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I I 2 //Pit 14 ik ux rd) CrA,Ce. k3-"fle. g al-fro /Lc? I If VVESTE WESTERN UNION AgrEORGE W. E. ATKINS. VICE-PRESIDENT UNION TEL AM NEVVCOMB CARLTON, PRESIDENT 41/1K" k RECEIVED AT 24 WALKER STREET, NEW YORK CITY Al7NO AOC 44 Form 2138 BELVIDERE BROOKS. VICE-PRESIDENT 4,....,:iDELIVERED FROM NL NL NEW ORLEANS LA SEP 29TH PENJ STRONG JR. 3'79 BANKERS TRUST CO., NE- YORK. OF GOLD AS UNDERSTOOD FOREIGN EXCHANGE WOULD BE ACCEPTABLE IN PLACE YOUR TELEGRAM TO CONTRIBUTION TO GOLD POOL WEXLER HAS SHOWN ME CONTRARY IF GOLD IS RENIRED TO MAKE GOOD STERLING OBLIGATIONS CANNOT UNDERSTAND WHY STERLING WIRE ME. J H FULTON 7PM EXCHANGE NOT ACCEPTABLE WILL YOU PLEASE 0 , 66 sc! litt3 zlegraim. APril 2, 1919, Dear :Jr. 'ulton: I am anxious to get an expression of your views as to the possibility of our getting Mr. P. B. Saunders of the Commercial Trust and Savings Bank to do some work. in Louisiana in connection with a proposal now being shaped for federal legisla- tion designed to establish a financial budget for our Government. The work required will not be very onerous, but it will need the services of a man who uan develop an organization for the purpose of some little educational and publicity work to bring about a better understanding of this be necessary to raise a small amount of It will zbject. money, and, generally, to carry out the program which will be laid out by the organization at the New York Headquarters. It needs the services of a man who is interested in tlie economic aspects of the Government's finance, and who is sufficiently interested in the subject to be willing to devote some time and energy to bringing about an improvement. be preferable to have some one who would be capable of on this subject, and Itwould making an occasional address who would be willing himself to study and understand it by an examination of literature which will later be furnished. Do you think Mr. Saunders could undertake this work successfully? Cordially, J. H. Yulton, Esq., c/o The Lational City Bank, 55 Wall street. New York. B3/MSB THE NATIONAL PARK BANK OF NEW YORK 41 October Twenty-third Nineteen Twenty-five My dear Governor Strong: I just want you to know how much I enjoyed your delightful dinner last night and your very interesting talk as well as that of Dr. Schacht. It was good of you to include me in your party which proved such a happy occasion for everyone. With kind personal regards, believe me to be, Yours sincerely, Gov. Benjamin Strong, 33 Liberty Street, New York City. I 7,71 o-) #4, kr- 19;3, copy of cablegram July 16 1923. (Addressed to Mr. Mitchell) From Mr. Durrell National City Bank of New York Havana Cuba (Received July 17,1923) 69916 Federal heserve Boston Mass. U.S.A. has accepted First National offers quarter in their local office and latter through Harding trying to secure Atlanta Ga. agency also stop Have offered Atlanta,,Ga. vault and office space gratis stop McCrary favorably impressed and will recommend acceptance to his board next Thursday although he considers our vault undesirable stop Have assured him we will have new quarters and modern vault within 18months 4 and will place same at Atlanta, Ga. disposition stop Suggest your cabling Atlanta, Ga. confirming my offer and expressing hopes of its acceptance Durrell copy of telegram New York, July 17, 1923. M. B. Welloorn, Governor, Federal Reserve Board, Atlanta, Georgia. We are advised by our Vice President Durrell resident in Havana that Federal Reserve Bank of Boston contemplates locating in offices First National Bank of Boston Havana and that through Mr. McCrary Durrell has invited your bank use our offices and vault space gratis stop This We contemplate new building confirms Durrell's invitation stop in Havana in near future and if you conclude join with us will make special accommodation for you when we build stop While above arrangement most agreeable to us we raise the ouestion whether under all the circumstances it is not more logical and dignified for Federal Reserve Agencies to have joint offices and vaults in a building of their own Of course if rather than affiliate with any other institution stop Boston joins with First National it is more than logical that Atlanta should join with us. C. E. Mitchell, President4 The National City Bank of New fork. copy THE NATIONAL CITY BANK of New York New York, July 17, 1923. My dear Mr. Case: I enclose herewith copies of a cable received this morning from our Vice President Durrell resident in Havana, and of a telegram I have sent this day to Governor Wellborn of the Federal Reserve Bank of Atlanta. . We are at resent the agents of the Federal Reserve Bank of New York in Guba, and that fact is generally known throughout the Island. We assume that the entry of the Federal Reserve Bank of Boston and the Federal Reserve Bank of Atlanta in Cuba will mean the withdrawal