the accomptinu cable from GovPrnor Strong to
S. Parker Gilbert.
Faithfully yours,
E. 0.4SE,
Deputy Governor.
Mr. R. C. Leffingwell,
C/o Messrs. J. P. Morn & Co.,
2$ Wall Street, New York, N. Y.
f i.acylotquM
Vac vaarceiP
as nalq eAT
Novedber 2, 1925.
01A OW las
4/4a4sb at
Ova welt 0
Dear Bui.sell:
ebco Ivo%
;ossid *alit
0.0
Please accept my thanks not
only for strranging to get the message
from Gilbert to ma, but for your kind,
nests in having a reply sent over your
wires in code. In these matters it is
most helpful to avail myself of your
kind offer.
As I as obliced to have the
message telephoned to New 'fork for trans-
mission to you, I want to confirm it
herewith*
"Cable 83983 October 31
through J. P. Morgan and Company transmitted to Strong in Washington Who sends
following reply "Various protests have been
made to Department objecting to letter
and raising question as to its wisdom
and propriety. Schacht is here cooperating in effort to develop a new plan by
which discrimination in German State and
Munioinal borrowings will be effected in
Germany under wenervision of Beratuags...Stelle.
The plan seams satisfactory in Washington so fax
and we are awaiting preparation of procedure
in detail. Will write imlediately on return
to New York."
irvaG
Will you be good enough to ask
your code department to send a bill to
Miss Bleeoker?
Sincerely,
al semaw
Icifse Sie
to bmti.
st ehacFiecra
o* no!se.,tm
10,1we.xen:
R. C. LAffihgwell, Esq.,
Allrotd4
o* be*Ilm
Antmclio/
c$ obAsm
aslam be
hqcmq boa
tle
anl
slab daidw
23 wall Street,
New fork City.
NoveMber 2, 1925.
Dear Mr. Cases
To confirm the cables telephoned
to New *fork for trancmission
to Kr. S. Parker Gilbert
through 3. P. Morgan a Co.
in their code
and
to Governor Norman, under
our own usual confidential
safeguards
I an attadhing the original draft.
When
it has served your purpose, will you please
return it to my office,
A direct confirmation has gone
to Messrs 3. P. Morgan & Company.
Very truly yours,
Case, Zsq.,
Deputy Governor, Yederal Reserve Bank,
33 Liberty Street, New York.
segolo0
°Al/v1.17W24
November 4, 1925
Dear Ben:
I received your letter of November 2nd.
The
cable was sent Monday, and I send you hereWith a copy
as it was'received and sent.
It seems to check with
the text of your letter except for two apparently immaterial clerical errors.
Very trul
Si
Benjamin Strong, Esq.
Federal Reserve Board
Washington, D. C.
Enclosure
yours
1-75M-9-23
el-61
444,, &)
FEDERAL RESERVE BANK
OF NEW YORK
FFICE CORRESPONDENCE
DATENovember 19, 1925
192
s,,BLLGIAN NEGOTIATIONS - PRIVATE
OM
Benj. Strong
As a matter of record:
After the directors meeting today (November 10, 1925) I explained
in some detail to Mr. Young the exact position of the Belgian negotiations.
He stated that he regarded it as most important that J. P. Morgan and Company
and the Guaranty Trust Company should understand that we had not in any way
withdrawn from our position that we desired to help, even though the circum-
stances, principally those having to do with the budget, had somewhat changed
the form or character of the transaction now being considered, or found to
be possible.
Thereupon I called Mr. Leffingwell on the telephone and stated to
him that I was anxious that there should be no misunderstanding about the
position of the Federal Reserve Bank.
That we had been considering a plan
for Belgium under which it Was our hope to buy $5,000,000 of bills from the
National Bank, or even more if the situation justified it; preferring that we
should do so in cooperation with other banks of issue in Europe, so as to
additionally strengthen and fortify the Belgian monetary position.
That the
- -
criticism by J. P. Morgan and Company and the Guaranty Trust Company of the
Belgian budget was a subject which naturally arose between them and the Belgian
Government, with which we were not dealing, and of that they must be the judges.
But that notwithstanding what they had learned and stated about the budget,
I did not agree with them that the position was such as to justify withholding.
In fact, that on some of the poirts as to the budget, I thought the position
they had taken was not wholly well founded, and, therefore, I did not want to
be understood as assenting to it;
and that our attitude in regard to assistance
C
.1
1
:.
13
FEDERAL RESERVE BANK
OF NEW YORK
CO''F10E CORRESPONDENCE
To
FROM
DATE
SUBJECT
November 19, 1025
Belgian Matters
192
Private
2
Benj. Strong
by the Federal Reserve Bank remained unchanged, notwithstanding the views
they had expressed.
That I was proposing to send a cable to the Bank of
England this evening, outlining our position.
(see cable 28)
This was the substance of a considerably longer talk, in the course
of which Mr. Leffingwell explained that he had greatly modified the terms of
the cable which I bad seen in their office, and to which I had objected.
He
said that if it were possible to get it prepared he would show it to me before
I left.
At about 6:45 p. m. be called me up to say that the Cable had
only then been completed, with many changes, and that every objection I had
made to the earlier cable had been eliminated, and that he was careful not to
say anythirg that would appear to commit me to their conclusions;
to me theist of part of the cable.
(copy since received)
and repeated
Thereupon I
gave his the substance of our cable (#28).
In the course of my earlier talk, Which I repeated in the later
talk, I said that I could not refrain from stating that I thought it was a
mistake to send anything like a final expression of views until after the
Friday meeting in London, nor, indeed., did I see how it was possible for them
to decline assistance based upon criticisms of the Belgian budget until they
had personally had opportunity to get an answer from the Finance Winister as
to the points criticized.
Furthermore, that my own feeling remained
unchanged, as expressed in cables sent to Governor Norman and his cables to
me, that we could not just now afford to see the Belgian monetary situation
break down.
23
WY/
June 27, 1927
Miss H. S. Bleecker
Federal Reserve Bank
New York City
Dear Hiss Bleecker:
Following are the various officers of the
National Budget Committee as listed in February 1925:
Trustees
John W. Davis -R. C. Leffingwel15-3
v Samuel McCune Lindsay
John T. Pratt
I/ Benjamin Strong
t"11,4A
/Paul M. Warburg
5-4.6_1_4
Officers
John T. Pratt, Chairman
Samuel McCirne Lindsay, Vice-Chairman
SJ,
V. Henry L. Stimson, Treasurer
,C,A,A,LA-41
/Wm. M. Chadbourne, Secretary
A
dato1114
atyw
V
Directors
A. Arnold,
Seattle, Wash.
John P. Burke,
Los Angeles, Cal.
Nicholas Murray Butler,
ul.
c
-.Y. 'City
William M. Chadbourne,
N.Y. City
Charles G. Dawes,
Chicago, Ill.
Walter S. Dickey,
L'ansas City, Mo.
A. B. Farquhar
York, Pa.
H. Fries,
Winston-Salem, N.C.
Leroy Hodges,
Andrew J. Peters,
Boston, Mass.
Richmond, Va.
Frank O. Lowden,
Arthur N. Pierson,
Westfield, N.J.
Oregon, Ill.
W. Norris,
Henry L. Stimson
Philadelphia, Pa.
N.Y. City
Albert L. Ordean,
Frederick S. Whitwell,
Duluth, Minn.
Boston, Mass.
Very truly yours
A_
eYre,,,,?-Y,04
June 28, 1927
Dear Ben:
I received your letter of June 27th, with
the enclosed resolution about John Pratt, for which
many thanks.
I am glad you are writing to the other
National Budget Committee members.
I am grateful to
you for your initiative in the whole matter.
Benjamin Strong, Esq.
Governor, The Federal Reserve Bank
33 Liberty Street
New York City
kr\
September 27, 19 27.
Deer Russell:
Thank you for sending me the enclosed. The project of
Sater come over wi,.;.8 augiseetsd on our jachtings,
etruck me as excellent in every way. I ao not see hot Le can bet
e. first hand appreciaticn of the problEm/s which we discui)sed then
of us from now ont,eacvt by such a
rind which till be before
visit end, of course, there was a ;:!elfish point of view in my on
dewire to have a chance for
talk WI him. But I can understand
the difficulty, and have not thought of pressing it.
Sincerely yours,
Er. h. C. Leffingwell,
23 Nall Street,
New York City.
BS/RAH
enc.
September 27, 1927.
Deta. Russell:
tiank you for 3:.incilrit; MT the enclobed. The project of
havinti, Salter come ov,-.A. 4-8 aug,sest.a-ci on our yachting trip, an,.
struck- at as excellent in ev3ry
y. I co nGt eee bO
firet hand appreniatical of th:.: problems which w
ie can et
1iouied then
and v,hiat. Aill be before all of us from no* on,..,ace,pt, by such a
visit and, of course, th..!re was
deeire to have a chcnce for
ltith point of view in my own
talk with him.
But. I can understand
the difficulty, v.nd have not thought of pre,sing it.
Sincerely yours,
Er. h. C. Leffingivell,
23 Nall Street,
New York City.
BS/Ftgi
enc.
2
Y//,e
(i6 e
November 11, 1927
o
Dear Ben:
I received your letter of November 9th, with
the enclosed copy of Mrs. Pratt's letter.
grateful to you for letting me see it.
I am very
I was fond of
John and greatly admired the enthusiasm and tenacity
with which he stuck to the budget idea until he put it
across.
Benjamin Strong, Esq.
33 Liberty Street
New York City
November 14, ISM.
Deer Russell:
I accept with pleasure your invitation to sit at
your table during the dinner of the -loademy of Politicel
Science on Friday evening of this 'oeex.
Sincerely yours,
Mr. R. C. Leffingsell,
23 Ian Street,
or City.
trr
S.S. "Minnetonka",
December 10, 1927.
PERSONAL
Dear Russell:
The week.-end book was a ten-strike.
Some of those sonnets
and poems are really gems, and I have just finished reading them all,
but I have not sung the songs, for reasons which I believe you will
understand.
It was most thoughtful of you to send me this little gift
and the good wishes which accompanied it, and if I can "come home with
the bacon" I will be more than satisfied.
Norman cables that Stringhar reaches London tomorrow.
We
will get in Monday afternoon, the 12th, so I expect the party will be
finished and I shall be able to
get
back home before the first of Jan-
uary.
Best regards to you and to the family uptown, as well as your
partners downtown, and a very merry Christmas to you all.
Sincerely yours,
Mr. R. C. Leffingwell,
23 Tell Street,
New York City.
DS:II
Fetes Park, Col.,
August 24th,
ky dear Jack:
It Was very good of you to telegraph me and I was g
to be able to send a favorable
report about my;Jvn
progress.
Dr. Sewall is quite
me out here for some time.
,It in too bad that the
failed to cover the
present
encouraging, b tl expects to keep
n 4nt to the
0
Knowing the temper of Con.
present/pos
//
ayten Act
n regard to the admisoio
of trust companies and state ba
gress as at
condition ar
that no effort to amend
the
1
Clayton Act in thii, respect w4uUi succeed, at any rate at t.is
session. v,5,1nliou
(
Nelovi)er
so muc
difficulty in agreeing
___--
pproporiatio *ills, in fact, Congress is so cloc;
with ipIortnt 1 ' lation that there see)Is some doubt of the
upon th10(
Pr-
i
nibus b
akin4i,dortain
serve Act.
be done
em.
necessary amendments in the Federal Re.
It may be that at the December sesoion something cm
and with that
in
view I am going to prepare a little bri,
outlining the difficulty and recommending some amendments in con.
aection with which I would like right
tttat may occur to you.
well to have any suggestio
I hope very much that Billy Porter continues to improlr
It wue a great shock to learn of his illness and no one realize
more than I what a lose it must be to you and your partners.
With warmest regards to you all, I am,
J. P. 'organ, flee.,
23 Iall Street,
New York City.
Faithfully yours,
PERSONAL AND CONFIDENTIAL.
EstesPaY4, C01.,
AkitiV/ii
31 et,, 1916.
5T1
Dear Jack:
it will soon be five months since I wnprin London dis-
cusuing the
with the
I
preliminary outline of our propose
arrangements
Bank of England, and have no diiiitt-tha Nord Cunliffe
and his associates may now be wo,s4;f-i-iihether
matter, particularly,
possibilty of a final conclusi n
as they know that I am in ill i
I an writing to advii*Kiou
inquiry should be
d
'the
te is any
orado.
