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F.D. 12A.3 '


0 VO


Federal Reserve Bank


District No. 2
Correspondence Files Division






CE-AVo, rwe,,to





Najor Gen. Leonard_ri

494quartere t'tntral Department U. S. Arm:;,


Chicago, Illinois.

dear Gen. Wood:

Basil and I left Phoenix for our camping trip
equippg0 with writing materials to enable me to prothat aftiole which I had expected to have in your
before this, but 70 found that our travels kept us
1y busy almost every day from sunrise to sunset and
-a was no ppportunity for serious thought about matters
more important than the daily routine of travel and caEp.
Our trip took us all the way to the Pinacate
atain in old Mexico within about -15 miles of the Gulf
f Calif ciia. We connected with McCoy at Casa GTande,
ad a short viisit ith biL 7A Douglas and anot4er visit
ith him $44jo. coil has to visit the Bliss's'
nta tta r
rut I join,him in San Francisco next
4 and on the 1 h we sail for the Orient.
Both of Uo lammed with wuch regret that the
fallen up-on-MoCoy and that he had been transferred
Central Devrtment as a Major of Cavalry, the only
bmpeneation betk his return to a close aseool-tion with
Won't you Ove him my best regards and tell.hi'h that
our photograhhS are ever developed I shall send him

ther instalLent.

The eneloeed memorandum is intended to be no

e than an expression of my personal views about some of
practical questions in finance and e00nomic:3 that are

pressing upon us as a result of the war. ObvioUelY,
very* close associhtion wah the treasury and its finan
perations during the war period may an the one hand be-con
idered as prejndipiht3 LT views, and on the other hand
Amh,oeing some ri6ttaint in expressing them. At Iehst
ou may take what I say on these matters as the best eonlotions I have And ac being based upon a rather intiuhte
owledge of what transpired.
lath most cordial - :thee, believe me
_incere_ h

Phoenix, Arizona, April 7, 1920.

The whole world is addressing' itself to a study
be economic problems growing out of the war, and they
et so intimately involved witL the s Oial and political
situation, both at home and. abroad, that aur public men cannot expect to s.-tisfy those who- are looking to them for
leaderabip, unlese they are able to present clear and easily
understord opinions on these matters and more particularly
coLe constructive program.
Tho cop:vents given below are divided into the
ollrwin,:7 subjects:2.


Dankinf7 and curmoney expansion.

Hipp cost of living.
Foreidn Trade.
Loanalo allies



Taxation and loans.

For the past two years otudents 7f this subject and
artioularly Gotha of -our economists ,connectod with the univeritie3 havo soverely,criA.eised the financial policy of the

treaoury department, claiming that a great expansion of
currency and bank oreditlhad resulted from the governments
borrowing at too low ratTo oi
from the reserve
banks talittetnin to low discutt :c..too in order that this,polciy
A.ght succeed, from the treasur:i 'sort:owing too much on short
loan and that the consequences of this expansion were the
present high prices of commodities and disorgaaisation of labbr.Thera is, of course, sole babes for a part of these chp,rges,
but the basis is theoretical and oompletely overlooks ciroul&Aanoca which fmiuently in time ofmarmakes it necessary to,

elect a choice of evils.
' When the war started in 1914 all belli;vent nations
=ell had aeoess to our makkete-camo here tr buy foodstuffs
and military suprlies in ulimited quantities, beyond our capacity to produce and their capacity to pay by the usual exchange
of goods ana services for goods and servJ.ces and without regard
to prices. This resulted in various econemicl phenomena, which

may be summarized briefly as follows:-


We planted more land end increaeed our farm production.
We bred more food and Oat animale and increased
our herds.

-We nnlarged our industrial plante, built new ones
and greatly increased out production of all kinds of
material requited,abroad for both civil and military
We enlarged our exports beyond anythin heretofore
witnessed in the worlds history.
We loaned largo sums of money abroad.
(r) We repaid debts which we owed abroad.

We imported over a billion dollars of gold and incroadedour bunk recervee by that amount.
In conoaluence of the above t;.ere wao a slight enthe note curronc- i ciroulation and

conuiderable enlargement of banh loans and-der_osite.

nosienasinvaribly accompany sn increase in
tione wealth Olether in timo of peace or war. In other
, we were rapidly etting rich out of the war, onls4rginL;
roduetion, our national aseets and our banking resourcee.
The only question which can be raised ac to the aeundneee and
perm-nence of thio- prosporify relates to the question of the
price level, which in my opinion, was unavoidably bound to advance under conditions which, no system of banking of of economics which has yet been devised could be made to control.
The above reltes to the period between the outbreak
of war in 1914 and cur ontr-sace in 1917.
Thoee,who have criticized the treasury's policy
laim that the federal reserve eyatem has been doiAnted bs the
resoury-and its rates, a result, have been, kept too low
order to facilitate an unsound treasury proram. They claim
t these bow rates are reeponnible for inIlation and high
Broadly speaking, there are throe ways by which ination crk be moderated or kept under control and prices kept



General economy in the consumption of all kinds

of goods by all the people of the country 3e that
what is resulted for military pursooes my be

out of what io saved by economy.
(2) Restriction upon borrowing from banks for the
pureose of expanding production by pharging
heavy rates for _loans, thereby imposing a t4A
upon production which is based upon bank credit.


The payment of higher and more attractive ratee
by the government for .long time war loane; so
that a wider distribution to investors might be
obtained without calling upon the banks either
to subscribe, for bonds or to lend money to aubncribere who were unable to pa 71 for their bonds.

As to the first, the people of thio country must be
to impreoe
aware of the determined efforts which were made that t'nere upon

them that there was urgent need for economy and
would be disorganizing consequenceo growing out of higher
prieee If they did not heed the onoAing. It may be that
moro. could have been done in thio direction, bnt the reeponsibility for the failure, if it was a fialure, rests neither with
the treasury nor wit the federal reeerve eyetem,, but kather
with the peculiarities of the 4Lerican temperament and the
habits of a people who bad long been accuetomed to enjoy the
luxuries and extravagances that 'are characteristic of a new.
,an rich country, and who were unwilling to surrender them.
As to two and three, opinione differ widely, but
my best judgment wile at the time and 'now that had much
higher rats e bean'paid by the government and charged by ..te
reeerve banks, wo would have brought on troubleu t
oueeesofully eacoped, p000ibly more serious in their affects
the expansion
* won the country than noae which reoult fromnot the secretary
and high Tricoo now prevuling.- Congress
of the trenoury wa chorgod witl; the duty of authoring war
lenne; Congress fixed the raloo or those %rens and delitgated
a moot limited authority to t7oe eocretnry of the treaeurylp
fix rntee-ano, termu. The Congreeo sirO1y heard his recommondo
tions which were arrived at after consulting the reperve banks
and other b nkere. Assuming, however, that the.aecretrxyre.;..
Congress to be
the treasury had auffisient influence with be paid, there were
garded as himself determiniboo the rates to
to be
than two bodies between 'whom this queotion of tntee
nrid on the
settled. On the one hand theotronsury deportment are that in
other hand the Federal Room:ye system. The facts
every instance they made every effort to have their minds- meet
to orrree unen the=wieeot °aurae.. There were certniniy
er-enoeo of opinion. La 301:10 inotancesoI personally felt
the rntee_were too low, wherene othyro of my own
ciates, as well as manyobankere outside of the Reeervetoo
eel,felt that they were about right, or in some caaes
always be true discueoionr these comg- ratesmust the reaultonifof auch4catteis,.and apolicies
e to
Inieh it was
at the meon
altion of oollflictino vi