of the .Agency arrangement we now have with you. While that is to be regretted, we can be philosophical regarding it provided that when the new agencies are made active they set up their own cuarters, independent of any other commercial and deposit bank operating in Cuba. To have our Agency arrangement withdrawn and have the new agepcies established with the First National Bank of Boston, thus giving to that ban1 . a. wholly unjustifiable prestige, is an unthinkable injustice to us. The new Agencies should unquestionably be independent, but if the Federal Reserve Bank of Boston elects to use the offices of the First National Bank of Boston, it is only fair and just that the Federal Reserve Bank of Atlanta should locate with us, and as suggested in Mr. Durrell's cablegram, we would be delighted to give them office and vault space gratis. If you see this situation in the same light as I do, I would very much appreciate your using your influence, first, to have independent quarters for the joint agencies of the Boston and Atlanta Banks, or, in the event that that seems impractical, that you will use your influence with the Federal Reserve Bank of Atlanta to have them accept our invitation. May I add for your consideration the thought that with the Federal Reserve Banks becoming active in Cuba for the first time, and looking to deal with all banking interests in the Island, it is most to be desired that they present themselves before the public as an independent entity rather than as directly affiliated with any American bank, but if they do affiliate with any, it is to their greatest interest to affiliate with a bank which is not new in its operations in Cuba, but whose prestige is recognized everywhere, and which has been a part and parcel of the Cuban financial structure long enough to have obtained the complete confidence of this rather timid and skeptical people. Mr. J. H. Case, Deputy Governor, F.R.Bank of N.Y., 15 Nassau St., New York, N. Y. http://fraser.stlouisfed.org/ Federal Reserve Bank ofs.nc St. Louis Yours very truly, (Signed) Charles E. Mitchell. July 19, 1923. Charles E. Mitchell, Esq., President, National City Bank, New York, N. Y. Dear Yr. Mitchell: Some days ago in the course of our conversation relating to the deposit of the Benkovni urad Ministerstva Financi of Prague, ycu ex2ressed an interest in the reasons warranting the establiehment of relations between the Federal Reserve Bank and foreign banks of issue; and at the same time asked what benefits Balk derives from its membership in the Federal Reserve System. I shall attempt to the National City These two queetions answer. 7elations of the Federal Reserve Bank with Foreign Banks of Issue. In accordance with the terms of Bank of New York has the federal aeserve Act the Federal Reserve entered into reciprocal relations portant foreign banks of issue. In so doing it with several of the more im- acts in the position of manager for all twelve Federal Reserve Banks, or such of them es desire to participate, rather than in a purely individual capacity. At present such relations are effective between this bank and Bank of England Bank of France Bank of Japan Bank of Italy Swiss National Bank Banrovni urad Netherlands Bank Java Bank Nationel Bank of Belgium Reichsbank Sveriges Riksbank Ministerstva Financi in Prague-. Agreements with these banks have been entered into at intervals during 4 period of about seven years. only occasionally active; six are utilized almost exclusively for and one, whice may be regarded lection account. Some of the aeccunts are now inactive; others are investment purposes; as still in a transitional stage, is utilized as a col- From these relatively dormant accounts we frequently observe that 2 Nationel City Banke 7.19.23. New York City. transfers are made to more active accounts maintained by foreign benks of iesue with member banks. In forming relationships with foreign banks of Jesus end in tarrying on business under the agreements made, the Federal Reserve dank of New York has been fully aware that it is undesirable for it to compete with its member banks in foreign exchange business, even though such business is permitted by the Act. The volume of the trans- actions carried on by us is limited by the terms of the agreements, or is subject to our control. The free belanses to the credit of eight foreign banks of leaus on June 50 lest amounted to $2,465,696.37 which comperes with ebout le450,000,0C° of balances held in New York City for foreign clients by a limited number of banks and benkers who recently reported to us. On these belances we pay no interest. The bulk of the transactions carried on by us for these banks relatee to the purchase and holding for their account of United States Trensury certificates of indebtedness, which on June SO amounted to t15,515,000, and bankers asceptences, which on the seme date emountea to 83024,139.12. This