On that Account,
two of the matter in case
de of you.)
On-myret\omJ4,Ipe, the following things had to
be don01144fore it was possible to make
any move towards start-
( 1
ing
thA
rrangemenit)in operation:
It/The Federal Reserve Act had to be amended
reserve banks to purchase bills
having 90 days to run, "exclusive of days of grace,"
(the words qufted not appearing in the statute in
Section 14, under wnich we get our power to buy for-
so sa_ter'authorize
eign bills).
A second amendment was desirable authorizing us to receive deposits and act as correspondents
for, banking institutions which we appointed as our
(Otherwise
correspondents in foreign countries.
any funds held for such institution would have to
be in the form of earmarked gold.)
it was necessary to obtain the approval
of the Directors of the Federal Reserve Bank of
New York.
It was necessary to
of the Federal Reserve Board.
obtain
the consent of
-2To
J. P. Morgan, Esq.
Aug. 31, 1916.
It was probably necessary to get some
sort
of approval or disclaimer of interest from the State
Department.
It was necessary to formulate some plan by
reserve banks could operate together under the direction of the Federal Reserve Bank
of New York.
which all 12 of the
The status of the above matters is at present as follows:
1.
I am just advised that the amendment as to
days of grace has been incorporated in he recommendations made by the Conference Committeel f the House and
Senate, end if
correct, the ame dment will undoubtedly pass at
that is
this session.
The same applies tec-tire---tumen
to our receiving accounts for foreign i
The Director/of
New York have approve
I
ent in regard
itutions.
Federal Re erve Bank of
the p
The Federal
ve Board has unanimously
consented tortate-pIccn,
/
Department/.
action
e schem
tte ye
eon taken by the State
or management of the account
has been lai6 out and I
Ink will be'-tdopted, subject to modifications in
e 12
d'erme---4frnke
etailu.
will
will be ti
her from the above that if, as I anticipate
aiwt/he final necessary
approvals are received and
the bill now before Congress is signed by the President, it will
become possible for us to actually put the arrangement into effect some time this year.
On account of your relations with the bank in New York,
as well as ybur part in the negotiations in London, it seems de-
sirable that you
should be fully posted as to
this matter, and if
the progress
you think the situation justifies
in
it, possibly
To
J. P. Morgan,
you would
Aug. 31, 1916.
7. .ect.
be willing to cable or write Lord Cunliffe indicating
that progress is being made, although it has necessarily been
Blow.
doubt if the bank
in New York will be disposed to
undertake transactions, notice and approval of which must first be
conveyed to the Board in Washington, without my giving an unqualified recommendation to do so, and outlining somtwhat the character of the bills to be purchased. Before don so, 1 want the
best*inttns 1 can get
1
jraw-louilljr
1
in regard to
rtified the
sterling exchange position in for.--turat\ Fan*
/'
-
As nearly as I
can47
\\
,----
her,
\
e present
mport point of
d ,407 and I am going to give
z
pre'So t exchange situation, asking
gold ia-lomewhere between $44
you my best guessa .16-1
you if you willcret it
!
to do so and give.
far
you feel able and willing
(
your colOa viewe as to what may transpire this
Fall.
surmip that France now has a total credit in New
York ked, cr d by the recent loan of $100 000,000 and by
various oigizerial credits of which I have been advised, 04I also surmise that
gregating possibly $100,7)00,000 in all.
the proceeds of the sale of the English notes togetter with
the unused t50,000,000 bank credit gives England a total drawing
account in New York to-day of 300,000,000, not counting some
of the gold recently imported and which I judge has not yet
found its way into bank reserves. I would, also, suppose that
England has unused but available, American and (her securities
Aug. 31, 1916.
J. P. Morgan, Esq.
To
which can be converted and used as collateral in this market,
amounting to anywhere from $100,000,000 to t200,000,000.
I
would, also, assume that Russia had considerable credits here
as to the amount of which I would not hazard a guess.
let um say, that
In all,
there is $500,000,000 available, possibly more,
This is, of course, a magnif-
for us to meet the Fall demands.
icent preparation but still I have some doubt whether it will be
sufficient to meet the enormous demands which willflertainly be
made upon us during the present period of the off
and
possibly,th-preparing for
-Thin:e
more extee-i_ye
if, as I surmise, these three nati
movement,
ent next year
'\.to contin
111(
he volume which the
our raw materials, etc., in anyl\
Government reports
iive
indicatsA_, Ita o,
seems likely that there
,
Fall and at pretty sub-
will be a large movemeyrt of calOon
t, view of t ) above, which I admit is large-
stantial prices.
t me,41.fied my feeling that the
I h
ly suppos
eets ofA4r banks and our
merits
the Ban,k/hif
/
inter-
exporters may require that the arrange-
England
-,sAuld'very much
be put into operation this Fall.
appreciate your
writing me,
in 'confi-
donee, if necessary, the best expression of your own views wnich
you can give me.
Of course, we would
not
undertake
the purchase of ex-
change, except at some margin below the gold import point, and
I would appreciate also the best calculation you can give me of
the cost
of gold
an American bank.
,
imported from
England
at the present time by
independent, of course, of the operations of
To
Aug. 31, 19164
3. P. Morgan, Esq.
the British Government where special facilities and special ar
rangemente for transportation may be made which would result in
a cost
quitf
different from that applying to the cost to an Am-
erican bank.
Please pardon this long letter, but I am so far from
home and out of touch with matters that I need the best
mation you
can send me before going any further i
hope you are well.
Unfortunatety,1
up for the past week, but hope to be artrun-dagai
My warmest regards
Sin
J. P. Morgan
23 Wall qtt
New Yory?ity.
B3/VOU
Pvt.,
to/46ly
our pnrt
infor-
ith our plans.
have been laid
n a few days.
0
Wr7-e&bif
*
c27)6v- 0-4
September 7, 1916.
Dear Ben:
I have been very much interested in your letter of
August 31st.
In regard to your summing up of the exchange
situation, you are a little short of various facts, owing to
your absence:
First - The French have spent pretty well all the
money they have here.
There are some commercial credits,
and they hope to make more, which vfill give them perhaps forty
or fifty million dollars if they get them;
but the French
exchange situation is not as good as you put it in actual
dollars, but has been much bettered by the recognition on the
part of England that they have got to help out if necessary.
In regard to British credit,
to say.
it is more difficult
They had made short time and call loans here for a
considerable amount, to pay off which was the first use made
of the recent $250,000,000. transaction.
bank credit has been used.
The
50,000,000.
On the other hand, they are at
the moment shipping vast amounts of gold, which you guessed
rightly has not yet entered the bank reserve situation.
amounts to some seventy odd millions so far advised.
This
England
has a larger amount of possible collateral than you have figured
on, but to what extent I do not know.
I think the gold importing point is now somewhere
2
0
about 4.75*, owing to cost of freight and the large insurance.
The British Government does not intend to allow exchange to
go far below this, and I think it will succeed in this attempt,
in which we all wish to help as much as possible.
That being
the case, however, your operation will really have to take the
shape of an interest operation, more than an exchange operation,
although there may be a substantial rise in exchange in the
spring.
The requirements for raw materials show no signs of
falling off, and they evidently expect the war to go on for
another year.
is now
0,
to bills.
advise.
On the other hand, the Bank of England rate
which may influence you;in the decision in regard
I do not think that it is worth while for me to
If the Federal Reserve Bank is going to take any
steps under your arrangement, I should think a month or six
weeks from now would be quite time enough to do it, by which
time we Should be able to measure the question of domestic
demand for money.
So far as I see now, that demand is much
less than ever before at this time of the year, owing to the
Western and Southern banks being extremely flush of money.
For your information, a New Orleans bank, which ordinarily
at this time of the year borrows all it can get from its
New York correspondent, requested that New York correspondent
to lend some money for it at 90 days, and 6 months (this about
two weeks ago).
That is only an indication, but it is a
pretty strong one to my mind.
0
I am, personally, very well, but much concerned to
hear you have been laid up.
Please telegraph me when you
get this letter that you are better.
For your confidential information, Davison is now
on his way to London, and I shall follow him in about two or
three weeks.
I am, naturally, not saying very much about
It as yet, but it will give me an opportunity of seeing Cunliffe,
and I can impart your mind to him, if you wish me to do so.
All going along very well here, and the English Loan
has been a tremendous success.
We are much encouraged by it.
With best regards and wishes for your prompt recovery,
I am,
Yours very sincerely,
Benjamin Strong, Esq.,
The Lewiston,
Estes Park,
Colorado.
lirri
APR2
1913/3
THE LIBRARY
EAST 36Th STREET
karch 29, 1917.
NEW YORK
you have such a plan do let us see if we
can't carry it out.
Dear Ben:
With all good wishes for your
continued progress towards health, I am,
Yours very sincerely,
I was glad to get your letter of
Uarch 16th, and to see from it how thoroughl
well you are getting on.
I wish very much that you could be
here (more than I can begin to tell you in a
letter);
particularly, as perhaps the bank-
ing fraternity here in New York might be
Benjamin Strong, Esq.,
4100, Liontview Boulevard,
Denver, Colorado.
able, through your position with the Federal
Reserve Board and the confidence they have
in you, to prevent some very foolish things
being done, and one or two gross abuses of
power which have shown up lately;- but all
that will have to wait until we can meet and
talk it over, which I hope will not be too
long.
Your suggestion of a meeting as far
East as you are able to come within a short
time, sounds good to me, and the next time
iD-2- 213
.Library
U.S. Senate, special Committee Investigating munitions Industry
Hearings, Part :2, Feb. 6, 1936(Was1iington, 1937)
(C 0 P Y)
EXHIBIT No. 4171
[From the files of the late Benjamin Strongl
23 WALL STBEET,
New
Yo4,
April
23,
1917
BENJAMIN STRONG, ESC.,
11.100 Montview Boulevard, Denver, Colo.
DEAR BEY;
I am very glad to get your letter of April 17th.
I do not know
anything about ainliffe's plans yet; indeed I am not sure that he himself
does.
I rather think you will have to communicate with him direct.
I have heard a' very good deal about the movement of the tr
and State banks in the West, that you speak of.
t companies
I think it highly probable
that such a move would have success here if the Clayton law were repealed; also,
perhaps if the Federal Reserve Board showed some sign of considering its
important member banks, it might have an influence in the feeling of the
non-member banks.
Perhaps at this moment, when we are all being threatened
with financial catastrophe
0
the imposition or enormous taxes on the top
of large bond issues, it is not just the time to work up a campaign of that
kind.
Perhaps by the time you come back, about June 1st, things will have
shaped themselves so that we know more where we are; and, in that case, we
might be able to get up something of a campaign on the lines you suggest.
I am very glad to hear that you still intend to return about the first
of June.
p
Yours very sinceeely,
f
r
J.P.MORGAN (p.104E9)
[Apparently a handwritten letter as Cunliffe spelled incorrectly and an of is
made an or. Not in the Strong Papers in 1962. EIIN1
lOn p.VII letter is given as"From the files of the late Benjamin Strong" and the same
on p.10423]
[Also given as Exhibit 3159, p.95590.UaTt 70. On page III, listed as from
"Personal file, Strong and the same ofis1):7526]
23
,
te&b",-
-April 23, 1917.
.elite-617 709-"L
Dear Ben:
I am very glad to get your letter of April 17th.
I do not know anything about Cunliffe's plans yet;- indeed,
I am not sure that he himself does.
I rather think you
will have to communicate with him direct.
I have heard a very good deal about the movement
of the Trust Companies and State Banks in the West, that you
speak of.
I think it highly probable that such a move would
have some success here if the Clayton law were repealed;
also,
7
perhaps if the Federal Reserve Board showed some sign of considering its important member banks, it might have an influence
in the feeling of the non-member banks.
Perhaps at this moment,
when we are all being threatened with financial catastrophe by
the imposition of enormous taxes on the top of large bond issues,
it is not just the time to work up a campaign of that kind.
Perhaps by the time you come back, about June 1st, things will
have shaped themselves so that we know more where we are;
and,
in that case, we might be able to get up something of a campaign
on the lines you suggest.
I am very glad to hear that you still intend to return
about the first of June;
pwter-r;
Denver, Colorado,
April 17, 1917.
My dear jack:
I learn that Lou. Cunliffe is exoected to reach New York in a
few days and doubtless will make his headquarters in Washington.