.believed fiat the greatest possibilities of euccepe 4xisted.
The fact is that the ratee at which the United States
Government borrowed money had to be determined, either by Con,
erese or be- the secretary of the treasury, or by the Federal
Reserve systeeo Congrese gave very limited authority to the
eecretary to fix rotea and terns for the long tine 'cane, except in the cene of the fifth loan, after Seoretgity Glass
took office. /le between Congress and the sooretory of the
Treasury, on the one hand, ond the Federal Reserve System
en the other hand, the former could fix to so low and no
much below the Federal Reserve rates that ,the loans would be
hopoloso failuroe, or on the other hand; the Foderal Reserve
Syeter ceuld have fixe-Aa rotes so much above those at which
the eecretory believdd that he could borrow money, that it
would heve caused the loans to fail. Ac to the long loans,


orincipal reeponeibility resMod with Congress end I firmly
_eve that the tares fined by Congress, Whioh wore partly
ho recomoendotion of the eeeretzry Of the Treaeviy, rated the best coneensus of banking experience and judgehat could be had at the time. I ale- bolive that little
it, and pteoihly a vod deal of advnnto eeuld result
ony attack of a poletioal nature upon the wa-r fine:nee
'ram, which on the whole, wrea a magnificent achievement.

The great cry for higher interest rates by critics
Toipally college orofessore, really vereliee to the short
borrowing of the troaoury. n--1;41e, principally from the banks
ox the country rather than investors, became() in those operations the greatest peseibilitieu of expansion wOh the resulting effect won prices existed. So far rep the Volume of that
borrowing is concerned, it eould hardly have been less, except
we had been willing to pay More taxes, because the country's abecrbe long tioe bonds had been strained to the
breaking point. The only question which I reg:rd as open to
debate as to the wisdon of the treasury program, oel-tee to
the rates paid for short loans.. As this letter is Loot confidential, 1 feel at liberty to say that 1 have differed with
the officers of the treasury and with some of my own aeoociatea
in the reserve system ea te this policy sine() the oummer of
1919, but nevertheidaa 1 realize that queetions here involved
ere ones of judgment and time may dieolote that my own .opinion
to rates, which wao a minority, was Wrong and the treasey
eiew wao right.
In general, however, theibllowing should be eald
on the sobjeot of intereet rates. Any nation which encounters
an unlimited demand for goods, at almoot any price,bad beyond
it..: capacity to oroauce, and whose people are consuming and

wasting goods beyond their ability to Tay out of current savings
muet resort to credit and mortgage the savings of the future i,..
order to pay for the =ate and extravegance of the present. ii







would have been effective in imposing a rigid economy uporsa

people who were mad to spend money, might indeed have emashed
the value° of all securities and poeeibly embarraesed or
bankrupt many indivduals and corporetions an.: caused hard-

shipe, loeSee and erbarrassments, equal,if not greater* than
thoee reoulting from the preoent high prices and inflation- of
bank depoeits and currency.

Critics overlook the foot that the greateet
corrective of waotaful expenditure b y the civil population
in time of war is direct taxation, graduated to the point
ere it will not diecourage production. :While our tax laws
re olumey in some casco produced oululative taxes and may
s degree be'diecouraging to production now that peace has
come, the tax program was neverthalese on the whole couraeeoup
and oonetruotive and saved us frou: esany a disaeter, such ac
were encountered during the civil wax', which waa financed
.almoet entirely upon credit.
Loot you feel that thee° atatemento are dogmatio
somewhat egotiscal, I hope you will bear in mind that durg the period eince our entrance into the war, the author
had a peculiarly favorable optortnnity of viewing all eidec of
these sublecte because of his intistte aeoociation with the
rtreasury, his connection with the Reeerve yetem and acting as
the head of the vartous wasnloan organizatione in New York.
During this time, that le in 1916 smd 191t, I applat po1
ntho in Europe studying their experinnoes and getting their
we, which helped to confirm my opinion that while semis
kee were made, in general, the financing of the we wae
done and these-are few importent mistakes, if any,- that
juotify criticism.


iI Cost of Livins.
Most people discuse this6Ator

though some

formula or aoetrom Could be administered at night snd doliver hin the next morning oomplotely renown:. of hiG
diceaoo without any period of conualeeance. They aleo.overlook the fact that At Is a diclease which is supported and
etimulated by the atmoephore in whioh the patient lisee,
and that juot now the atmonphere extends over the entire
oivilleod world.
The real ours for the high 000t of living is a
supply cs. ' goodo w'ioh arc generally claeced as noemecitiee
in exceee of a nomal demand for those geode. Thie es, be
brought about L) br:nging to bear infitlencee which will
stinulge productien and diecouraee coneuMption. What are


the fundemental influences which do not develop of their
own accord and which can be brought to bear in accomplishing
this cure? Possibly the _following are the most ipportant.
(1 shall not arrange these in any order of importence, es
opinions very so widely and my own views are not positive)
e. A revision of the tax laws to remove those
features which discourage production of neeessitice.
2. Thoprompt funding and payment of the short
borrowings of the United States government so that these
loans will re oh the hends of inveotors and be taken out of
the bank.
A deter,eined and vigoirue campaign of economy

h must be practiced by the people of the 'United States.A similiar policy of economy by the government
of the United States and by the states and municipalities.
The maintainence of sufficiently hieeh rates of
diecount by the reeerve banks to 'make borroeringe by the
banks of the country en-rofitable unless they cherge their
customers such high r es (n turn as to s ourage all unncooseary borrowing.