aggregate of about $50,00C,000 compares with about $9CC,0'e,0'0 of loans and securities held in Nee York City for the account of foreign clients by a 'Imited number of banks end ben'iers who recently reported to us. Under the inventment arrangements no obtaining we charge commissions of 1/4 of 1 per cent, per annum en bankers acceptances purchased for the account of foreign banks, and in return therefor we guarantee payment at maturity an Agree to repurchase such bills at the market prior to msturity upon reesonable notIce. Benkers acceptances so hendled by us are of the acme character as those we purchase for our account, and bear e banking endorsement. Upon purchases of certificates of in- debtedness se charge a commiesion of e/e of I per cent. per annum, and in return therefor agree to repurchase at the shrket prior to maturity upon reasonable notice. Also, we have from time to time held gold under earmark for the account of certain foreign banks of issue, but at this time no gold is so held. Is The foreign banks of are prepered to act for us in their markets under similar conditions, when re- -nested. 7.12.23. National City _peak, New York City. The foregoing gives very briefly the neture of our present relations with foreign banks of issue. The principles underlying the establishment of such relations relate entirely to the steadying of credit and tion of the flow of gold. for many years. the foreign exchanges, and to the regula- They follow the traditional lines laid down by banks of issue Inasmuch as operations under them are in the interest of international commerce and finance, they are also of direct benefit to the bunks having international relations and of indirect benefit to financial institutions of all kinds. It is recognized that under present conditions international banking ar- rangements cannot exercise the seme stabilizing effect to be exeected under conditions in which there are free international movements of geld. was passed it Indeed, when theFeserve Act was assumed that the Peserve Banks would exercise the powers granted to them in meeting ordinary rather than present extraordinary conditions. of such powers by foreign banks of issue toward the sueport of their The exercise under pre-war conditions was often directed exchanges and the partial control, at least, of gold movements; and when the exchanges were at levels requiring adjustment banks of issue sought to effect such adjustments teroughthe medium of their portfolios of foreign bills on gold countries. Sterling bins were formerly extensively eceuired for purpose and London was the erincipal center for such operations. EL more effective control over movements of gold and exchange (and that It is believed that hence credit) can be brought about through cooperation between the various banks of issue, and that such a procedure is preferable to one where we would transact business in England, for exempla, through private banks, and the through private banks. The principle of Bank of England transact its business hare cooperation between banks of issue was recog- nized as most desirable by the Genoa conference and has been followed by the sank of England as well as by a large number of other banks of issue, which are now-establish- ing relationships with each other. o- Today this country, because of its free gold market, has assumed an lever-tent position in connection with such operations as the foregoing, and in consequence it hes been to the advantage of the various foreign banks of issue referred to above to con National City Bank, 7.19.23. New York City. duct in this market the kind of operations which banks of issue normally transact abroad. But the Federal Reserve Bank of New York has had practically no occasion as yet to use its foreign correspondents for the transaction of such operations, though they are provided for in the reciprocal agreements now ineffect. without doubt, how- ever, the time will come when it will be desirable for us to make use of them; but we cannot expect the foreign banks of issue to perform for us in future such operations unless we are ready to perform similar operations for them in this country at times when conditions melee such transactions desirable or necessary here. Furthermore, as the aim of most, if not all, of the banks of issue is to create steadier currency and credit conditions in their respective countries, and as such steadier conditions in foreign countries are very much in the public interest in this country interest of American business, it is to that we perform here for foreign tee banks of issue such proper operations as they, in endeavoring to steady their conditions, find it desirable or necessary to transact thronge the goderal Reserve Banks. This country did in fact derive finance from the reistionships we material benefits established with during the period of war certain foreign banks of