It is
highly desirable that I should have a conference with him before he returns
home, and I an planning to go ,,ast for the purpose, eve,: if it is necessary for inc to come back to Denver after seeing him.
1
Ara you well enough acquainted with his plans to be able to
advise me whether 'ae will be hero until after the date of my expected
return, about June 1st? IfInot, I want to arrange for a flying trip
east before. then.
Possibly you have been advised of a strong movement amon the
Trust Companies and Ttate Banks in come parts of the West to take member-
ship in the Vederal naserve 3yetem. Do you think the tine has arrived
when we should unAertake t7') start a similar movement in Now.,York?
Best regards to you and your partners.
Very sincerely yours,
J. P. Morgan,
23
Now York City.
15S/CC
Denver, Colorado,
April 2, 1917.
Dear jack:
F:lany thanks for your note of the 291h.
at any time. on a few
occasion to
bein
I can
o to Chicago
days' notice, if you or harry or Tom should have
that City, and I will certainly let you know in ad-
vance of any trip that I have to make there for other reasons.
Confidentially, I hope to be back about June let and will never
cease to regret my absence at a time When I really think I could have
been of some service.
Things look better now in so many ways that I hope you feel
much encouraged.
Very sincerely yours,
J. ?. organ, Esq.,
23 *all St.,
New York City.
BS/CC
ii(
717-ASb JP SERVICE SYMBOL
ESTEcf/AN,
Day Message
Day Letter
Blue
Night Message
Nite
WESTERN IlitiON
UNION
TELZV7 AM
NL
If none of these three symbols
Night Letter
appears after the check number of
words)this Ise day message. Otherwise Its character is indicated by the
NEWCOMB CARLTON, PRESIDENT
symbol appearing after the check.
CLASS OF SERVWL
Day Message
Day Letter
Blue
Night Message
Nite
Night Letter
NL
If none of these three symbols
appears after the check number of
words)thls Is aday message. Otherwise Its character is Indicated by the
symbol aopearing after the cheek.
RECEIVED AT
PM 4 - 50
16
B391CH DH
NEW YORK NY 5P 16
BENJAMIN STRONG
-1-0Q
4100'MONTVILw BOULEVARD DENVER COLOt
`./0
boi.
CO
SEEMS A LONG TIME SINCE I. HEARD ANYTHING FROM YOU HOPE YOU CO(TINUE
TO GET ON FIRST RATE AND THAT WE MAY HOPE
TO
SEE YOU BACK
IN FIRST
CLASS SHAPE BEFORE MANY MONTHS ALL WELL HERE AND, WHILE CONDITIONS
VERY COMPLICATED BY PROBABLE WAR AND THREATENED STRIKES NEVERTHELESS
ALE.SEEM PI BE IN FAIRLY GOOD SPIRITS AND MILITARY NEWS FROM THE
REAL WAR
IS EXCELLENT
J
P MO,RGAN.
P*"..."-Ld
November Gth, 1916.
Dear Sirs:
I beg to acknowledge receipt of your favor of the
28th ult., enclosing two copies of the Syndic e Agreement
covering the issue of the 6overnment of the U ied Kingdom
Three-year and 'jive-year fel-
Seuuredima-404.41
tes, the
ned here.
original of whi'ch duly executed "
leen ilietructed to
make payment in full for the
payment is called
and I will be glad if y,l se
cesoary notices to
them, receive payment f/f41:7Tillte nd do ver notes to them
The Bankers Trust Co
.
/
(
for my account when Ipley are i
Flee accept i
s
d.
tkorik,A
for your courtesy in per,
mitiing me tO -..-aticipete in the purchase.
V
truly youre,
Messrs.. P.Aargan & Company,
23 v7411 Street,
New York City.
13S/VCM
PERSONAL.
o tr-mrs.
L711! Yffr-,
A
Ltr:riTArPark, Cola.,
LAX 1 1 1$17
Septembr 12th, 1916.
FEDE1'/41, b.:WE'VE BAN;
Dear Jack:
tour letter has given me a great deal of pleasure
and I have read it with muc intnrest. A t...:/egram is t;oing
to you to-day, tolling you how I am getting along. I will
elabor&te a bit in this letter. Par come reason ør tcVne
(something I at or change in clime:tad' hr.d rather a bad upset, which id 11.1: connection at all with the fundaontal difficulty. It kept mu in bed a week or ten days, but I em up
and about again just now, feeling better than ever. Last
wee%, I had a visi with the doctor in Denver who tells me
that my lungs are mitking wonderful progress, but I need some-
what dirferent .sliet than I on got up here, so I have t_ken a
furnisho,i house in Denver where I can have everything I need
and where, he says, I will makE oplendid progress from now on
He always reit4ratne that I have a tough case that will require
careful and oopsoiontious treatment, but that 1 am goin to get
'lhat is re.thaly the whole story.
Wiale
Aeplying specifically to your letter: I think I
realize some of the difficulties about the Yrench exchange. It
oas alwoye scealed to me that the Government was putting too'
great a burden on the Bank of France, and that the Bank of France
was too timid in consequence about letting gold go out oV the
country.
In other words, they shouA, if possible, shrink their
.200
To
P. Yorgan, Yeq.
Sept. 12, 1916.
note issue and chip more gold. This means larger government
loans, repayment of advances made by the sank of France and
the consequent reduction or note issues.
On the whole, I suppose the policy of letting gold
.exme to this c ountry through 2,41g1and is wizer end strengthens
eaeir position all around, but so long az they are doing that,
it meano that England must bunk for France and give France a
ratable share or the boneritorNsulting from the use of French
gold, which, in turn, enables the negotiation of large English
credit here.
Of couree, whatever operations'we eotad undertake under the termeeof the proposed account would be small in total,
atimpared to the total requirements and it would be a very flexible account and could be made one ot the means of stabilizing
exchange, rather than s)ecifically a drawing credit, and after
till, the proposed account is to create machinery for steadying
exchange retes, having an eye to conditions after the war is
over, just ac much, if not ore, than present conditions. It
is all in the interest of our exeortere and some day I guess
that will be fully realized.
The general plan in my mind was to keep in as close
ouch aR possible with the factors wnich affect the figure at
which gold can be profitably imported and accumulate exchange
at or below that rate until we have reached a point where we
have created ae larse an account as we thougitwise, most of
which would be invested jr prime bills. The accumulation of
-3'-
J. 11. aorgan,
To
eq.
Sept. 12, 1916.
the ameunt of exchenge agreed upon would take place only on oc-
canions where exchanae was very weak and, naturally, the account
continue a fairly conetant one until the time came when
the exchanges turned permanently, when the whole operation will
weal
be transferred to the other side. In other words, it might be
an invealment eccount running for one, to or three years before
any chenal of penition takes place.
What you say about money conditions is exceedingly in-
tereetirg. The hanky throughout me west are ell flush so far
ac I can tell, 'rid if imported gold in held in reserve and doposted only when our surplus at tiew sork shows signs of a aharp
reductien, ehould think we could get pest this Fall witaout any
high money rates at all.
I notico by the newepaper; that Davison has sailed and
am much intoreeted to hear that you are also sailing in a few
Won't you give my warmest regards to our mutual friends
in London, particularly, Grenfell, Lord Cunliffe, Montague aorman,
Brian Cokayne and tae others with whor I had the pleasure of many
most interesting reetinge?
ilh warmest regards to you and your partners, I aa
Very sincerely yours,
Lergar, Yea.,
22
all rtreet,
New York City.
BS/VC
P. n. I would appreciate yourntaaing opportu
if convenient, to explain to Lord Cunliffe the
present situation in regard
to our negotiations and
the necessity for more delay than I had anticipated
by reason of my absence. The amendment bill has
passed both houses of Congress
and will be eigned by
the President.
C.
March 15,1915.
Dear Jur. Morgan:
Copies of Mr.
Delano's letter of March 5th ad-
7thore
dressed to Mr.Forgan and Er.Forgan's reply of March
returned herein.
Mr.Delano refers to a point of considerable import.
slice in connection with the establishment of rates of dis-
count, viz;- that a precedent will be established by Which
future preceedure will doubtless be more or less controlled,
and it is important that the
precedent should be
based_upon
sound judgement..
The Federal Reserve Act provides that rates of dis-
cohnt shalled be fixed by the Federal
to review
Reserve Banks,subject
and determination of the Federal Reserve
oare.
On the other hand.the Act in section 11,Paragraph B. authorize the Federal Reserve Board to "permit of, on the affirmative vote of five members of
the Federal Reserve Board,
to
require Federal Reserle Banks to rediscount the discounted
paper of other
to be fixed
Federal Reserve Banks at rates
by the Federal Reserve
Many views have
of interest
.6oard."
been expressed as to the method
which should be employed by the Federal Reserve Baord to expower.
ercise a reasonable control over the rate-making,/ I have
always maintained,personally,that this control should be
-2-
To,
March lb,191b.
J.P.Morgan,Esq.,
exercised under provisions of Section 11,Paragraph B. so
that when transactions are contemplated between different
reserve banks.the Federal Reserve Board,with knowledge of
the conditions prevailing in all of the districts,will be
to fix the rate for rediscountsond.if necessary,on the'vote
apportionment of
of five members,fix the
rediscounts
with
due regard to the interests of the different reserve banks.
Exercising their power to fix the rates on these transactions,
they can of course determine that a rate
higher than
the dis-
count rate of the borrow ing bank is justified, thereby forcing the borrowing bank to raise its rate of discount.
.proceedure,if
This
inter-
adopted by the Board,would avoid direct
ormy
ference with the auton-Voi any Federal Reserve Bank in iniating its own local rate of discoupt.which applies only to its
own members.
Taking this view of the matter,(as I do very
strongly). I feel that Mr.Forgan is right in suggesting that
there should be a difference of, say one per
rate.some difference, in
favor of the
cent.or
at any
bank which geta the
loan,provided always that their locn1 discount rate is fairly governed to meet local
conditions.
In the case of the Atlanta bank; I have always
felt that the 4% rate was too low.the Reserve Board fixing
paper mat,has afforded
the rate of rediscount as they have..at 3 i % for
uring within 30
days and 4 %
for
longer paper
ppportunity for a very slight profit to the Atlanta bank,
should it require rediscount,and if later :!----
demands for
money in that district result in large discounts at this rate
I
believe that the Reserve Board would be justified in
J.P.Morgan,Esq'
March 15,1915.
increasing the rate of
rediscount to say,4% and 5%, which
would automatically force the Atlanta bank to increase its own
rate of disiount.
Mr.Forgan's letter is not quite clear as to the
method
an Inc:geese in the Atlanta
suggests that the Reserve Board should
he employ to bring about
rate of discount.
If he
increase their local rate, I am positively iit)pposed to any such
proceedure.
Local
rates
should always be fixed by the directors
of the bank, in my opinion.
All things considered,it seems to
me the rates fixed. meet the situation very well for the present,
and subsequent developments may indicate the desirability of
no doubt the Board will not
further action, which
hesitate to
take,if the Atlents bank shows a disposition to borrow too such
money.
It certainly would not do so for a large volume of dis-
counts at a direct loss.
Please do not
es pasitively,the
understand that this letter express-
the directors of this bank,because
these rates were fixed during my absence in Washington last
week,and I have not yet had opportunity to discuss the matter
with our directors. Knowing theirs views about the method of
fixing the local rate, I surmise that the chances are favorable
opinions of
to their adopting some
such view as expressed above.
Very truly yours,
Governor.
J.P.Morgan.Esq.,
23 Wall Street,
New York City.
BS Jr/VCM-3
4eT.
014.
BANK
_ RESERVE
Decmber 14th, 1914.
Dear Sirs
Strong wishes me to exrross his
regret at being unsble to have a talk with you
before the Advisory Council meeting to-morrow,
but he was too indisposed to-day to be in his
office.
2he attadhed memorandum, however, wa,,
dictated by him for your attention.
Very truly yours,
J. P. Liorgnn,
23 Wall ;:troot,
New York City.
JRLNDUM FOR MR. MO
AN:
I have taken the position with the Federal Reserve Board
that for the present it would be .univise to entertain suggestions for
reduction of the New York discount rate; basing this upon our belief
that the market rate would always keep below our rate and it would be
an additional incentive to lower interest rates, expansion and specula,
tion.