A vigorous campaign with the laboring classes
particularly thooe belonging to lebor unions, to speed up
production. They should be &own that they on increase their
bun waecs more rabidly by reducing the cost of goods through.
an incre-ee in the production of goods than theypoan poo.ibly
noreased by striking for higher evges at the wee time
they reduce production and increase the cost of goods.
Verieue measures of lees importance, looking to
a more prompt distribution of the necessities of life from
producer to consumer, the disciplining of those who obtain
control by one means or another of the supply of any article
f neceeeity, etc., etc., can all be undertaken, but what can
be accomplished by such measures is trifling, comperedObb
those mentioned above. Of all influences upon the cost of
livi,ng,.the most importent is economy .lwthe avoidance of


Many diseased in the body politic are cured by
remedies provided by nature, just as diseee.cs of the human body
are arrested by anti-bodies, developed by nature. Much of the
economic disorder of the world and more than any other disorder
this very serious one of high living-coats, will find their

principal reraddy-through the operations of the natural law of supply and demand,
rather than IT the enactment of statute
Federal Reserve Bank of St. Louis

aind that the damage caueed by this war did not occur in a
day or in one year, or five years. It is the damage eaueed
by the misdirection of human effort0 over a period of 4o
years, over eince Germany undertook to be a military deppbtism
and this damage will take a long time to repair nxid results
cannot be expected without further loeeee and euffering.

Undoubtedly the industrial development of this''
Country received a gre t etimulue from the protection aforded by a protective tariff. We grew rich rapidly by developing the countrytu reeources and employed much fole*gn
capital for the purpose. It w scosts and wages', however,Iby
establishing a higher level of
higher standard of
believe, is usually confused with ahave enjoyed a greater
living. Our wor'ing classes might
prosperity had we been able in the earlier years of our
development to engage more largely in world trade.
Whatever may be the traditbonaliview of tate of
matter, I think the time has now arrived when the people
the country would be better setiefied to leave the develop-

ment of tariff legislation 'and conoeauently the adoption of a
tartff policy to a body of experts and eliminate it as a
palitical issue. How otherwise oan the uncertainties which
now surround all of the economicwhat ourof Europe be taken
tariff policy shall
into consideration in

The war has unquestionably developed special
situations in respect to special protection may bean the
dye indus Ty, a' ore--some sort of
the less

It might also appear that In the case of some of utili very
living are
eveloped counties, where standards as in China, some sort
of ours,
low and wages abomaat a fraction
produced goods coming inof protection against very cheaply our awn, may be necessary.
to our markets in compptition
A tariff which would accomplish thiswould, of such, for instancg
course, operate
as would exclude C ins so pig iron,
irons, but the list of such
to exclude all other foreig4 pig
articles iu comparatively command great advantagce of in which
small and applies to goods production.
we ourselves, as a rule,

One of the effects of the long period of education
protective tariff
of the people of the country to the idea of a that a nation
mistaken belief
has-been to lead them to tl,e
trade. Hati_ga
grows rich principally outs. of its exportthe exchange of grow
rich out of "trade" and trade consists in
goods and services between the nations.

In the long run the natural ros-urces an other
advontagesof climate,of a new industrious and virile
populationj)f liberal government enjoyed by thie country
should enable us to compete with the other producing nations
of the world, find markets for our surplus production, and
import freely those things which we cannot produce ourselves.
It has always'seomed to me that the greatest
breeder of international dispute and warfare' in modern times
is the interference by governments through preferential
tariffe, bounties, subsidies and other similar devices, in
order to grasp for their citizens some of the international
trade of the world which natural advantaoco did not entitle
thooe nations to enjoy. With all of Europe prostrated by
the war and most of the nations of Europe now owing us large
oums of money, the temptation to all of their governments
to opploy.devioes of that character will be stiong indeed.
Since Making two visits to Europe during the war period, I
have become convinced that herein lies the groat danger to
the future peace of the world and the greateot argument for.
the early establishment of some such body as the League of
Nations, under the direction of which intornotional law may
be °edified, troaties ado public, and ultimately, I hope,
a court of; 0.OootienelAajudication established. Leaving out

all other

'eetioneLeurrounding the troaty and the leeague
ae to this particular question, no surrounder of the
of the United States need be involved in participating- in
such an4 international organization.


with all of

The future trade of the United States
the rest of the world is intimately involved in the question
of what we shall do about the loans now °win- to our governIf we eapeot them to be paid
ment by the allied governments.

even though payment ofoorincip01 and interest is spread over
a very long period of years, it can only be done through
large importations of goods in excites of the amount of our
ex-ortations.. How these loandoshali be dealt with is-a
serious and impvrtont question referred to in the next para-

It ig probable' however, that the country must be
gradually Iodate) indurstand that we cannot expect to maintain any such surplus of exports as we have recentty Witnessed

certainly not without a continuenoe of 440ordered exchanges


a long delay in the ecionomic recovery of 'Europe and ultimate
inability of our creditors to cy their debts.


Loans to Allies.

One of the unfortunoto necessities of the war
emergency required our government to make direct loans to

fcrekgn governments.

Had it been possible, it woulO

halite been

infinitely better for thee° loans to have been sold direct to

WM. ts

continue to be o41 uhdorourrent of suggestion or preesure to
induce a rioH creditor to forgive onOeimpoverished debtor.
This would be a misfortune and a great blow to the credit of
citizene of
nations. In the event of another war, the with belligerents
neutral natione would be chary of dealing
and ef lending them money, fearing that they would never get
or more every
-it back. On the other hand, for a generation those foreign
budget subloitted by the finance ministers
countries must make rovieion for the payment of a tribute irand

to this country. This will be a source of une-sinee


Under pronont conditions it would seem to b oat
impolitic and unwise to agitate this subject at all. I
should hope, however, that our present administration eill
ahortly conclude an arrangement for dealing with current
interest payments on our foreign loans so thot no policy need
by adopted for a year or two. After that period, anC,. ofter
conditions cattle down in Germany and Austria, it ehouid be
Possible to effeot an adjustment of the e_ebt by cancelling
duolicat4one and to some extent accepting payment in the form
of the bends given by Germany and Austria in reparotion of

war damage, so as to almost, if not quite, cumin to this
.cause of international bad feeling.
In Interleave when European credit recovers, these
loans now held by our government may be converted under arrangment with the borrowers into a form which can be distributed
to American investors andothe proceeds applied to reducing our
wn government debt.