issue. Some of these transactions, carried on by them for the benefit of this country may be enumerated as follows: In 1916, at the request of the Holland, Sweden and Norway. United States Treasury Department, the Federal Reserve Bank of New York opened current accounts with de Nederlandsehe Bank, Sveriges Riksbank and the Norges Dank for the purpose of receiving therein funds for the use of the Treasury Department and disbursing officers of the War Department. and India. - During the same year, important arrangements *ere entered into between the United States and the Governments of Argentina and India to stabilize the exchanges between those countries and the United States. Under these arrangements New. Argentina York banks deposited dollars with the Federal Reserve 3ank of New York, which in turn gave instructions to the respective governments to pay out the equivalent in peas or rupees to the beneficiary designated by the purchaser of the exchange. Up. to the end of 1918 the equivaleet of $59,00,000 in pesos (of which the National City Bank transferred to its Buenos Aires office $9,000,000) and rupees 202,500,000(of which the National City Bank and its affiliate, the International Banking Corporation took rupees 26,000,000) were sold and transferred with a moot satisfactory result in the stabilization of exchange between the United States and those countries. 5 National City Rank, 7.19.23. New York City. Bolivia and Peru. - Similar arrangements with the governments of entered into. Under the Bolivian agreement, which provided for a maximum of $5,000,000, we received deposits totaling $4,500,000. No operations were carried on through Bolivia and Peru were this bank under the Peruvian agreement. Spain. - In 1919, at the re,uest of the United States Treasury, we Opened an account with the Bank of Spain to receive the pesetas which we purchesed es fiscal agents of the United States to retire peseta certificates of indebtedness issued by the Treasury in connection with the Z50,000,000 peseta credit which was established on behalf of the Treasury in 1918 for the purpose of purchasing war supplies in Spain. Germany. - In May 1919 we purchased from the United States Grain Corpoin gold (approximately 730,000,000 gold marks) which it had received from the German Government in payment of fod stuffs bought in the United States. A deposit of 290,000,000 marks of this gold was made with the National Bank of Belgium, Brussels, an& the balance, 440,000,000 marks, with de Yederlandsche At our request these banks examined and weighed Bank, Amsterdam. ration *173,000,000 the gold coin as it was received by them. The Bank. of England V,6 transfer of this eold from the continent to London and as it arrived at the Bank of England, it was reduced to bars. Of this gold, $61,800,000 was sold to New York banks for exportation to the Far East, and would have been withdrawn from this country if it had not been available in London. Of this latter amount the National City Bank and its affiliate, the International During 1920, the Banking Corporation, purchased $3,,00,000. balance of the gold, namely *111,200,000, was shipped to New York by the Bank of England. undertee Similar operations carried on by us for the benefit of foreign banks of issue, include the following: lagland. - In June 1917 the federal Reserve Bank of New York paid to the National City Bank for account of certain English banks *52,000,000 representing a loan with interest maturing in New York, and accepted in return earmarked sovereigns of equivalent value in the Bank or England. During 1218 all hut . small amount of this gold was either shipped to New York or furnished to the Treasury ne,artment for the use of the United States Government or its allies in Europe. France. - In November 1920 we advanced $3,000,000 to the Bank of France against a like amount of gold which they earmarked for our account. This gold was shipeed to us in March 1921 in liquidation of the advance. In swam ry of the foregoing it may be said that the transactions which we carry :n for foreign banks of issue involve comparatively small free balances upon which we pay no interest; that occasionally we earmark gold for National City Bank, 6 7.19.23 N3W York City. their account; making investments that the main oprations are those connected with for foreign banks of issue in the open discount market, for which we charge commiesions; and that unless we stand ready to perform such operations for them at times when it is advantageous to them to make investments or have gold held under earmark in this coun- try, we can scarcely expect them to act for us at timee when it may be advantageous for us to make investments or have gold held under earmark abroad. The present effect is to encourage foreign investment by banks of issue in market, thereby broadening its support and our discount strengthening its position in world finance, and