We would prefer to hold our rates high and if tension
developed after surplus reserves had been absorbed throughout the
country, we could then perform a valuable service which we would be
precluded from performing had we used up our lending resources
simply
j!ot. the purpose of making expenses and dividends.
The
meeting in Washingbon developed no real
from aly other section of the country
FILING DEPT.
DEC 16 MIL
FEDERAL RESERVE BANK
or lower rate.
Benj. Strong, Jr.
pressure
6/10/28
Dear Miss Holmes:
Mr. Strong wishes to have Mr. Philip Strong
get a wedding present for the attached, to cost somewhere
between $25
request to
and $50.
Will you kindly communicate this
him, and supply him with
one of Mr. Strong's
personal cards if need be?
- O.E.M.
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COPY
23 Wall Street, New York.
July, 1916.
Dear Mr. Warburg:
I have been slow about answering your letter of June 16th,
because I was working along on the very questions which we took
up in Washington and which you speak about again
n your letter.
In the first place let me say that I have read every word
of your address with great interest, and concur very heartily
in most of it.
There are certain questions I should like to ask
about it, because I am open to conviction on thOse points and inclined to agree, but they are not of importance and I.:think they
will have to wait until we
can meet.
I hope that the prospects for legislation this session are
pretty good, because the improvements that have been suggested
will make the whole system so much more workable.
There are still
other improvements, of course, which might be made, but there is
nothing to prevent further helpful legislation at later sessions.
The question of the trust companies and State banks I have
not forgotten for a moment and have had a gooa many discussions
with the heads of several trust companies already, and expect to
have another one this week with Sabin, whose attitude seems to me t,
be very much modified.
If the Guaranty Trust Company should come
into the system I think you would find that other large trust
companies would follow on pretty easily, and once the large ones
are in the small ones would come in without hesitation.
Any in-
fluence that I have has been exerted in the diredtion of the success of the Federal Reserve System, and I think that the entrance
0
(2)
of the trust companies into it, while not an essential part of the
Al-
success, will materially hasten the day when we can all point
with pride to the banking and financial system of the United States
as an assistance to legitimate business in every direction, and
the unification and strengthening of the position of the United
States among the financial powers of the world.
Yours very sincerely
(Signed)
Hon. Paul M. Warburg,
Federal Reserve Board,
Washington, D. C.
J. P. Morgan
U,S.Senate, 74th cong.,2nd sess.,special
Committee investigatir
the munitions Industry, wearings
pursuant to s.Res. 206,
Part 27, pp.844-6-8449(washington,
197)
,8446
MUNITIONS INDL STRY
o
EXHIBIT No. 2477
[Copy]
[Personal and confidential]
ESTES PARK, COL., August dist, 1916.
DEAR, JACK: It will soon be five months since I was in London discussing
the preliminary outline of our proposed arrangements with the Bank of Eno.-
land, and have no doubt that Lord Cunliffe and his associates may now a
wondering whether there is any possibility of a final conclusion of the matter,
particularly, as they know that I am ill in Colorado. On that account, I am
writing to advise you of the status of the matter in case inquiry should be
made of you.
On my return from Europe, the following things had to be done before it was
possible to make any more towards starting the arrangement in operation:
The Federal Reserve Act had to be amended so as to authorize Reserve
banks to purchase bills having 90 days to run, "exclusive of days of grace"
(the words quoted not appearing in the statute in section 14, under which
we get our power to buy foreign bills).
A second amendment was desirable authorizing us to receive deposits
and act as correspondent for banking institutions which we appointed as our
correspondents in foreign countries. (Otherwise, any funds held for such
Institutions would have to be in the form of earmarked gold.)
It was necessary to obtain the approval of the directors of the Federal
Reserve Bank of New York.
It was necessary to obtain the consent of the Federal Reserve Board.
It was probably necessary to get some sort of approval or disclaimer of
Interest from the State; Department.
It was necessary to formulate some plan by which all 12 of the Reserve
banks could operate together under the direction of the Federal Reserve Bank
of New York.
The status of the above matters is at present as follows:
I am just advised that the amendment as to days of grace has been incorporated in the recommendations made by the conference committee of the House
and Senate, and if that is correct, the amendment will undoubtedly pass at
this session.
The same applies to the amendment in regard to our receiving accounts for
foreign institutions.
-3. The directors of the Federal Reserve Bank of New York have approved the
plan.
The Federal Reserve Board has unanimously consented to the plan.
No action has yet been taken by the State'Department.
The scheme for management of the account for the 12 Reserve banks has
been laid out and I think will be adopted, subject to modifications in details.
You will gather from the above that if, as I anticipate will he the case, the
final necessary approvals are received and the bill now before Congress is
signed by the President, it will become possible for us to actually put the
arrangement into effect some time this year.
On account of your relations with the bank in New York, as well as your
part in the negotiations in London it seems desirable that you should be fully
posted as to the progress in this matter, and if you think the situation justifies
it, possibly you would be willing to cable or write Lord Cunliffe indicating that
progress is being made, although it has necessarily been slow.
I doubt if the bank in New York will be disposed to undertake transactions,
notice and approval of which must first be conveyed to the Board in Washington, without my giving an unqualified recommendation to do so, and outlining
somewhat the character of the bills to be purchased. Before doing so, I want
the best opinions I can get in regard to how well fortified the sterling exchange
position is for next fall.
As nearly as I can gather, the present import point of gold is somewhere
between $4.76 and $4.77, and I am going to give you my be guess as to the
present exchange situation, asking you if you will correct it so far as you feel
able and willing to do so and give ME) your own views as to what may transpire
this fall.
I surmise that France now has a total credit in New York unused, created by
the recent loan of $100,000,000 and by various commercial credits of winch I
have been advised, aggregating possibly $100,000,000 in all. I also surmise that
MUNITIONS INDUSTRY
8447
rTh. the proceeds of the sale of the English notes, together with the unused
-
$50.000,030 bank credit, gives England a total drawing account in' New York
today of $100,000,000, not counting some of the gold recently imported and
which I judge has not yet found its way into bank reserves. I would, also,
suppose that England has, unused but available, American and other securities
which can be converted and used as collateral in this market, amounting to
anywhere from $100,000,000 to $200.000.000. I would, also, assume that Russia
had considerable credits here as to the amount of which I would not hazard a
guess. In all, let us say that there is $500,000,000 available, possibly more, for
us to meet the fall demands. This is, of course, a magnificent preparation, bat
still I have some doubt whether it will be sufficient to meet the enormous demands which will certainly be made upon us during the present period of the
offensive movement, and possibly, in preparing for a more extensive movement
next year, if, as I surmise, these three nations are to continue to purchase
our raw materials, etc., in anything like the volume which the Government reports indicate. It also seems likely that there will be a large movement of
cotton this fall and at pretty substantial prices. In view of the above, which
I admit is largely supposition. I have not modified my feeling that the interests
of our banks and our exporters may require that the arrangements with the
Bank of England be put into operation this fall.
I would very much appreciate your writing me, in confidence, if necessary,.
the best expression of your own views which you can give me.
Of course, we would not undertake the purchase of exchange, except at
some margin below the gold import point, and I would appreciate also the best
calculation you can give me of the cost of gold imported from England at
the present time by an American bank, independent, of course, of the operations of the British Government, where special facilities and special arrangements for transportation May be made which would result in a cost quite
different from that applying to the Cost to an American bank.
Please pardon this long letter, but I am so far from home and out of touch
with matters that I need the best information you can send me before going
any further with our plans.
I hope you are well. Unfortunately, I have been laid up for the past week,
but hope to be around again in a few days.
My warmest regards to you and your partners.
Sincerely yours,
J. P. MORGAN, Esq.,
23 Wall Street, New York, City.
BS/VCM.
ExInarr No. 2478
(Copy]
23 'WALL STREET, NEW YORK,
September 7, 1916.
DEAR TIES: I have been very much interested in your letter of August 31st.
In regard to your summing up of the exchange situation, you are a little short
of various facts, owing to your absence:
First. The French have spent pietty well all the money they have here. -
There are some commercial credits, and they hope to make more, which will
give them perhaps forty or fifty million dollars if they get them; but the
French exchange situation is not as good as you put it in actual dollars, but
has been much bettered by the recognition on the part of England that they
have got to help out if necessary.
In regard to British credit, if is more difficult to say. They had made short
time and call loans here for a considerable amount, to pay off which was the
first use made of the recent $250,000,000 transaction. The $50,000,000 bank
credit has been used. On the other hand, they are at the moment.shipping vast
amounts of gold, which you guessed rightly has not yet entered the bank reserve
situation. This amounts to some seventy odd millions, so far advised. England
has a larger amount of possible collateral than you have figured an, hut to
what extent I do not know.
think the gold importing point is now somewhere about 4.751A, owing to
cost of freight and the large insurance. The British Government does not
kvi.
F4-4- 'it
MUNITIONS INDUSTRY
8448
id.71).
Intend to allow exchange to go far below this, and I think it will succeed In
this attempt, in which we all wish to help as much as possible. That being
the case, however, your operation will really have to take the shape of an,
interest operation, more than an exchange operation, although there may be
a substantial rise in exchange in the spring.
The requirements for raw materials show no signs of falling off, and they
evidently expect the war to go on for another year. On the other hand, the
Bank of England rate is now 6%, which may influence you in the decision in
regard to bills. I do not think that it is worth while for me to advise. If
the Federal Reserve bank is going to take any steps under your arrangement,
I should think a month or six weeks from now would be quite time enough
to do it, by which time we should he able to measure the question of domestic
demand for money. So far as I see now, that demand is much less than ever
before at this time of the year, owing to the Western and Southern banks being
extremely flush of money. For your information a New Orleans bank, which
ordinarily at this time of the year borrows all it can get from its New York
correspondent, requested that New York correspondent to lend, some money
for it at 90 days, and 6 months (this about two weeks ago). That is only an
indication, but it is a pretty strong one to ray mind.
I am, personally, very well, but much concerned to hear you have been laid
up. Please telegraph me when you get this letter that you are better.
For your confidential information, Davison is now on his way to London,
and I shall follow him in about two or three weeks. I am, naturally, not
saying very much about it as yet, but it will give me an opportunity of seeing
Cunliffe, and I can impart your mind to him, if you wish me to do so.
All going along very well here, and the English loan has been a tremendous
success. We are much encouraged by it.
With best regards and wishes for your prompt recovery, I am,
Yours very sincerely,
P. MORGAN,
B=JAMIN STRONG, Esq.,
The Lewiston, Estes Park, Colorado.
EXHIBIT No. 2479
[Copy]
ESTER PARK, COLORADO, September 12th, 1916
DEAR JACK: * * * Replying specifically to your letter: I think I realize
some of the difficulties about the French exchange. It has always seemed to
me that the Government was putting too great a burden on the Bank of France,
and that the Bank of France was too timid in consequence about letting gold
go out of the country. In other words, they should, if possi,ble, shrink their
note issue and ship more gold. This means larger Government loans, repayment of advances made by the Bank of France, and the consequent reduction
of note issues.
On the whole, I suppose the policy of letting gold come to this country
through .England is wiser and strengthens their position all around, but so
long as they are doing that, it mp.ns that England must bank for France and
give France a ratable share of the benefits resulting from the use of French gold
which, in turn, enables the negotiations of large English credits here.
Of course, whatever operations we could undertake under the terms of the
proposed account would be small in total. compared to the total requirements,
and it would be a very flexible account and could be made one of the means of
stabilizing exchange, rather than specifically a drawing credit, and, after all,
the proposed account is to create machinery for steadying exchange rates,
having an eye to conditions after the war is over, just as much, if not more,
than present conditions. It is all in the interest of our exporters, and some
day I guess that will be fully realized:
The general plan in ray mind was to keep in as close touch as possible with
the factors which affect the figure at which gold can he profitably imported
and accumulate exchange at or below that rate until we have reached a point
where we have created as large an account as we thought wise, most of which
would be invested in prime bills. The accumulation of the amount of exchange
agreed upon would take place only on occasions where exchange was very
E
t=.7
MUNITIONS INDUSTRY
8449
Cteak and, naturally, the account would continue a fairly constant one until
..ne time came when the exchanges turned permanently, when the whole operation will be transferred to the other side. In other words, it might be an
'nvestment account running for one, two, or three years before any change of
,,sition takes place.
What you say about money conditions is exceedingly interesting. The banks
throughout the West are all flush so far as I can tell, and if imported gold
is held in reserve and deposited only when our surplus at New York shows
signs of a sharp reduction, I should think we could get past this fall without
any high money rates at all.