It is altogether too soon to determine ifiat the
of *miggation and imraigrotion will be throughout the
on there Will be a
world. It may be a fair guess that lotor If that proves to be eoneiderabte migrttion to this country.
the case, I cannot phrade in thtemmemorhndum any policy which
uld meet the situation so admirably as that which you stated
me. in Chicago. We shall need added. population in the
make sure
future just as we have in the past, but we mustAmerican that
these who come*Ifrom abroad come here to boon=
.citizens, and that they are capable of doing so.
Unfortunately, the ideal of self determination has
taken such a strong hold upon the raises and tribes of Europe
that their relatives in this country have become thoroughly
imbued with the idea and in .any cases nue beginoe to
t'oink more of their oid country and its welfare than they should
This idea must be combeetted and it
of the United States.

not be- allowed to grow worse bfy allowing hordes of foreigners

to coe to this country nithout any regard to their education
their underetonding of our inetitutiono,eed their willingness
to lea= the ,.language and °beery° our laws.


Taxation and Loane.

There is agimoot natural outcry againet the preeent
to.e laws and some danger loot in heeding it our Congress
may gb to; far to the other aeltreme and reduce revenue from
tnxation, too much and too seen.
United States Government now has a debt of abut
twenty-five billion dollors offeet by about ten billion 4o1,lare, owing us by the alliee. Great care must be exerciffed
leet thic situation develop amonnce similar to that which
occurred during President Cleveland's adminiotration, when
an adverse balance of trade, following the reduction of te
teeiff caused heavy gold exports and almoot forcedous to -a
auopension of specie payment. Thio lc a subject of great
complexity end difficulty, lorzely one of edminietration
for which the statesmanship of the Secretory of the Treasury
will be a better pretcotion to the oountry, if he is an able
-ad experienced man, than anythinn eloo that I gen think of.
the present time, I belive that the most that cierebe
claimed for a conetruotiveoprogram for the future wilo be to
so reviee our tax laws that rovenueo will not be greatly reduoed, .but will oprean over a larger number of tax payero
and relieve some of the burdens which I believe it hao been
found root too heavily uon some of our industries and upon

their proprietors.
There will be a natural endeney in a hen Ogre's
to look to indirect taxation, the effects of which are obscure
but which, novertheleao, boor too heavily uoon the laboring
aleseee for relief from the preeentosituntion. Suchaa policy
will in the end be calamitous. It will play into the hands
of that olase of agitators who in their heorts are enemiee of
our inetitutions. Thie io one of the penalties of the woro
which muct be principally borne by those of moderate an) larger
means, and to ac groat an extent ao poseibleo by direct taxes.
Little can be expected in the way of revenuee from
our allies for many years to come. The burden, therefore, of
.ainortizing our own loans must be borne by our own people. It
will be a miotake to defer connencing repayment to later years.
Our Government should quit borrowing at the earliest pooeible
moment and start a regular and scientific retirement of Ito
debt. Failure to do so will renderiit exceedingly difficult
to get this painful process well under way and will lens de fer a return to normal conditions.
Federal Reserve Bank of St. Louis



Every wax of modern times which inflicted heavy
dcstruotion of lift and property has boon followed immediately
upon its ooncluoion by a period of business activity, opsoulationip.
and higher prices. This post war period of somewhat artificial
prospority hao voried in ion* and intensityand han then been
followed by a reaction and liquidation with groat prostration
tr businoss and 3eolry looses ano suffering. It somos ao th ugh
the speculative period- follSwing this war might last for some
time, and how serious the osriod of liquidation will be, no
one eau safely prophesy.
Probobly at no time in our history has it boon so
'necessary that our govornment shoulJ adopt a constructive
policy, looking to the conservation and security of the industry
and oomoorce of the country, as at the present time.
So many of the business activities of our citizens
in manufacture, transportation and bankingiare now-eubjoot
to statutory regulations of the Federal anti State govornments
that it is impossible in this brief memorandum to attempt to
refer to any particular branch of this subject. The most that
I shall say is that our government should pet about aositting
the business interests of the country and adopt a more sympathetic and helpful attitude than has charootorizod the past
tt:enty years.
Mich has been actoomrlished in ocorching out and
-destrotimg dishonest practices and s4useo. It has been followed
by an antagonism felt throughtttt the whole country directed
ao:ainat our successful men of -affiirs and their enterprises
and frequently oxpressed,in all sorts of congressional investigations whioh have aceomplisheld little more than to oreate aralto perpetuate sootional and class fooling.
The above memorandum has not contdined any reference

to the nesd for budget legislation. It is a sulpct now
faitly well understood and as I understand. it, rbto prpposol has
received the endorsement of both political partioa.
For obvious reasons this memorandum is confidential
for General Woodlo personal use and information and not for

publication or distribution.


Opt Gouvator-Ognierni


1017itippirm Utanbrz

Manila, September 15, 1925.

Dear Mr. Strong:
EVer since the Insular Auditor, lar. Wright,
told me of his interesting conversation with you and spoke of
your interest in Philippine affairs I have intended to write
you concerning the situation here.

I frequently receive letters asking me what
my viers are concerning the 2hilippine situation and what I
think should be done.
Last year I sent the inclosed telegram
of ;Larch 14 to the home government.
This telegram expressed
my views at that time and expresses them now.
It was published
in the Official Gazette here and went to practically every important official in the Islands.
It was also published in the
insular press and at home and had a wide circulation.
It is a
concrete expression of my views on the situation and as to what
our policy should be.
The views expressed were not pleasing
to the political agitators, but nevertheless caused little comment among the people.
Indeed, I did not receive a letter,
telegram or verbal protest against any of the statements made

That the Filipino people are contented and
happy and making steady progress is everywhere evident. Business
is steadily increasing, as are our revenues, which were nine
million pesos more last year than the year before and the expenaes of the government a million less.
Exchange, which at one
time was 15 per cent against us, is stable and during the past
year has at times been in our favor.
The balance of trade is
heavily in our favor.
There has been general improvement all
along the line: in the administration of justice, public health,
public education, etc.

Largely as a matter of race pride, the mass of
the people desire independence without understanding its responsibilities or what it means.
To turn over the twelve milliOn
people of these islands to their political leaders would not establish a condition of independence but one of stagnation and








The people are not strong enough to defend themselves successfully nor are they prepared either from the standpoint of economic development or resources to maintain an independent government.
Such stability as exists here is fundamentally due to the presence of the American flag, and anything which
unstabilizes the flag will affect adversely the wellbeing and
progress of these people through the destruction of confidence ,confidence in investments, confidence in the administration of
justice, confidence in the efficiency, integrity and stability of
the government.