to add some measure of stability to international finance operations, now necessarily disordered. Benefits derived from Membership. The second questien you raised is whether the National City Bank is getting any compensatory advantages from its membership in the system and for the large kept with us without interest, at present about $56,000,000. interested in making the following analysis of the way in which deposit I have been much it seems to me the system has effected the business of the City Bunk, especially because we hey° not had occasion heretofore to leeks so detailed a study of our relations with a vetropolitan institution. Reserves. The National City Bank's last report of condition, June 30, 1923, shows on $461,000,000 net demand and time deposits, subject to reeerve, keep and was keeping, reserves of about $56,000,0e0. the teat it was required to These reserves are figured at rate of 13 per cent. on demend deposits and 3 per cert. on time4eposits. If the reserve in effect, namely 25 now be keeping requirements prior to the Feelers' Reserve System were now per cent. on both time and demand depocits, the City Bank would on its present deposits reserves of about $120,000,000 in the form of cash in its vaults. On these figures membershin in in reduced reserves elone. $2,500,000 per annum. the System shows a saving of about $64,000,000 Figured at 4 per cent, this amounts to a. saving of over Nationsl'City Bank, 7 7.19.23. New York City. To put the matter in another way, we have looked up the tAty Bank's condition report of October 31, 1914, just prior to the inaoguration of the rederal Beserve System. We find that its net deposits subject to reserve were then 1217,000,000 against which it was reeuired to carry reserves of about $54,000,000, and was actually carrying about $67,000,000. In other sords, by reason of the exietence of the feders1 neserve System and theCity Banks membership in it, it has not been obliged to set aside any additional unproductive reserves to support its vastly expanded busines ,, but is condueting it on substantially the same reserves as were !aeld before the system opened. Deposits. It is interesting tc note the changes which have occurred from 1914 to 1923 in two classes, of t".. ty Bank's deposits: Time Deposits. $62,000,000 are reported. In 1914 no time deposits were reported, whereas now The development of this olass of depoeits is, presumably, due to the reduction of the reserve on such deposits from 25 per cent, to 3 per cent. Deposits of Banks and Bunkers. On the date of these two reports the City Bank's deposits from banes sod bankers were as follows: Oct. 31, 1914 Due to national banks Due to other }Jenksbsnkers Totsl June 30, 1923. *35,C00,000 t32,000,000 61,000,000 $11s,0cc,0ce 107,000,000 As the 1914 report does not show hether deposits from foreign banks are included emong those reported as "other banks and bankers," comparieon between the figures in this group is impossible. But wit.b respect to the deposits of nstional banks, comparison is possible. It will be sec-ailed that when the rederel Reserve Act was passed it was anticipated that the city banks would lose a very of their large oroportion out-of-town bank accounts, particularly those of the national banks, because all of these had to join the system. The figures of the 4ationa1 City sank, showing substantially no change in the volume of out-of-town nationsl bank balances, conform generslly with the experience of other New York City national banks. Unquestionably, S National City Pank, 7.19.23. New York City. if the Bystem were not in existence end if the war had in some way brought ebout an expansion of bank deposits equivalent to that which has actually occurred, the City Bank's out-of-town-natioael bane balauces would now be considerebly larger. But the point I want te make iE teet the greet redection of these deposits, which was anticipated when the Federel heuerve Act was passed, did not occur. Judging from whet other city banks tell us, out-of-town bank deposits are now on a more profitable and satisfactory basis than they wore prior to 1914. The Federal Reserve Bank hae relieved the city hank e ofmany mechanical and expensive services which they formerly ead to perfcrm for their out-of-town banke, such ae shleping currency, collecting checks and collecting notes and drafts. On the other berel, its rediscount and other facilities nave enabled the city banks to give better service to out-of-town banks. Currency end Coin. e. adequate supply of currency and eoin is now elweys aveilable at a moment's notice. It is notlanger neceesery for the Sat1en41 City ?enk to carry more than is required for till money, ely four or five million dolltre. Furthermore the bank is relieved of the labor, expense and responsibility formerly involved in shipping currency and coin to out-of-town banks. On the City Rank's inotructions and at our