I notice by the newspapers that Davison has sailed and am much interested
to hear that you are also sailing in a few weeks. Won't you give my warmest
regards to our mutual friends in London, particularly Grenfell, Lord Cunliffe,
Montague Norman, Brian Cokayne, and the others with whom I had the pleasure of many most.intetesting meetings?
With warmest regards to you and your partners, I am,
Very sincerely yours,
BENJAMIN STRONG.
J. P. MORGAN, Esq.,
23 Wall Street, New York City.
P. S.I would appreciate your taking opportunity, if convenient, to explain
to Lord Cunliffe the present situation in regard to our negotiations and the
necessity for more delay than I had anticipated by reason of my absence. The
bill has passed both houses of Congress and will be signed by the
Digitized foramendment
FRASER
President.
.
Y.S.Senate., 74th cong.,2nd sess.,special committee
investigating
the Munitions Industry, Rearings pursuant to
S. Res. 206
part
?0,
10.9559(wakibimI,m3
9559
,
Aaja
EXHIBIT No. 3159
[Copy]
0DEAR BEN: I am very glad to get your letter of April 17th.
23 WALL STREET, NEW YORK,
April 28, 1917.
I do not know
anything about Cunliffe's plans yet; indeed, I am not sure that he himself does.
I rather think you will have to communicate with him direct.
I have heard a very good deal about the movement of the trust companies
and State banks in the West, that you speak of. I think it highly probable that
such a move would have some success here if the Clayton law were repealed;
also, perhaps if the Federal Reserve Board showed some sign of cosidering its
important member banks, it might have an influence in the feeling of the nonmember banks. Perhaps at this moment, when we are all being threatened with
financial catastrophe by the imposition of enormous taxes on the top of large
bond issues, it is not jut the'time to work up a campaign of that kind. Perhaps
by the time you come back, about June 1st, things will have shaped themselves so
that we know more where we are; and, in that case, we might be able to get up
something of a campaign on the lines you suggest.
I am very glad to hear that you still intend to return about the first of June.
Yours very sincerely,
J. P. MORGAN
BENJAMIN STRONG, ESQ.,
4100 Montview Boulevard, Denver, Colo.
EXHIBIT NO. 3160
,7?
tif
COPY
Wall Street, New York
April 23,.1917
Dear Ben:
I am very glad to get your letter of April 17th
I do not know
anything about Cunliffe's plans yet, indeed, I am not sure that he himself does
I rather think you will have to communicate with him direct.
I have heard a very good deal about the movement of the trust companies
and State banks in the West, that you speak of. I think it highly probable that
such a move would have some success here if the Clayton law were repealed, also,
perhaps if the Federal Reserve Board showed some sign of considering its important
member bank, it might have an influence in the feeling of the non-member banks.
Perhaps at this moment, when we are all being threatened with financial catastrophe
by the imposition of enormous taxes bn the top of large bond issues, it is not just
the time to work up a campaign of that kind. Perhaps by the time you come back, about
June 1st, things will have shaped themselves so that we know more where we are; and,
in that case, we might be able to get comething of a campaign on the lines you suggest
I am very glad to hear that you still intend to return about the first
of June.
Yours very sincerely,
'signed' J P.Morgan
Benjamin Strong, Esq.
4100 Montview Boulevard, Denver Colo.
U.S.Congress, 74th Cong., 2nd Sess., Special Committee Investigating the Munitions
Industry, Hearings pursuant to S. Res. 206, Putt 30, p.9559 Exhibit 3159
(On page 9500 it is stated that this letter came from "personal file, Strong." )
June 13, 1921.
PFRSONAL
y dear Mr. Morgan:
V4e have only within the last few weeks been able to conclude the
final accounting of the expenses of the various Liberty loans, and determine
to what extent, if any, expenditures made by the organization could not be
reimbursed by the Treasury under existing law, or rules of the Department.
find that the total amount of such items that cannot be reimbursed is
Of this aum, the ?edaral Reserve Eank is able to absorb t2,229.74.
4i2,535.97.
The re"inaer, $303.?$, I have paid personally.
The Liberty Loan Oomzlittee passed a resolution, agreeing personally
to aS6UMe certain charges, up to a limited amount, tvhich as I recall was t1,000.
If the members of the cs,ammittee cure to pay their respective shares of this sum,
the amount of each committeeman's proportion will be $23.55.
Had these operations been conducted since the passage of the Volstead
Act, it would not have been necessary to %sk the committee to make any contribu-
tion.
Yours very truly,
J. P. 2orgon, Tag.,
23 ;iall St.,
Aew tork, J. Y.
1.3S:'112
023 WALL STREET
NEW YORK
June 14, 1921.
4>
1,4
Dear Ben:
JUN 15 1921
I enclose herein, with great
pleasure, my cheque for $23.55, for pay/4
ment of my share of the ant6,-Prohibition
expenses of the Liberty Loan Committee.
Yours very sincerely,
don. Benjamin Strong,
Federal Reserve Bank
of New York.
June 15
19?1.
My dear Ur. Morgan:
I thank you for the remittance of $23.55
encloaad in your favor of June 14.
Yourc very truly,
J. F.. korgul, rec.,
23 Wall Street,
New Yorks N.
GnIMM
Y..
A.(
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WV
231, MADISON AVENUE.
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.
July 23, 1923.
Dear Ben:
I am off to England on Saturday for my annual holiday,
and before leaving want to get a line off to you to tell you how
glad I am of your progress towards health, of which I near much.
I hope that when Deaember comes I shall find you here again in
tne saddle, on my return.
Of business news there does not seem to be much to write
about.
I believe that the dread of inflation, which was exhibited
by the whole community in the spring, has had its legitimate and
most beneficial effect in removing that danger from us.
Everybody,
but the politicians and the labour people (particularly the bricklayers), seems to be thinking in terms of sobriety and industry, and
nobody is putting out his hand further than he is mighty sure he can
pull it in again quickly.
The Federal Reserve Bank is losing its earning assets, but
I presume it will get some more as the autumn begins to come on.
At any rate, it does not worry me to have them make some less profits
than they did in the old days of 40% reserves.
Wednesday of this week is the sixtieth anniversary of the
starting of The First National Bank, and it is also the completion
of the sixtieth year of Mr. Baker's continuous office-holding in
that Bank.
I have a few of his more intimate friends coming down
to dine with me on the "Corsair" that night, to meet him and to
celebrate.
I wish very much you were to be of the party.
However,
you probably will for his seventieth anniversary, for he certainly
As not going to give up before he is 95, and long before that time
you will be in splendid condition;
so put it down in your memorandum
book for 1933.
Our new partner, Leffingwell, is,
sition.
I believe, a great acqui-
You know better than most about his work in the Treasury,
and how, even' when he did not agree with us, he had good reasons and
stood his ground.
I hope he will continue to do that here, where
I hope his career will be much longer than it was at the Treasury.
When you feel like it, send me a line telling me how you
are getting along, addressing it care of Morgan, Grenfell & Co.,
22 Old Broad Street, London.
With best wishes for your recovery, I am,
Yours ever,
AAA
Hon. Benjamin Strong,
Cragmor Sanatorium,
Colorado Springs,
Colorado.
(0 4e-L,04-7//
/9/(i) /f-zi
i3ENJ, STRONG-,
Jr.
PRRSONAL.
Dwight W. Morrow,
are J. P. Morgan & Co.,
London, algland.
Strong authorizes following cable. quote.
Have reported to Secretary of Treas-
ury by telephone that negotiatials are proceeding in London in Paish matter and
am anxious that no steps be taken which night cause embarrassment or Which Secretary would not approve.
Head
him your number thirty.
Secretary states he
initiated plan for negotiations at a critical time in International exchange to
facilitate negotiations for our bankers.
Hazing arranged preliminaries, does
not consider Government is concerned with details of resulting plan which in
present hands, he is confident will be satisfactory.
This plan is essentially
a banking matter, that his duty was performed then he concluded arrangements
for negotiations.
I suggest it might be arranged have British authorities
cable him they were now satisfied to have negotiations continued as banking
matter between London and jaw York bankers and ask his concurrence in that
course.
He state:lit would be entirely agreeable to him to receive such a
cable and would cable
his
assent.
If cable sent Secretary as suggested,
care should be taken that an agreed official statement should be made simultaneously both sides. Quote.
re-4y ora.
It was learned today that the bankers in New York who drafted the
report of conferences with Sir George Pal& and Eakil P. Blackett, Esq.,
had asked Mr. Davison, of J. P. Morgan dc Company, and gr. Brovm, one of
the membels of the Comndttee, to continue the discussion of the report in
landau,. NI.. Brom is now in London, and Mrs Davison is saling on the
"Adriatic" on Wednesday, on which steamer Sir George Paish and Mr. Blaakett
are returning home.
April ?6, 1921.
Dear Dwight:
Here is another bothersome matter where I am making the only
exception to what is otherwise an invariable rule; never to solicit a
subscription to anything.
I have been interseted, since its organization, in the Committee
which is pushing for sound budget legislation by Congress.
We are really
making some progress, and I euppose it is not unreasonable for me to be
guilty of asking you to make a contribution ,to the work, if you have not
already done so through come other member of the comeittee.
The enclosed pamphlet gives some description of the activities of
tile organization, and if you feel that you could spare V00.00 to help us
along, I would deeply appreciete it.
If you cannot do so, will you be good
enough to return the enclosure so that I can make 1169 of it elsewhere, as it
seems to be numbered and identified with me as a member of the committee.
Yours very truly,
Dwight W. Morrow, Esq.,
c/o J. P. Morgan & Co.,
23 Wall St.,
New York, N.
BS:MV
En" #irl)
Y.
May 2, 1921.
My dear Dwight:
I thank you for your check for $100, as a
contribution to the work of the National Budget Committee,
enclosed in your favor of April 28. It is fine to have
your cooperation and support in this matter, and I certainly appreciate it.
nth warm regards, believe me,
Very sincerely,
Dwight V. Morrow, Esq.,
23 1a11 Street,
Nev Tork, N. Y.
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July 21, 1925.
Dear Dwight:
Norman and I spent a most interesting week
But I had some
in Berlin, mostly with Dr. Schacht.
interesttpg and enlightening talks with Gilbert. there
are one or two matters that I would like very much to
discuss with you.
We plan to be here at Spa for another week,
and, after that, may plan to go to Paris, andfrom there
I am not at all sure of getting
to the seashore somewhere.
to Beritz.
Is there any chance of your being in Paris in
the next few weeks?
Could you drop me a wire here, or,
possibly, write me in care of the Bankers Trust Company in
I will pick up mail when I reach there.
Paris.
I hope you all keep well and are having a fine
Won't you give my best regards to Mrs. Morrow,
and to Betty, and Ann, and Dwight, as well as a generous
supply for yourself.
rest.
Very sincerely yours,
Dwight W. Morrow, Esq.,
0/0 Messrs. Morgan, Harjes & Co.,
Paris, France.
1
Hotel Majestic,
Paris, France,
August 15, 1925.
Dear Dwight:
I am returning the White Paper
relating
to the Pact
Negotiations, and thank you for giving me the opportunity of reading it.
Just this morning the newspapers bring word of Mrs.
Morgan's death, and, of course, it is a
me very much indeed.
ing.
We were all
And now I nm fearful that
to Jack that he will
be
great shock
so hopeful that
this will
and
distresses
she was recover-
be such an irrepairable loss
hopelessly discouraged about the future.
I
am cabling him, but it seems a most inadequate way to express ones
feelings.
order to
Unfortunately, in
I must be in
Switzerland
Saturday evening.
keep a promised engagement,
on the 21st and 22d, but I shall be back
And if you are in Paris over that
you mind calling me at the Hotel Majestic, Room 380!
anxious to see you before you
return
home.
Please give my love to all the family.
Sincerely
Dwight W. Morrow, Esq.,
Messrs. Morgan, Harjes & Company,
14 Place Vendome, Paris.
yours,
Sunday, would
I am so
P7.44,--1
Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 14, 1927.
E-4119N.ti,
Dear Dwight:
I will be writing you shortly about some other matters, but in the
meantime want to send you a copy of the letter which I au just writing to
Dan Wing.
I don't know how well you and your associates know Basil Miles.
Personally, I have a very high regard for him indeod.