We are trying to build up here a well-organized,
well-trained Christian people.
Great progress has b
people are mostly Christians and under our protection and leadership
will be a tremendous force in Christianizing the Orient and in esTo do anything which
tablishing a Western type of civilization.
would bring this work to an end or put it in the hands of those
who cannot carry it forward would be a blow to progress in both

To withdraw from the Philippines with the Bast
talking self-determination and full of unrest would be a great blow
to civilization throughout the East and Lmpose a heavy additional
burden or responsibility upon England, the Dutch and eventually the
French in Indo-China, as it mould result in a great increase in the
existing unrest in all the Eastern holdings of the principal Western
Moreover, if we withdraw one of the great powers will
promptly take our place and this change will not be to the benefit
of the Filipinos nor of the upbuilding of our own ideals of government in this part of the world.
If we are to be strong in the Pacific west of
Oahu, it is absolutely essential that we have a strong first-class
There is no other place
well-equipped naval base in these islands.
The Islands are our part of
where we can establish such a base.
the Far Eastern problem and are our only holdings in this part of
Without a first-class well-equipped naval base our
the world.
Navy will be tremendously handicapped in all its operations west of
Indeed it will be pretty effectually off the Pacificwest of
that island.
Such action would be
We cannot fortify Guam.
We are
taken as an offensive rather than a defensive measure.
free, however, even under the terms of the Washington Conference,
to develop to any extent our aif forces, our submarine forces,
and surface craft up to 10,000 tons, with guns not to exceed 8
inches in caliber.
Full development on these lines will make the












Philippines safe from attack, provided we have an adequate fleet
on the Pacific, which now seems to have been adopted as our policy
after years of struggle to this end.
We should also maintain a military and commercial
base at the place where we maintain our naval base or its immediate
vicinity, namely, Manila Bay, which is the best available base.
This is the century of the Pacific and our position and influence in the Pacific will be greatly improved if we stand
here in strength, as will our influence in the maintenance of the
Open Door in China, and our ability to protect our educational, Missionary and commercial interests there and secure fair treatment for
our growing trade with Asia.

To withdraw from the Islands now would be in
effect a betrayal of the Filipino people and a failure on our part to
discharge our clear responsibility to carry our part of the eastern
We are confronted by a situation of responsibility toward
these people, the world and our own interests, and we should discharge
it fearlessly and to. thebest of our ability.
It is no time f
istic dreams based on self-determination, which has doae so much to
destroy good government and upset the world in recent years.
If these people were as near us as Cuba, we might
attempt the experiment, because if anyone molested them or intolerable
internal conditions arose, their vary position would justify our
but if we leave here of our awn volition, We can never
return except through a great war.

We have done more for these people in 25 years
than any other nation ever did for a dependent people in a much longer
They have made excellent progress under Our leadership and
with our assistance.
,-They enjoy true liberty to an extent which
they can never hope for under a government of their awn.
They have
confidence in us, as shown by the fact that practically every request
for a special inspector has stipulated that the inspector be an
American if possible.
The problem here is not political but biological.
We cannot expect a black, yellow or brown race to ask to be governed
They will accept such government if it is efficient,
by a white race.
honest, kindly and tolerant, but we cannot expect them to ask for it.
stated in the dispatch, it is our clear
As I
duty to continue our government here until we are confident that conditions are such that the Filipino people can maintain an independent
stable government and protect themselves.




laisa -USD



91 to ffOS.









The independence propaganda has been limited
to a very small but very active group who hope to control matters
One hears little
themselves in case we withdraw from the Islands.
of this oropaganda outside of Aanila.
the mass of the people want independence as a matter of race pride,
I am convinced that in their Oval hearts what the intelligent and
informed ones rant is the protection which Comes from our sovereignty, coupled with the largest practicable measure of autonomy.
The present agitation and attacks upon the policy of the United
States keep the eyes of the masses upon the agitators and are in
a way their sources of influence and income.

Although, as I have

As to local autonomy, they have a very large
measure of autonomy at present and no more should be given until
they have accepted and lived up to , in letter and spirit, the
clear Latent of Congress as expressed in the Organic Act.
There is
not an American who holds elective office in the Islands and the
total percentage of Americans in office is between 1 and 2.
including schoolteachers, men and women, the Americans who hold
office or government positions is only a little over 3 per cent of
the total number.
We must not be swept off our feet but hold
steadily on our course until we are sure the situation warrants a

The Vice-Governor should always be an American
and should be availablefor assignment in case of an emergency as
the head of a department or to discharge such other duties as the
Governor-General may assign to him from time to time. The ViceGovernor, who may be Acting Governor-General at times,would then
have the power to call upon the Army and Navy of the United States
and to do other things the power to do which Should only be extended to an American.
Commencing almost immediately after the passage
of the Organic Act, known as the Jones Law, there have been almost
constant enroachments upon the executive authority through legislaThese enroachments have been such that we need
tive enactment.
certain changes in the Organic Act to strengthen the hands of the
His main strength now rests on the right of superGovernor-General.
This has envision and control over all departments and bureaus.
abled me to keep the situation well in hand, but certain changes
should be made in the Act in order to minimize certain conflicts with
the Legislature, especially in the matter of the confirmation of
The Senate, for example, claims that it should be
consulted prior to an appointment, and that an appointment should
This would mean that, in
not be made except with its aLproval.












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addition to having the power to cdnfirm, it would also virtually
control the power of appointment. I have always freely admitted the
Senate's power to confirm or reject, but I have always held that I
was in no way obligated to consult with it or be guided by it in the
makft of appointments, the only exception being possibly in case of
judges of first instance, where the phraseology of the Organic Act
states that the appointments shall be made with the advice and consent of the Senate.
Under the Organic Act
Department Secretaries.
all executive authority is vested in the Governor-General and must
be exercised by him in person or through the executive departments
under his control and supervision. These executive departments are:
Public Instruction, including public health; Interior; Justice;
Finance; Agriculture and Natural Resources; and Commerce and CommuniThe Departcations. Under these departments are the various bureaus.
ment Of the Interior is the department which has the most to do with
It is the departthe conduct Of municipal and provincial affairs.
ment which is most closely in contact with the administration Of
All the Secretarthese units and the political influences therein.
ies, with the exception of Public Instruction (the Vice-Governor),
are Filipinos, appointed by the Governor-General and confirmed by the
This, as you will see, largely ties the Governor-General's
hands in the free selection of his own Secretaries, heads of executive departments, in other words, the selection of those who are to
carry out his policy and exercise a large measure of executive authorThe necessity for their confirmation by the Senate results in
the Senate claiming that the Secretaries owe allegiance to it and are
The Governor-Gendependent on it rather than the Governor-General.
supervision and coneral, who under the Organic Act has the power of
trol, maintains, and properly, that they are dependent on him and are
his representatives and not in any way subordinate to or dependent on
the Senate. The result is that it is at times difficult and indeed
impossible to obtain, confirmation of Secretaries of departments.
issue to the point of demanding
some cases the Senate has carried the
of the Secretaries a promise of allegiance to it prior to confirmation.