expense we make e great many such shIcmnte to banks in this district. Shiements of coin end currency to banks in other districts are made by the fieserve Bank e of those districts, also at their expense. de and other te)serve Banks also handle the hulk of the large incoming shipments of currency which were fcrmerly sent tc roe TOrk City banks, thereby saving these banks further labor, expense end responsibility. lire Transfers. Th5 'lational City Bank uses, to the extent of several millions of dollars daily, our wire transfer system, which is carried on at cur ex of this system fun es are transferred anywhere in the without the shipment of currency. Througe'the use country, ecroee district lines, This is a facility whice is highly regarded not only by the banks themselvee, but by their customers. eese. Netionel City Sank, kOw Iork eity. 7.1P.23. Collection of Checke. The Netienel City 3auk collects through the eederel Reserve Sretem delly :I the neighborhoed ef $5,0'0,000 IA checks,. Of these about #5,er,W),OCC aro direet send in gs to other districts. The Syetee reduces the time of collection of meet of then) checks by about one telt'. This is if great importance) to the Nationel City Peink and to its ousters. Furthermore, routing practically everything through the. yetem !les doubtless relieved the City Bank of a considerable emoent of 1b-r, expert and other, Our collection facilitiec have eleo enabled it to 'loo elmoet entirely the many collection account it used formerly te eerry .t.h cetefe in its treneit department. town correepondente. In the two condition reeerte above referred to it eneeers thet now, with greelly increeeed bUeineee, the City 3en. has ease then t1,0CO300..e due free other banks, wherean in 1914 it had $14,000,000 due from other banks. Rediscounting. The ability to rediscount eseures Lae Netionel City Bank at all time of u dependable seeely of credit and currency which eermits it to conduct its beeineee eitb mucb greater eesuranee then formerly and to keep its funds inveeted much more closely. It has used this privilege freely when neceeeary. For a eerine of two yeere, from the fall Of 1919 to the fall of 1921, it was t oontinuous borrower end in January, 1921, owed ue as much as t165,000,000. Foreign b-ins. The eedorel }serve Act permitted national Osaike to open branches in foreign countries and to inveet in share*: of foreigu trade beaks, slice as the Intern -tionel Banking Corporeticn. . 4.thile such leeisletion might have teen enacted independently of the l'ederel hesseva Act, aa was the case in flax York State, nevertheleee this was part and parcel of the whole conception of a laror, safer and more effective benkingbuelneas for the United. States which the Federal Reserve Act contempleted. The Act a7ao firet gave national banks authority to accept time drafts. This would have been of little value had the Reeerve banks not been reedy frem the outset to meke e market for the bills and to make forward quotations for them, to be cabled to foreign countries. 10 Netionml City Bank, New Icrk City. 7.j.23 great benefit to the commerce of the country, end the privil eges have been of then by the Netionel City Benk haa made its name and position proaeit and wide l*e ° of These Irnown the eghout the world. It seems probable thet the ability to exercise these privileges has also been instrumental to the eity Bunk in holding old foreign a'counts and in attracting new ones. Of couree, L chent:e in the internetional finanoial position of the United States in s 1914 has been the melor influence in attracting more foreign aecouets to the United States; but the exictence ef the Reeerve System, providing an instant means for converting baleneee and other oblieatione into gold, hes furnished a background of confidence hion feraerly we leeline. In this uoeriection, a very concrete edventaee which the cteserve System is about to brine to the businesa of tee% City Pank is the saviaj of some $400,000 per annum which ycu tell us rill result from carrying lower reeervee in Cuba when the Boston and Atlanta resorva banks aetehlish their eeency there. I neve meds no re'erenee to the very gr?at added factor of safety waieh the mere sxistence of the eeeerve ystem /Inc injected into American banking. That its benefits to tankine and buelness ere large, nearly all will admit. But you have asked for e statement of the tangible benefits to member banks which can be figured in dollars and cents. le have often had to figure thin for country bankers and it has sometim s been hard to bring the balance into thoeredit column. But as I go over the debits and credits for a :eeis York City bank I em astonished at the showire- it makes, and I em inclined to think that the National City Bank, although a few millions of its depcsite from foreige banks of issue say have been transferred to s, has profited from the Reserve 3yatem relttively more than