Confidentially, I be-
lieve he is just now discussing the possibility or some connection with Lee,
Higginson e. Company and of course that might be the best possible thing for
him to do.
BA it was not concluded when he sailed for Europe a couple of
weeks ago, and if there is anything that you can suggest for him, I hope you
will feel willing to do it.
I am coming along slowly, and if I could have my way and you found
it possible, I would like right veil, to try and induce you to come down here
and spend a little time with me to talk over a lot of things, just as you Buggostod you might like to do in a note I recently had from you.
Please give my best regards to the family and to the boys in your
office, and the same to yourself.
Sincerely yours,
Mr. Dwight W. Morrow,
c/o J. P. Morgan & Company,
23 Wall Street,
New York City.
B3:11
February 17, 1927.
Thank you for your good note of February
14th with reference to Basil Miles.
I am turning it
over to Leffingwell and, if anything occurs to us, we
will communicate with you or with Milos.
I have wanted very badly to talk with you.
The world keeps changing rapidly but, despite constant
interruptions, it seems to be getting better.
You
probably have noticed the rumble's that have come from
Germany about their ability to pay.
prised if the question became an
Dawes year or the next Dawes year.
I would not be sur-
acute one during this
However, we have no
information that you do not have.
With much love,
Faithfully yours,
Benjamin Strong, Esq.,
Stuyvesant Road, Biltmore Forest,
Biltmore, North Carolina.
Stuyvesant Road,
Diltrere Forest,
Biltmore, N.C., February 20, 1927.
PERSONAL
Dear Dwight:
Yours of the 17th just roaches me.
I would indeed enjoy a
talk with you just now, which would cover a great variety of subjects
which are Only/ suggested by the words *France", *Italy*, *Germany" and
"Poland*, all atehich seem to be more or less in the minds of a good many
of us juin now.
I had a splendid visit with Monnet and hope to see him
again at the end of this week.
We are going to have a session on Poland.
I don't know how long it will last, but if you felt equal to coming down
hoes after the Poles left, I would try and keep Vonnet over so that we
could have a good talk.
How does the idea stele you?
As you may have gathered from our former discussions, I have
never been optimistic that Germany could meet the full schedule of payments.
In fact, / am not optimistic that any nation could meet payments
of that magnitude, except they borrowed from Peter to pay Paul.
Peter.
We are
I have some figures just now to mull over in this connection which
may throw a little light on the subject, but not one that encourages me to
dhango my views.
If you come down, this would be one of the subjects of our commun-
ion.
My best regards to you and your partners.
Sincerely yours,
Mr. Dwight W. Morrow,
23 Wall Street,
Mew York City.
MAI
11,17-1
I4ArtirlAr'
StuyTesant Road,
Diitmore Forest,
Biltmore, N. C.,
March 1E., 1927.
Dear Dwight:
I was delighted to have your letter to-day, hut sorry to
earn that there is no chance of your coming down.
do hope to see Dean before he returne and get the, laot
word he can give me from abroad.
Many thanke to you for thinking of that book. I will ..00n
have finiehed the Napoleon and will then tackle the one you are sending, and after that I :Rant to read Ludwig's Life of William rohenzollern
which I hear ie'very intereeting.
I am taking the liberty of enclosing a note of introduction
which I hope you and Petty will use when you stop at Gibraltan It ie
7:aj.Gen.
addressed to my old friend, Sir Charlee C. Munro. He is now Governor
at Gibraltar. Prior to that he wae Gomm:rider-in-Thief of the forces hn
India. He had charge of the evacuation from Galipolli,and prior to
that was in comiand of a division, I believe, at the Battle of Mons.
While he is quite lame from an-4njury received at r.Jalipolli
he is not, like gelphibaeeth, who wae lame in both feet. He is a perfectly delightful fellow and his wife iu very charming, and I am
writing him of the possibility of your arrival and that I have gioren
you a note.
L do hooe you see him. He is a regular old British war-dog.
If you do sce him please give my love to him and to Lady Liunro.
My very best to you and Betty.
-
Mr. Dwight W. Morro',
23 Tall 7treet, New York.
Affectionately yours,
Inne ID, 1427.
Dear Dwight*.
It
e really too bad that you nhould have pore
to the trouble of etoppiop et t1
rguer nd then not to
have been allowed to come up.
I did Oot apefiir
to tl,eirtl.
about. your ooming and. 1 had clomp/ etely
orerlooked the fact
that Piame time ago, for my prrotoo-tion,
6ove instruction&
were given atout ttlephone cane or callers in the
evening,
because memtsere of the family were tryinf
.to protect my
rest.
I can't tell
you how wtortified Irge, but. It ,contt
imp en again.
Sinoere)y your',
Mr. Dwight W. llerrow,
Wo J. P. liorgan
& Company,
23Ifir11 Street, New Tork City.
z-fLo.),45.4f 7ke
DVVIGHT W.MORROW
V\
10'1MA
EN G LEWO 00
October 5, 1927
NEW JERSEY
'At'
Dear Ben:
I thank you for the notation which you have
put at the foot of the formal notice of my withdrawal.
I am not going to try to tell you how much I will miss
youlbecause one day or another you will probably herd
together your list of central bankers in a place where
I can see them all again.
I gave Betty your message about the dinner, and
she was very grateful.
As a matter of fact, Anne has
gone back to school and Betty is declining all invitations
to come in to New York because she wants to spend as much
time as possible with Elisabeth before she goes away.
With kindest regards, believe me,
Very sincerely yours,
Mr. Benjamin Strong,
33 Liberty Street,
New York City.
6
rg.,041
Mexico,October 31,1927
PERSONAL
Dear Ben:
I went downtown on the last day I was in New York
to lunch with my former partners, and with the firm resolve to stop at the Federal Reserve Bank to pay my
respects to its Governor and Deputy-Governor and to say
good-bye to you personally. Unfortunately, the tail-end
of the Brady arbitration caught me and kept me until
just time for me to catch my train. I can not, however,
leave New York without saying good-bye to you by letter.
It has been a great pleasure to have known you so well
in the past thirteen years and to have perhaps helped a
little from time to time in the great work which you have
I hope you will keep in mind one thing, and that
done.
is your health.
Incidentally, the climate here is almost exactly the
same as that at Colorado Springs. We are most comfortably housed in an Embassy which the Government furnishes
its Ambassador. Many of the problems are new and perplexing, but for that reason they will be interesting.
If from time to time you feel like dropping me a line
upon your work, I will greatly appreciate it and will try
to answer you.
With warmest regards, believe me
Faithfully yours,
The Honorable
Benjamin Strong, Jr.,
Federal Reserve Bank,
New York City.
-C
NA."._
(11:?
j
6.-C-4.../o--47 3
(1)5
;.1
November 9, 1927.
Dear Dmight:
It was fine today to have your letter and thue personal assurance that you had ranched Mexico sefely and were installed in your
new and mighty interesting post.
/ was also disappointed that we could
not have a last word before you left.
There is no doubt whatever about the help you have been in our
work.
Of all of my associetione in Nee York, that great firm of yours
I believe has shown a groeter loyalty and a more effective cooperation
with the reserve bank and its policies than anyone else.
It weuld be more than deliehtful could I visit you In Mexico.
In fact opportua.ty may arise although just now it seeme remote, but I
will give you a voluntary notice if I see a chalice to get down there and
cound upon your advising me frankly whether It is convenient.
You know
how earnootly I wish you success in a very difficult mission. If there
is any way by which I can contribute to making it a success, you need
only call upon me.
Indeed, I shall be delighted to drop you a line now and then
about how things ere goin4.
Polish matter.
looks hopful.
over-sold.
Just now we are immersed in concluding the
4onnet is here and so far as I can discover everything
The bond issue was a success, with some seven millions
Salter hare decided not to come over but Tom Pad Jeremiah
Smith got home yesterday and I ma expecting this week to do a little
more exploring into the League matter with Monnet here to he/p.
2.
November 9, 1927.
I have just returned from ten days in Vashington attending
the semi-annual conference of reserve banks, have a pile of xork ahead
of me, but will find excuse shortly to write you a letter with al the
news.
Please give my love to Betty and my earnest regards to you.
Faithfully youre,
Honorable Dwight W. Morrow,
Ambassador to VtAiCO,
Embassy of the United States of America,
Mexico.
.1
c
,e-1,e424-e
9Y7
/
Eaten Park, Colo., July 31, 1916.
George W. torkins, Esq.,
71 Broadway,
Dew York City.
Dear Mr. Perkins:
You and I both shed our hoofs some years ago and
now that you have also shed your horns, I am taking the
liberty of writing you a few lines ab t-the Republican
Uominee for President.
The Denver newspapers state tt Mr. Hu es is
about to make a tour to the Pacifi Coast an ,on his way
back will spend a week resting at Estes Par./ He may
be interested in knowing -0o li
and A thought it would
at you
of my own experience so
if you had opportunity.
In the immed
there are only thre
the Stanley, the Le
is rather a fashi
is probably the
Park, but I do
thou (t the Le
a'4
ne
ote
borhp
e'hotels here,
abo
ty f
416 to write you
diuld tell him about it,
1
of the little village
"Whe,r41 he would care to stay,
The Stanley
n and 'Elk Horn Lodge.
It
otel, with about 150 rooms.
ished and equipped hotel in the
'the meals are quite equal to
During August it is crowed and they
There is music and
50 people there.
goner
have
-the_hotel and if ;:..x. Hughes is seeking quiet,
danci
I doubtirtiastsvould suit him as well as the Lewiston.
I
1
Eli fiforn Lodge. which is about the same size as the
It is right down
Stanley i II would not recommend at all.
in the tettom of the Valley, on the main thoroughfare
and has not anything like the outlook, the air or the surroundings that either the Stanley or the Lewiston enjoy;
they also have music and dancing there.
After making a therough 'survey of all the hotels, my
brother,. Dr. Stronp:, recommended that I some here to the
It is a very small, quiet hotel and I find it
Lewiston.
delightful. The hotel itself has only 9 bed-rooms and adjoining it there is one cottage of 6 or 8 rooms, with two
baths, one of 4 rooms and a bath (which we occupy) and
five small houses of one or two rooms, without running water.
Just now they are all occupied.
The hotel is on a bluff, with a view of the whole valley
and occupies about the best location of any of the hotels.
It is run by Mr. and :,1rs. Lewis, who give the whole manage2he meals are excellent,
ment their personal attention.
2.
very simple and plain and
consequently better than at
some of the hotels where they
try and introduce French
cooking.
Assuming that Ia.. Hughes is looking
would be the best place.
for quiet, this
At the present time
only 4 or 5 men at the hotel,
there are
4 or 5 children, which is aboutabout lb or 0 ladies
and
the capacii y including
cottages.
If the
of Mr. Hughes'zplf*A.
would be wellreport
it
for
him
the Park is generally to make early-reelex Oorrect,
tions
here
as
crow0ek-dU ng Augu
b6 difficult to get accommo
and
it
would
lo
had any considerable partparticu ly if he
here until the latter pa
If he noes not reach
I oould be advised in adv
or September, and
would be a great pleasure
for me to arrange for what e
'see that they wepi,'
tab reservations he needs and
1
of tist,
Sometimes 4 is dan 'ous
his views
recommend hotels and
of what is com rtable, might
as mine, but 1\4' nd this
not be the same
ace
delightful
and the.in every way
1 sip e
uiet. I am sending
views
er sepa?ate
you some
/
cov6r,
n additi
these hotels mentioned
hat are setoaccessible;
there are
as "
one particularly,
's Pe,çJ Inn", 9 miles West
rathe
of here, whichknown
is
tive, but has not nearly
the delightful
outlook'thnt'-this one has, nor do I understand
accommodations, or table, are as good
that the
Lewiston.
as here at the
i
some
0 '4.
If i can be of any service here,
will not hesitate
to make use of me. I hope Mr.
With best regards to yourself, I
am,
Sincerely yours,
Hughes
fr
9fr
(I 9(9 7 -/
AA," y et)
THE DIAMOND MATCH CO.
111 BROADWAY
NEW YORK
Sept. 28, 1914.
SEP ZS 1914
Benjamin Strong, Jr., Esq.,
No. 14 Wall Street,
New York City.
My dear Yr. Strong:
Many thanks for your kindness in letting re have
the circular issued by the Atlanta Chamber of Commerce, which
I now return.
As to the plan of handling cotton, Which was outlined in the letter which I left with you the other day, your
criticism is decidedly to the point.