The confirmation Of the appointments of the
Governor of a State or the President of the United States is supported
by the party which elected him, but the Governor-General has no party
and no representatives in the Legislature other than the two appointive
Senators and seven appointive Representatives representing the nonThese men naturally have very little weight in the LegisChristians.
lature and can only be expected to look after affairs immediately
affecting their own people.
I think, in view of the situation, that the Secretaries of departments should be appointed by the Governor-General
without confirmation and should hold office during his pleasure. If











this cannot be done, they should be appointed by the President upon
the recommendation of the Governor-General.
The Governors of the non-Christian provinces,
that is, Of the lohammedan and non-Christian mountain people, should
be appointed by the Governor-General without confirmation. These

people have been disarmed and are absolutely dependent on us for protection and are a unit in desiring the confirmation of American Governors by the Senate.
I have one or two cases which have been pending for months.
The Senate desires to place Filipinos over these
people regardless of their demands for American Governors.
Other changes are also very desirable. First,
with reference to the Constabulary, a force of nearly 6,000 officers
and men, of which the Governor-General is commander-in-chief.
is the only organized force for the maintenance of law and order within the limits of the Islands.
It is under the immediate command of
an officer known as the Chief of Constabulary, who holds the relative
rank of Brigadier-General.
He is appointed by the Governor-General
and must be confirmed by the Senate. This is undesirable, as he is
the immediate head of a force of which the Governor-General is com,
mander-in-chief, and the only force outside the Army and Navy (which
can only be used in case of martial law) which he has for the maintenance of law and order from oae end of the Archipelago to the other.
I feel that the Chief of Constabulary should be detailed by the
Governor-General (from among the assistant chiefs) had hold office
This would do away with the present condition'
during his pleasure.
of double allegiance, so to speak, which results from the Chief being
It also introduces the
dependent upon the Senate for confirmation.
element of politics into a force which should be absolutely free from

The sane policy should be in force with reference
to the assistant chiefs.
They should be appointed by the GovernorGeneral from the field officers of the Constabulary without confirmation by the Senate.
The change suggested would not be a very radical
As it now stands, all officers of the Constabulary from
lieutenants up to and including majors are appointed by the Chief of
Constabulary and commissioned by the Governor-General without confirmation by the Senate.
It is highly Important that the senior officers
should be in no ray dependent upon political support; in other words,
they should be appointed by the Governor-General and serve during his
This would not in any ray affect their permanent commission
in the Constabulary.
Unless I can be furnished a thoroughly competent
legal adviser, there is another official who should be appointed by
the Governor-General and hold office without confirmation, namely, the
Anyone familiar with Filipino character realizes
how difficult it is for a native Attorney-General to declare uncon





stitutional the Acts Of his awn Legislature or to interpret the provisions of the Organic Act in a manner contrary to the prejudices and
political aspirations of his people.
There are also certain necessary changes with reference to the exercise of the veto power in connection with appropriation
Under the law as it now stands, the Governor-General can veto
an item or items or a section or the entire bill, but he cannot veto a
The provisos are sometimes the most objectionable
proviso of a bill.
The power of veto with reference to appropriation bills
should give the Governor-General the power to veto the bill in toto or
any item or items, proviso or provisos, section or sections of the bill
or parts of the same.
The Jones Law on the whole is a good law, and with
the power of control and supervision in the hands of the Governor-General it has been practicable to maintain a progressive and efficient
but there has been a great deal of difficulty in securgovernment;
ing satisfactory Secretaries as heads of departments, for the reasons
I have therefore suggested the above changes.
above outlined.
Az I have
With reference to further autonomy.
stated, we can give further autonomy by appointing Filipinos to Secretaryships of Public Health and later on Public Education if it is
deemed important and advisable to further extend local autonomy. I
have already appointed a Filipino Director of Civil Service, a very imThe few Americans left in
portant position with far-reaching powers.
the service are highly technical men such as the Director of Forestry,
the Director of theBursau of Science, the Director of Education, and
the Director of Public Works.

I have no particular objection to all Secretaries
being Filipinos, provided my hands are strengthened as to their appointment and I continue to have the power of supervision and control.
Ihile the present law giving the GovernOr-General
power of supervision and control makes it perfectly clear that the Secretaries are dependent upon him and not upon the Legislature, nevertheless it would be well to emphasize this in any change which may be
made in the law.
We do not need a radical rewriting of the Jones
Law, becasse we are likely to get something much worse; but if we have
the changes herein suggested, it will be tremendously strengthen the
and tend to a
hands of the Governor-General, clear up the situation,
more efficient conduct of the government.


All reports that the people are uneasy and disI know of no more happy people in
contented should be disregarded.
they are free from all responsibility
any land than the Filipinos:
and worry, aad their tax rate is the lowest in the world for any
people receiving the advantages they enjoy.
If I were to recommend the policy to be followed,
I should recommend the permanent continuation of our sovereignty, with
the largest possible measure of local autonomy, combined with adequate
power of control and supervision in the hands of the Governor-General.
With this power clearly defined, local autonomy can be as extensive as
the progress and loyalty Of the people warrant.
In my
With reference to the Fairfield Bill.
opinion, it was a most objectionable and dangerous measare and it is
very fortunate that it was never favorably considered. It would have
left us with full responsibility local and international but without
any adequate power of control. It would have opened up the natural
resources of the Islands to practically unrestrained exploitation
during the period of probation. Noreover, whatever period of probation was agreed upon no sooner would it have been fixed than there
would have been an insistent demand that the period be shortened.

I am practically conducting the government without
Americans. A British or French colonial possession with twelve million
people would probably have from six to ten times as mazy nationals
I can get on, however,
representing the home government as I have here.
provided I am given the same support which I have had Up to date; but
it would be much easier if some of the changes in the Organic Law which
I suggested were made.

I-do need, as I set forth in a letter of November
12 of last year, the assignment of a group of three carefully selected
men to serve as assistants and advisers very much as does the staff of
an embassy or legation, men who could pass on from one Governor-General
I have asked for a
to another the policy and traditions of the office.
first-class man from the United States Treasury Department and one from
the State Department as well as a carefully selected man from the AttorIn addition, a man
ney-General's or the Judge Advocate General's office.
from the Department of Agriculture would be very valuable as the future
develOpment Of the Islands depends very largely upon the development of
their agriculture. This is a rather, modest request considering the magnitude of the problem. Its approval would be of the greatest assistance,
and the appointment of a thoroughly competent man from the Attorney-Geaeral's or the Judge Advocate General's office -would maim it possible to
get on satisfactorily with a native Attorney-General and obviate the
the hands of
necessity of placing the Appointment of this official in
the Governor-General without confirmation.