any otber member beeeuseit has intelligently taken edvantege of all the opportunitiec fee- expansion and for wider service to American business whie, the Act and the System provide. Very truly yours, I/ . H. OASE, Deputy Governor. - COPY FEDERAL RESERVE BOARD WASHINGTON Office of Governor July 19, 1923. Dear Mr. Mitchell: I have your letter of July 17th with the three enclosures, concerning the Cuban Agency of Boston and Atlanta. I have had the matter up with Governor Harding of Boston, and from investigation made I find that the boston Federal Reserve Bank is proposing to go into the same building that is to be occupied by the First National The First National Bank of Boston is to have the ground floor of Bank of Boston. an eight story fireproof building, and the Boston Federal Reserve Bank is to occupy Access to this room is not through the First National a room on the third floor. The vault to be used by the Bostan Bank's room, but through an outside entrance. Bank is to be independent of the First National Bank - in other words, while it is in the same building, the agency will be entirely detached from the First National Bank, and it would seem that this would protect your bank from the theory that you have that it would be advancing the interests of the First National Bank of Boston to the detriment of the National City. I am advised, further, that this arrangement will only be made for the term of one year so that if the agencies are a success and it is thought advisable to continue them, the banks themselves would likely want independent quarters, and I am confident if the agencies are a success that the Board would likewise insist that the You can see by agencies be entirely detached from any other balking institution. the above arrangement that the Boston Bank is in no way attached to the First Ratinal Bank of Boston. I am further advised that there is no other suitable place in Havana that can properly take care of the Federal Reserve Notes that will be necessary to be carried in that City in order to accommodate the agencies and the banks operating through them. Governor Harding appreciates the situation, but feels that there is no You will understand that the Board has no other alternative at the present time. intention whatever of favoring one bank as against another and has every desire to have these agencies operate independent of the influence of any bank and for the PUrpose of being helpful in the situation as it now exists in Cuba. Assuring you of my appreciation, I am, Very truly yours, (Signed) D. R. Crissinger, Governor. Mr. C. E. Mitchell, President, National City Bank, New York, N. Y. COPY THE NATIONAL CITY BANK OF NEW YORK. July 23, 1923. Dear Mr. Case: I enclose herewith a copy of a cable that has come in to me today from our Vice President Durrell, resident in Havana, in which he challenges and comments upon the statements made by Governor Crissinger in his letter of July 19 to me, copy of which I sent you under date of July 20. I have gained an impression that there is going to be a discussion of this subject in Washington tomorrow, Tuesday, and if you can get these facts before the Board in a formal manner, by telephone or telegraph, I will appreciate it very much indeed. I am mailing tonight to Governor Crissinger, under confidential and personal cover, a copy of Durrell's cable. Incidentally, I understand that the Atlanta Board has adopted a resolution setting forth t that both banks should be located in the same building, but in a building in which no other banking institution is located. Their position, as I understand it is that the banks should join in an independent location if Boston will " play ball", and if not, the sentiment is in favor of accepting our invitation. Yours very truly, (Signed) C. E. Mitchell. Mr. J. H. Case, Deputy Governor, Federal Reserve Bank of New York, 15 Nassau Street, N. Y. New York, COPY OF CABLEGRAM. Mr. C. E. Mitchell, President, National City Bank of New York. July 23, 1923. Contention that First National Bank Boston Mass, quarters only suitable ones available for Federal Reserve use absurd. Royal Bank of Canada Havana will have representative in Washington Tuesday to offer all or any part Trust Company property which is very well adapted for purpose. Present quarters Canadian Bankcf Commerce in Barraque building with modern vault available October first. Believe suitable space including vault can be obtained Mendoza y Cia building available at once. If necessary we offer gratis space sufficient for requirements with vault facility(ies) combined Boston and Atlanta agency. Maryl nd Casualty Company advises cost insurance our use and that of First National Bank/ We feel position these agencies will be much stronger if they jointly occupy independent quarters as it will serve to dispell opinion that prevails locally that primary object Federal Reserve Bank of Boston