I do not believe, however,
that any opposition need be feared from the present administration.
Indeed, the plan has already received the endorsement
of some very prominent people in Washington.
I do not believe,
however, that there is any likelihood at all of anything being
done along these lines, mainly for the reason that there are
too many conflicting interests, and there does not appear to be
any one available who is sufficiently forceful and aggressive
to put the scheme through.
Yours si
ERS-YW Enc.
61--E4,?).)
12;47
Ay,
CROSS REFERENCE SHEET
FILE NO
SUBJECT
-4144-6-,
SFH
FILE NO.
LETTER OF
DATED
Hotel, London,
September 12, 1919. 441
lily dear Ed:
I have finally completed my plans to sail on the 19th
or 20th, but before leaving am writing to advise you of what
developed while I was ia Holland.
1 had quite a frank talk with Doctor Vissoring, President of the llederlandsche Bank, and with Tx. terUeulen,of Rolle
L Company, in regard to the possible advantages to the Dutch
Government in placing a loan in America. The exchanges, as you
know, are about 8,, against Holland. It developed that Doctor
Vissering had personally always opnosed such a transaction. The
Dutch Government has never made a fbreign obligation payable in
a foreign currency and 1 think he Ills held to the view that, if
credits are needed in America, they should either be arranged
rivately or Americans should be induced to purchase Datchsecurities.payable in guilders, just as Dutchmen have heretofore purchase& American securities payable in dollars.
On the other hand, 1 found that Ur. terEeulen and
possibly one or two of Doctor Visserin.f:'s associates were not as
strong in their conviction as he and on the whole, while the sug-
gestion may at the moment be productive of nothing,inclined
itr
irm
441
2-
o think that it might be a good. pl an to have a talk with these
we gentlemen about it in case you or llx. Jay had occasion to go
to Amsterdam or even as far as Brus sels.
am most grateful to you for the splendid help you
gave me in Paris in meeting various People and getting informat ion; it will make it much easier to accomplish the object of
.my trip, if anything at all can be accomplished by it.
Wont you give my best reg ards to your partners and
the same to yourself.
Sincerely yours,
R. Stettinius, Esq.,
c/o Morgan, Harjes & Co.,
Place Vendome, Paris.
BS/PE
14, PLACE VENDoME
PAR I S
Sept.
1919.
OCT 1 41919
My dear Ben,
A,v47)..
Many thanks for your letter of the 12th which I received a day or two ago on my return from Belgium.
Jay spent
several days in Holland, having arrived in Amsterdam just after
you had left, and both he and I appreciate sincerely your introductions and the help you have given us.
I am sorry, on personal grounds, that you have return-
ed to America, for it was certainly a pleasure and a comfort to
talk to you, but I know that you will do all kinds of good
at
hone and that, with eloquence andifervor, you will preach the
gospel of Europe to the beknighted American.
_My own plans are uncertain at the moment
but it ap-
pears reasonably certain that I will leave here in about a month.
I shall hope to have the pleasure of seeing you in New York and
fully expect to find on my arrival that you will not only have
worked out a solution of the problem of financing Europe, but that
your plan will actually be in effect.
With very kind regards, I am
Yours s
Hon. Benjamin Strong,
Governor, Federal Peserve Dank of
New York, City, U.S.A.
-. ew York,
28 1921
INovenber 22, 1921.
My dear Ben,
I deeply regretted to be compelled to send you last
evening, at the last hour, a message telling you that I would be
unable to join you at dinner.
Of course nothing but most unusual
circumstances would have led me to do such a thing.
On my way
home, I went to the hospital to see my wife who has been confined
there for several weeks, and while there I found that young
George Case's condition had suddenly taken a turn for the worse
and that he was in a very precarious condition.
As it appeared
that I could be of scY,e use to the family, I took up a number
of commissions for them and felt sure that, under all the circumstances, you would pardon me if I were to devote my evening
to them.
As you may perhaps know, the boy passed away at two
o'clock this morning.
.Again expressing my regret for a seeming ,discourtesy
which I am sure you will excuse uno_er the circumstances, I am
Yours si cerely,
Governor Benjamin Strong,
470 Park Avenue,
City
2r,-;;49-1 0147
November 98, 19?1,
Dear Ed:
Of course, I understood about your absence
from the Shibusawa dinner; in fact, I was not there
myself, but laid up at the house for a few days.
I was shocked by the news in your letter;
I have written George.
Yours sincerely,
Edward R. Stettialgs Esc.
23 Wall St.,
,
New York, N. Y.
BS:MM
1-9714m
144,,
:
,r..:I.Jk
JAN1 g=g-
January 16, 1922.
My dear Ben,
Just a line to tell you how delighted I was to
receive this morning your letter of the 14th.
I have been
very badly tied up during the past week or ten days; otherwise, I would have dropped
in to
see you.
However, I shall
certainly give myself that pleasure within a few days.
-1 am glad that you are so greatly improved and
earnestly hope that you will have the good sense to go away
for a little while in order to receover from the effects of
the operation and subsequent treatment at the hospital.
Hon. Benjamin
Strong,
15 Nassau Street,
City.
Z7-4.1017
January 17, 1922.
My dear Mr. Stettinius:
Mr. Strong has asked me to thank you for your
letter of January 15, and to say that he is leaving tomorroe for Atlantic City for a ires.,: or tan days. I DM
sure that the chanRe should prove most beneficial to Mr.
Strong, and that he Nill return feeling fit to resume
his duties at the
bank.
Yours very truly,
cratary to
Edward E. Stettinius, Eva.,
2! Sall St.,
Nev York City.
ar.vv
Strong.
January 17, 1923.
Dear Ed:
When I was in Washington last week, Mr. rislcolm Stuart
litcConihe, whose card I enclose, asked if I would ive him a note of
introduction to you, which I said I would be glad to do.
Let me now 'explain that I know him very slightly indeed;
in fact, my only acquaintance with him has been in the Metropolitan
Club in Washington, where I met him through Senator Saulsbury of
Delaware, and I simply want you to know that if he has any business
proposal to make, I 7vould like to make some inquiries about him,
because I do not know him well enough to justify me in giving him
any endo rsement.
Yours sincerely,
Mr. E. FL Stettinius,
ts,/o Messrs. J. P. Eargan 8- Co.,
25 Wall St., New York City.
Enc.
December 11, 1922.
Dear Ed:
That beautiful cock pheasant arrived safely, and
He certainly is a beauty to
I hope to enjoy him today.
look at and will be as enjoyable to eat.
It is mighty good
of you to think of a chap when he is laid up, although
cannot claim -01444%, sympathy as there was little more the matter
with me than being a bit tired.
I hope you take warning
from me.
am just about to leave for Chicago, but on my
return I am anxious to cwtinue our talk.
fith many thanks, old man, I am,
Yours sincerely,
Mr. EdwartalA1-44
c/o Messrs. J. P. MorginCto.,
23 Wall St., New York City.
BS.MM
X-why e
400°
Olifee-v,q10-71c
W'5 400
401$31/114
Hon. BenJamin Strong,
,
//
January 18, 1923.
,
Federal Reserve Bank of New Yo/k,
New York.
Dear Ben:
Thank you for your note of the 17th.
If Mr. McConihe
calls, I shall be glad to see him but will keep your suggestions
in mind if
he submits any business
proposition.
1747/ 6-t&P7'..1
110
WI/ YA-eat
IFIJ
JAN251923
Weer%/0-7,4_,.la fox,01.13010
140416°
January 22, 1923.
My dear Ben,
I have just received your message stating that you
will be unable to join me on my trip South this week. I am
distressed and do wish you would reconsider the matter.
feel satisfied that you would derive all kinds of benefit t from
the trip and I can assure you a very good time. I shall try
to drop by nd see you either this afternoon or tomorrow.
A:04
In the meantime, I am sending you drafts of two
letters which I have written in regard to the Bank of Central c tpf
k
and South America. I wish you would look over them and tell
me if they fill the bill.
Sincere
Hon. 1:3enjamin Strong,
Federal Reserve Bank,
New York City.
urs,
r
Form 1204
itSS OF SERVICE SYMBOL
Telegr.
Day Letter
Blue
Night Message
Nite
WESTEk
TEL
NL
ght Letter
If none of these three symbols
'irs after the check (number of
is) this Is a telegram. Other:
I
wise its character is indicated by the
symbol appearing after the check.
NEWCOMB CARLTON, PRESIDENT
UNION
AM
GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT
CLASS OF SERVICE SYMBOL
Telegram
Day Letter
Blue
Night Message
Nita
NL
If none of these three symbols
Night Letter
appears after the check number of
words), this is a telegram. Otherwise its character is indicated by the
symbol appearing after the check.
AECEIVED AT
37FY WS 40 BLUE
BONAIRVANDERBILT AUGUSTA GA 950A MAR 3 1923
HON BENJAMIN STRONG
470 PARK AVE NEWYORK NY
TOUGH
LUCK BUT HAVENT SLIGHTEST DOUBT OF OUTCOME AS FIGHT
WILL BE MADE WITH CAFIDENCE AND SAME DETERMINtTION TO WIN
Thof HAS ALWAYS WON BEFORE IN EVERYTHING THAT HAS BEEN
TACKLED STOP WIRE IF THERE IS ANYT INC
ED
I 044A
I
CAN DO
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CkNOWLEDOED
MAY 7
W&LCIAee--1.
1923
R
e/KG1/0"1-'
April 28, 1923.
Governor Benjamin Strong,
Cragmoor,
Colorado Springs,
.Colorado.
Dear Governor Strong,
'For the first time since his operation, I
spent an hour or so yesterday in going over mail with Mr.
atettinius and he asked me to send you particularly a line
to thank you for your messages and especially for
your
note of the 21St.
Mr. Stettinius has asked me to tell you that
he is still progressing though somewhat slowly.
However,
he hopes to get down to Long Island on May 10th and believes that the change of scenery and the country air will
speed up his recuperation.
He sends you his kindest re-
gards and best wishes and hopes that you too are coming
around in fine shape.
Si cerely
cak-
Loy,
Ur8
---
4aLtak do,
ackAAJLAr
4-4rmic
truke'ii
4Ya-D etcruh-
[7:4-*/)
May 7, 1923.
My dear Mr. Dennett:
governor' Strong hs
cked
a to thank you for your letter
cf A;ril 28, and tc sF.,y thatz.)e ;las extremely -c.leasd to receive
word II) IP you giving such ,3ncoura,4ng news aOout r. L:tettinius.
Governor Strong i E likewise coming around in good shape !Ind by the
time he returns East he will be fully recovered.
write
Stettinius solLetize soon.
he hot,es,
r. y& 1 informed me that
Mr. Stettinioa left for ektltotic City lant F'riday for a week or
two and that he expe,cte to
summer.
from there to :Locust Vally for the
;Then I wrote ;stir. Strong I informed him of what Mr. Ryalt
-fold me.
iours sincerely,
r. John J. Bennett, Jr.,
23 ;Vali St.,
New York City.
G.B.YM
Form 1207A
!CLASS OF SERVICE DESIRED
Telegram
:ter
WESTEkaiN UNION
TELsx.
AM
Ire M
WESTERN UNION
Night Message
Night Letter
Patrons should mark an X opposite the class of service desired;
OTHERWISE THE MESSAGE
YILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM
NEWCOMB CARLTON. PRESIDENT
Street and No.%for Telephone'
Number
Place
/tar/AB-A-A
BENDER'S ADDRESS
FOR ANSWER
Time Filed
19
To
A- A
Cheek
GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT
Send the following message, subject to the terms
on bac hereof, which pre hereby agreed to
mmm ALA_.
Receiver's No.
Ade
_
.61-AMPITe 1.7,
SENDEN'S TEI1.
PHONL
mamas
ALL MESSAGES TAKEN BY THIS COMPANY ARE -SUBJECT TO THE FOLLOWING TERMS
To guard against mistakes or delays, the sender of a message should order it repeated, that is, telegraphed back to the originating office for comparison. For
one-half the unrepeated message rate is charged in addition. Unless otherwise indicated on its face, this is an unrepeated message and paid for as such, ie misidera,
whereof it is agreed between the sender of the message and this company as follows:
The company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any message received for transmission at the unre-.
peated-message rate beyond the sum of five hundred dollars; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any message received for,
transmission at the repeated-message rate beyond the sum of five thousand dollars, ualess specially valued; nor in any case for delays arising from unavoidable interruption
in the working of its lines; nor for errors in cipher or obscure messages.