I do not, however, wish to ask for the impracticable. I should place first in LAportance the appointments of the
Secretaries; second, the appointments of officers of the. Constabulary;
and third, the appointments of the Governors of the so-called Special
Provinces chiefly inhabited by the liohammedans and other non-Christian

The tTsident!s letter to Speaker Roxas embodies
a sound policy and was and -is most helpful and there should be no change
It was thoroughly sound and for the
in the policy therein announced
best interests of these people.

There should be no further extension of local
autonomy until the Legislature and the people have accepted in good
faith the provisions of the present Organic Act and have shown capacity and fitness by constructive legislation and full coopEratioa.
There has been a lack of cooperation, and too much effort has been
expended by the Legislature to defeat the clear Latent of Congress
as expressed in the Organic Act, and too little to comply with its
provisions in a spirit of loyal cooperation and an effort to promote
the progress and welfare of the people and the proper development of
the natural resources of the Islands.
Senator Quezon and Speaker Roxas have declared
it to be their purpose to reduce the Governor-General to a mere
Senator Osmeila and other leaders, in effect, concurred
These stateby actively supporting the policy of non-cooperation.
ments indicate a lack of that spirit of true loyalty and cooperation
which is so much needed in solving a problem such as we have here, in
which all concerned must work together.
Whatever changes are made, the Governor-General,
the Vice-Governor, the -Auditor and a majority of the Justices of the
Supreme Court should be Americans, and in case of disabblity of the
Governor-General and the lace-Governor, the president should be free
At preto name anyone he sees fit to serve during such disability.
the Vicesent in case of disability of both the Governor-General and
Governor, he would be required to name one of the Secretaries. This
would be a Filipino, whose detail might result in very serious complications.
The Organic Act should also make it perfectly
clear that Americans, otherwise qualified, may hold any office or
position under the government - insular, provincial or municipal.
is preAt present their appointment as Secretaries of Departments
local kegislattg - that they be
vented by the requirements of
Islands three years
Filipino citizens and have been residents of the
immediately preceding their appointment.


The policy of the Legislature has been to get
Americans out of the government as rapidly as possible and to Filipinize throughout. This is in a way to be expected, but we cannot
go beyond a certain point without seriously crippling the government.
The Filipinization which has already taken place has been too rapid
and has resulted in a loss of efficiency.
We must have a certain number of efficient
Americans here, and especially must we have a great increase in the
number of American schoolteachers.
I have gone somewhat into detail so as to give
There is nothing whatever
you a lit/le view Of the situation here.
to worry about so far as any reported trouble with the Legislature is
I have gotten through my budgets for the last three years.
It is simply the inevitOur personal relations are very good indeed.
able differences between the executive and legislative branches, which
have been added to by racial differences, and lack of training - on the
part of the Filipino - in our form of government and lack of appreciation of the sharp distinctions we insist upon between the exenative,
After all is said,
legislative and judicial functions of government.
it must be remembered that at the bottom the problem here is not so
much political as biological.
With kind regards.


ely yours,


Benjamin Strong, Esq.,
Federal Reserve Bank, 15 Nassau St.,
New York City.

enclosure - 1.









*ii,41,-7 /1-45.

Office of die (531irrnor (65eneral


September 30, 1925.

Dear Ur. Strong:

I have sent you a rough memorandum
which gives you a general idea of the
Bob Bacon has been here for five
weeks and has gotten pretty thoroughly
in touch with the general broad problem.
I hope you will see him and have a good
His visit has been most
talk with him.
helpful and I am sure he can be of great
assistance to us at the Washington end
of the line.
You can render a great public service if you would take a vacation and come
out here for a month or two and look
over the general situation. I will guarantee you some very go3d fishing and an
interesting trip and a most cordial reception.
With kindest regards, as ever,

ely yours,

15 Nassau Street,
New York City.




November 30, 1.925

My Uear Genend:

Ci an exceedinly busy time for the last few
:::.bsencein Europa
e ek s &ince my return, has made it impossible until today to reply o jour
But you may be sure tnat 1 have
letters of September 15 and Zeptember 30.
read them both with the greateet possible interest and attention.
Nothing Ikoula please me more than to be able to make you a visit,
such a b you euggest, which ia really the beet *ay to oneself for some
Constructive .or t here, but 6e are, e I thing. you realize, in the RiOst Of a
period of monetary reorganization abroad which pl.cee a good deal or responsibility u4on U 5 in the Federal Reserve system, and it seems alost unlikely that
I can lve or 60 extended an .abse.noe for ,ome time to come.
May 1 express soult: impressions which I gain from your letter

rather categorically:

It would seas that too strong a d.evelooment in the direction
of 8,u t000lki, or certainly complete indepen..:ence, presents the possibility of
great danger unless we are willing to turn the Filippino to become the
prey to their on immediate incapacity of self-government, or to immediate
subjection to the sovereignty of 60ine other power,
have in mind that autonomy, as expressed by some of the
agitators, would etai that the talted otatee Government would still retain all
responsibility for Filippinb independence, but ,,ould leave the country in condevelopdition politiIly where :kis-government, ox2loitetion and othor
ments ,lould etortly cell fur the hcetl Of iabervdrition Of g,,ogie :,x)rt, and tA,

time , :hen

e had so end our 1oci:4 org 'thzation that the intervention


be costly in Lae extreme.

The Jones Law, which it, the organic law of the laluids, re-,uires
Emenoment, princip,ily in the matter of ?ointments and their confirm,tion
the Senate, in order that your organization may betreagthened at the top by
including a Isr6tr or skilled Americane 8,3 Department Secretaries,

A more effective, direct responsibility of tile coustEbulary

to the GovErnor General v,ould seem desirable.

1...xecutive control of appropriations is now not as complete ae it
-,hould be.

There should be assigned to the Governor General's staff a
sm,:11 group or four or five technic ai experts who would be the backbone of a

nprm,,nPot nroAni,uk*Inn tn (tarry on nn/inipn


Major Genera Leonerb

11. M.25

utl oreeni zati o o It rent;tk3ered, an 1 n t el 6. 4ith. the D
ligent eevalopment, of greeter ;:utonomy .old be poeeitde. eni.sefe, FM-oh eennot
now be undertaken.
epply not only to
Fron this end I think chteages .ere re.juired
tee Philippiue Ielande, but to our other insular ?oseeeeions, evereepoesibly
eieekeud the Genta Lone. Leevine out the territorial goeerremere.
Alaske, sie aoe have the Virgin Islends, Porto Rico, the Philippine
Ieleende, ana the Cenal. Zone, all more or leee .)bjct to s,iiitiy overeeent
Eech of the possesetione hfle probleme
welch centers in the seer Lepertment.
Of a.apecial. aeture which reeeire th.e review of epecielly tieiaed men leech s
we heve for our own oontiaeutal governeent of the Urited See-tee in the IP rioue
departeemte of the Government, theet is to say, politicel netters under the
Etete Depertmene, finenoiel meeeeare Jade:Jr the Treasury rifspertment, 1.K.wi natters

in the office of the Ateoraey Geuerel, Commerce, Agriculture, etc:. etc.

L'y thouglat hes tete*. tieet if the LiL.n.-...6-exent of iJce. tht1 pobeeseiona
could be put. lehe exnoutive aupervieloo ofa :.5ecretery who eould 'oe ft C,ebinet
Member, ano bo would have es MS staff b. group of mea, stly the oerm,..ment Under
Secreteriee in the veri.oee Deeertmeeite, it might be pole:Able to develop en or6arai-

4b.t1on in ;ehingtou which. eould correeooad to and 000rdiaate with the orgnizations
in the verieue poeseeeions, so thet dl locel croeleme esealee oe eubject, eo tee considereeion 'eee reviee of men of experience in eece divieion of the eork.

0.d.11 not uadertend thie to be s.ay criticiem of :_tey indiviceasa


It is diffieelt for me to eicuelize
present ceneerned 4th irul
an orgenize.tion to cover all of this groenathich ooula effectively center in one

itheet the 4.ciek,uate 13u;..ort of xen o2 experieece uneer him 'eh° ere 4,e1.1

euelified toe:,ive edvize on spaciii tocanicel metters, and, of couree, there
iireet raeoeeeibllity to 'Lb Pre:A:lent.

"eere euch n ozgenization developed here, the v rioue diftieultiee
expreteien In your letter would, it eeecs to me, heve the kind of atudy which
they all re.eare, nc the tuOiee would rezezit n recemeeeeetioee- inr dl of

the chengee thich yoe eegeeee

You have, of couree, beeneedvieed that some little thie airection
tees alreedy teen ieeugureteci.s The eLeeject tee aporeaclea originelly becaeae of
various otonetery problem eich', ere oreeeiag tor attention both in Porto Bieo

IL the ceee of the letter, juet to larelceete the eeed for
specielieetion, the cureency of thoet. ielende ia etill the Deniel currency, iesued

the Vi rg in I sleuth .

e. Denieh Beek, which, in tern, is owned in Denmerk end which tee. never been
brou,?ht under the sLonetery sietere of thie: coent.ry.

msy be thet the eteeiee these ;entlemen ere now :Inking (men princip .1Lill result in ;ileac, recomI am oropoeine to take the first
meade.tione elon:-.; the line of your letter.
opportunity to have e. talk eith them, end will Arita you the reaulte. ky on
ly drettei frem the verioue .Depertmeute of the Gov ermn n

difficulty is to find exactly the means of keoroechine the eubject in oreer to get
emethinse done.



eine I &hell first have a tlk with Freak McCoy, who is now in

Wiaoll I expect to bee this week.

I have one or two men in mind t.ho might Le useful to you in poeitione
d more eepecie.11y to monetary eel financial metters, but of course the nife
eey .1weyes ariees ,bout fmilice, the long dietence from the United f..1- tee,
.ele pr-oblete of youk, children, their schooling, climete, ate.


Mijor General Leonr..


After P.t1k 4th IteGoy I el 6.11 prot.--b1y o;;porti;nity for a word

lth Mi. Mi1on, ithsr this week, or on my nE.,xt viz,1t. to whi_biraton.

I very mint e...p.prediste your writing as GO fully, end you ev:y certsinly
count upon Ity usint; every opportuaity for t6ei1ia; tti ubjcot aliveA:1o%; sone of

my -friends in Oie.stincton.

vi alt to '

Lo...torI mv be Ab1e to ot,ary out te plan I b:ve loug had to sake
4th rsgarcs sma i;oot
%gory sincerely yours,


Genersl Leonard :40oo,

Lovernor cienerll of tt,e Philippines,




My dear Generale



se *wryest flreetiege

January 4, 1926,

.e ihe


1,13 you will aea by the date on the aecompanying letter, it wee
written over a month ego, and heb been held only until I could have b. talk

with McCoy and poeeibly with Bob Bacon, ea well 8.6 to meke some furteer

inquiry as to a man who might be eent to Manila, in case that developed to
be desirable.
Unfortunately I heve been continually invaded by vieitore from
Europe on important mattere heving to do with the benk, ever Arica my return
from Europe. It has delayed me* things, including the opportunity for
ese talks. I have had one or two trika with McCoy, and only let week
erranged with Bob Bacon to have him meet ma the next time he is in New York
or I dm in WeehinLton. A1°, bb you doubtless know, my friends le the

Treasury are continuing activities looking to further study and a better
underetending of all insular matters.

Mr. Winaton, the Under :secretary of the Treasury, has asked me
if ee could apre h earl to go to %enilb, who would be competent to give you
some aesistance both in connection with the budget and with the Philippine

I had in mind one of our Mbll who le now eoing a somewhat
eimiler piece of work in Chile, hevinie been a member of Proreeaor Xemsereeb
Commie/elan and beint, kept there in order to round out the work. but his stay
he been extended in response to urgent representetionb from the Chilian
Government, end i fear we cannot gat ham back in time for your purpose.
Alec) I am not quite sure that he is just the men you need.
Nationel Brink.

We were considering the possibility of sanding our 101-. Rounds,
who would Le in every way just the men for your purpose. Unfortunetely, due
to the very active banking situation in New York, we have had e heavy drtft

on our staff, no lobe than four of our beet men having accepted positions
with oommercial tanks within the last few months, and another one is now

This, therefore, Is
eimply a report that tne matter is being given attention and that we are
doing what we can to find just the right person.
considering an offer which may take him elle), from us.

You doubtlese by now have received McCoy's cable about my son

Philip. He is a fine fellow, hee had quite e little benking experience, and
he is interested in some form of public service. The eugeeetion wee in response to his own desire to do something of this sort, brought out, I believe,
as e result of bome talks be had about the Philippines, end in no small part
inspired by his admiration for you and the work you ere doing there.

I. 4.26

This letter carries warrneet greetings and best wishes for the
Nt,vi Tear.

I beg to ref:win,
6incere1y yours,

Major Generel Leone ra *000,

3overnor General of the Philippines,

tails., Philippine IsIsnde.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102