In any event the company shall not be liable for damages for mistakes or delays in the transmission or delivery, or for the non-delivery, of any message, whether
caused by the negligence of its servants or otherwise, beyond the sum of five thousand dollars, at which amount each message is deemed to be valued, unless a greater value
is stated ni writing by the sender thereof at the time the message is tendered for transmission, and unless the repeated-message rate is paid or agreed to be paid, an, an
additional charge equal to one-tenth of one per cent of the amount by which such valuation shall exceed five thousand dollars.
The company is hereby made the agent of the sender, without liability, to forward this message over the lines of any other eompariP, when necessary to react, its
destination.
Messages will be delivered free within one-half mile of the company's office in towns of 5,000 population or less, and within one mile of such office in other cities
or towns. Beyond these limits the company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this company concerning messages until the same are accepted at one of its transmitting offices; and if a message is sent to such
office by one of the company's messengers, he acts for that purpose as the agent of the sender.
The company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the message is
filed with the company for transmission.
It is agreed that in any action by the company to recover the tolls for any message or messages the prompt and correct transmission and delivery thereof
shall be presumed, subject to rebuttal by competent evidence.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes
in addition to all the foregoing terms.
No employee of the company is authorised to vary the foregoing.
THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED
,NEWCOMB CARLTON, PRESIDENT
TELEGRAMS
CLASSES OF SERVICE
ing and agreement that the Company does not undertake that a
A full-rate expedited service.
NIGHT MESSAGES
Accepted up to 2:00 A.M. at reduced rates tO be sent during the
night and delivered not earlier than the morning of the ensuing business day.
Night Messages may at the option of the Telegraph Company be
mailed at destination to the addressees, and the Company shall be
deemed to have discharged its obligation in such cases with respect
to delivery by mailing such Night Messages at destination, postage
prepaid.
DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard Night Letter
rate for the transmission of 50 words or less and one-fifth of the initial
rates for each additional 10 words or less.
SPECIAL TERMS APPLYING TO DAY LETTERS:
In further consiaeration of the reduced rate for this special Day
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters, may be forwarded by the Telegraph Company as
a deferred service and the transmission and delivery of such Day
Letters is, in all respects, subordinate to the priority of transmission
and delivery of regular telegrams.
Day Letters shall be written in plain English. Code language
is not perthissible.
v. This Day Letter is received subject to the express understand-
Day Letter shall be delivered on the, day of its date absolutely, and
at all events; but that the Company's obligation in this respect is
subject to the condition that there shall remain sufficient time for
the transmission and delivery of such Day Letter on the day of its
date during regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.
No employee of the Company is authorized to vary the foregoing.
NIGHT LETTERS
Accepted up to 2:00 A.M. for delivery on the morning of the ensuing business day, at rates still lower than standard iaight message
rates, as follows: The standard telegram rate for 10 words shall be
charged for the transmission of 50 words or less, and one-fifth of
such standard telegram rate for 10 words shall be charged for each
additional 10 words or less.
SPECIAL TERMS APPLYING TO NIGHT LETTERS:
In further consideration of the reduced rates for this special Night
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect to delivery by mailing such Night Letters at destination, postage prepaid.
Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.
-4--
elegram
Night Message
BY TELEPHONE FROM THE WESTERN UNION MAIN OFFICE
NEWCOMB CARLTON, PRESIDENT
.
Form 1222_.
CABLEGRAMS
Day Letter
Charges Gf any) $
17.7.
UNION
.SSES OF
riTIC SERVICE
Nigh. " etter
I
GEORGE W. E ATKINS, FIRST VICE-PRESIDENT
CLASSES OF
CABLE SERVICE
Full Rate
Half Rate Deferred
Cable Letter
Week End Letter
Charges (if any) $
CLASSES OF DOMESTIC SERVICE
Telegrams
The regular fast service for all purposes. Code language permitted. Minimum of 10 words charged for-
Night Messages
Over-night service for short messages at reduced
Due for delivery the
following morning. Code language permitted. Minimum of 10 words charged for.
rates. Accepted up to 2 A.M.
Night Letters
Day Letters
For longer communications not requiring the faster
service. Subordinated to Telegrams on hand. Must
be in plain English Code language not permitted.
Fifty words for the price of an 18-word Telegram
Over-night service for longer communications. Accepted up to 2 A.M. Due for delivery the following
morning. Must be in plain English. Code language
not permitted. Fifty words for the price of a 10-word
Telegram.
CLASSES OF CABLE SERVICE
Full-Rate Cablegrams
A fast cable service to all parts of the world at
Cable Letters
Over-night cable service to certain countries at
regular rates.
greatly reduced rates. Due for delivery the following
noon. Code language not permitted. Minimum of 13
words (including necessary prefix) charged for.
Code language permitted.
Half-Rate Deferred Cablegrams
Subordinated to Full-Rate Cablegrams on hand.
Must be in plain language of country of origin or
destination or in French. Code language not per-
The cheapest cable service of all. Accepted at any
time.
Due for delivery Monday morning. Code
mitted.
(including necessary prefix) charged for.
Week-End Letters
language not permitted.
Minimum of 25 words
CLA-Sri OF
no SERVICE
CLASSES OF
CABLE SERVICE
Full Rate
Night Message
TELEGRAMS
Day Letter
Night ' etter
CABLEGRAMS
BY TELEPHONE FROM THE WESTERN UNION MAIN OFFICE
Charges Of any) $
NEWCOMB CARLTON, PRESIDENT
GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT
Half Rate Deferred
Cable Letter'
Week End Letter
Charges (if any) $
Dated
19
Uvuuti
CLASSES OF DOMESTIC SERVICE
Telegrams
The regular fast service for all purposes. Code language permitted. Minimum of 10 words charged for,
Night Messages
Over-night service for short messages at reduced
Accepted up to 2 A.M. Due for delivery the
following morning. Code language permitted. Minimum of 10 words charged for.
rates.
Night Letters
Day Letters
For longer communications not requiring the faster
service. Subordinated to Telegrams on hand. Must
be in plain English. Code language not permitted.
Fifty words for the price of an 18-word Telegram.
Over-night service for longer communications. Accepted up to 2 A.M. Due for delivery the following
morning. Must be in plain English. Code language
not permitted. Fifty words for the price of a 10-word
Telegram.
CLASSES OF CABLE SERVICE
Full-Rate Cablegrams
A fast cable service to all parts of the world at
Cable Letters
Over-night cable service to certain countries at
regular rates.
greatly reduced rates. Due for delivery the following
noon. Code language not permitted. Minimum of 13
words (including necessary prefix) charged for.
Code language permitted.
Half-Rate Deferred Cablegrams
Subordinated to Full-Rate Cablegrams on hand.
Must be in plain language of country of origin or
destination or in French. Code language not per-
The cheapest cable service of all. Accepted at any
Due for delivery Monday morning. Code
time.
mitted.
(including necessary prefix) charged for.
Week-End Letters
language not permitted.
Minimum of 25 words
1
23 WI/. [Ave-4DA;79bei-W,o
December 26, 1924
4
Dear Ben,
Thank you 30 much for Root's Speeches and Essays.
I will
certainly enjoy reading them and they will remind me of the dear old
scout who sent them to me.
My best wishes to you always, and particularly that the
new year will bring you blessings and prosperity in the fullest possible measure.
Yours sine
Hen. Benjamin Strong,
270 Park Avenue,
New York City
January 15, 1925.
Dear Ed:
I ar leaving 'or tle South this evening, withoA,
having a chance to bet ia to sea you before l go. In fact,
I t.svo been endeavoring for ,ome time past to do that, me
posAbly you will unoerwtano that circumstances have mane
it imc.aible.
Iave evon been torking Sundays all day, and shall
be oLliged to leave without haying good-bye to my good
mother, alcc.epe over the telephone.
I want you to'know, however, t?.',at I have thought
about you a lot ana have inquired from your partner how you
are getting along, tut tht.t is an utmatisfactory way AO so
dear a friand is ill.
ky best to you, Old rasa. rleL>et be g000 ano get well
soon.
hi:merely yours,
E. h. Stettiniuz, Eso
1021 ?ark Avenue,
New York, h. I.
i3S.L8
?et,
ary 27, .k.
Dear Ed:
i.ver since my return from t,ne South I have been
promisliks myself ti visit 4th you, or at least a chat over
the telephone.
But things have been moving rather fast
and I had to he in iashington 3ever,...1 days wnile. you acre
here in New York.
yaeterday,
I en mighty disapoointed not to have gotten you
bui., my
it was too late.
,: aver4.1 attemi:i;e were interrupted until
However, with it all, I have had several
enourin,-, reports through your secretary, and I am hopeful
that this change will do you a world of good.
I shall try to send you some of the neas soon,
and, in the laeuntime, h.:;,nt to erld Eay very hest wishes and
the hope that we snail see you back again your usual self
before ve,ry long.
Ey beet Lo you, old men.
3inuera.4 yours,
E. it. !;tet.tiniue,
2248 ilialton
Augusts., Georgia.
6444 '""r
March 14, W5.
16ae
Dear Ed:
It his been on my mind to write you ever since I got back from
the South last month, but I have been terribly busy and unable to get
off a letter.
There is not much to report from here in the way of news.
had lunch at your office a few days ago with Jack -ad Tom. Both of
them are back and looking well and cheerful, but we had nothing of
particular interest to discuss. All the reports of you are encouraging
and that is good.
I had a month, devoted principally to golf, at Palm Beach with
John
the time with Dick Howe min Jay Cooke with his eife.
We had nine holes every day at the Golf Stream Club, generally a nap in
Grier, pert of
the afternoon, and some engegoment for dinner every evening. 'ghee I left,
John went on South for a cruise ene fishing trip. He has not yet turned
up in New York, but I bather he is planning to atop at Bermuda for a
couple of weeks' golf there and then come up by boat.
Although I em a pretty poor judge, it looks as though the top were
off the speculative movement in etocks, which is probably a good thing.
1
There also seems to be a little chill in the distribution of some of the
foreign lone that have been coming to
is that the
the merket.
quality he aemewhat deteriorated. The
The explanation probably
reports of bueiness continue to be excellent, alteoueh everybody is cautious, and there seems to
be no eiepoeition to contract much ahead or stock up with goods, ehich again
is a gooe thing.
The lest issue of Governmeet bonds ane certificates
cut very
about
close on rate, but really was e good success. The subscriptions were
50 or 60 per cent. eh excess of what the Government wanted to take.
Don't bother to answer this letter unless you happen to te short of
to to while away
reading matter, for if you are I may send you a book OT
the time.
My very best to you. I am looking forward to the time when you
wili te back with Us hale and hearty, anu able to enjoy the good things of
life again.
Affectionately,
E. R. Stettinius, Esq.,
224e Walton Way.
Augusta, Georija.
24f
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http://fraser.stlouisfed.org/
Federal Reserve' Bank of St. Louis
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ARIMP/
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C3OVERNOW3 OFFICE
RECEIVED
ö1925 2
,t
7.67,),4i'77
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Wrch 30, 1925.
My deer Ed:
It wee a greet delight, but eleo a aurpriee, to
receive your letter today, because it *P.,6 really a violation of
my injunetion. All that you write i6 a cause of joy to me, ea
it will be to, John when I eee him.
About myeelf, I can report that I heve not been in
such fit shape for long time. It is the reward of vittue.
I
have been taking a regular course of treatment which includes an
hour's rest after lunch en' the Alpine rey lamp, which really
seems to be n excellent thing.
There is not muca news, other than whet you read in
the papers every day. I have seen your partners with coneiderable
regularity lately, end they all seem exceedihOy well.
I is I could help you out about your inveetments,
but certainly thet would be carrying coal to Newcaetle.
John and I had a getne time Lt. Palm .betch together, and
just to indicate that I am not altogether out of the running while I die not play more than 9 boles W- t;olf any dty, I did
manage to accumulate a little plunder from John and acme of the
others, etc *Lee I left I at oirre the 9 holes in the low 406.
Now take good care of youraelf and pletee do not oother
to write me unleee the spirit really moves you to. I should like
to aend you eome booke if you think youw-suld care to have me co
so.
With much affection,
Sincerely yours,
Ldward R. Stettinius, Esq.,
224.8 Walter: Walt
Augusta, Georgia.
Be. S
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