Boston decision to enter this field is to advertise First "ational Bank Boston. Have so advised Bullen -2- Copy of cablegram. . C. T. Mitchell. July 23, 1923 Federal Reserve Bank of Boston, Boston representative now here and have urged him to advise taking independent quarters. Should Federal Reserve Bank of Boston Boston persist intention to use First National Bank Boston quarters urge using every means to secure Atlanta agency for our building. Durrell. COPY July 24, 1923. Deer r. Mitchell: I ac, in receipt of your letter of July 25, with ,hich you enclosed 4 cooy lice President Jurrell's gram of the same date. For your information,the following telegram was sent by me to Governor Crissircer today: " Pursuant to your instructionr we h7Tve notified the National City bank oftliew rork that their designatiAl as agent and correspondent of this bank in Cuba will terminate u7;.on the opening of Cuban arencies by the Federal Reserve banks of Atlanta and Boston. In view 71'' thid proposed cancelation of this designation City Bant now expresses the belief that Cuban agencies of the AtInta and Boston bnk7s should by all mens have sepatate independent quarters of their own and should riot be located in a building occupied by agency of other American bank. We heartily concur in this view and believe it most imortaht that Reserve agencies in Cuba have quarters of their on wAch will be so located that their relationship of independence of say other bank will be unquestioned." Very truly yours, J. i. CAST, Deputy Governor. Charles E. kitehell, Esq., President, The Nrtional City 13,,,.nk of N. 55 Nall Street, New York, N. Y. MEMORANDUM OF A CONFERENCE WITH MR. CHARLES E. MITCHELL, PRESIDENT, NATIONAL CITY BANN, NEW YORE, N. Y. August 11, 195, in the Office of J. H. Case. Yesterday evening Mr. Mitchell telephoned me that he was negotiating with Dr. Schacht of the Reichsbenk for the flotation in this country of an initial offer- ing of Rentenbenk mortgage bonds ef a substantial amount, and that, in the course of the negotiations, the City Bank had insisted that the mortgage seourity be deposited with the Reichsbank as trustee; that Dr. Sfhacht had elbled that lest January he had taken up with Mr. Jay, of the Federal Reserve Bea of New York, the general question of the propriety of the Feichsbank's serving as trustee; that Mr. Jay had cabled Dr. Schacht advising Against it; and that, under those circumstances, Dr. Schacht was loath to adopt Mr. Mitchell's suggestion. I looked up the correspondence here relating to the subject and found that Dr. Schacht's inquiry related to an iesue of public utility eecurities; end I telephoned Mr. Mitchell that if he would come over here to the bank I would be glad to show him the correspondence. I also told him that, so long ac he was in process of negotiating with Dr. Schacht for an issue of hentenbenk securities, and so long as he was going abroad Saturday of this week, I would give him en opportunity to read a confidential letter on this subjectewhich Governor Strong had written to Mr. Jay under date of July PO, 1925. (Mr. Harrison and I reviewed that letter end concluded that there would be no impropriety in showing it, in its entirety, to Mr. Mitchell.) Mr. Mitchell was extremely intorested.in its contents and exeressed his cordial ap- preciation of our courteay in permitting him to see it. Mr. Mitchell stated that, in addition to having one or two of their senior officers abroad at this time,conduoting negotiations with Dr. Schacht, the City Hank had also sent over some of their counsel to consult with the German attorneys in order that all the essential points might be carefully covered, es this offering would undoubtedly be followed from time to time by others, and they proposed to start off right. Mr. Mitchell furthel' stated that the City stink w.s ineistent upon herring the bonds deposited with some trustee, and expreseed the opinion that, oeing to the close relationship existing between the Reichabenh ead the Rentenbenk, it did not seem proper to have the securities deposited with one of the joint stock banks. I ed- vised him that on that point we were inclined to Agree with his view, and that if the Reichsbank should care to make further inquiry, we would say in substance that, while we were governed by the information expressed by Mr. Jay lest January, we did feel offering Was in e special category and entirely different from that this particular miscellaneous public utility securities. At the conclusion of our talk on this eubjeet, I told Mr. Mitchell that only a day or two previous I had received a communication from the Treasury Depertment to the effect that the State Department desired information as to our relationship with the Benkovni urtd Ministeretve at Prague, the basis of which inquiry, I underetoo4 was a protest made by Mr. Mitchell to the State Department about our taking that account. Mr. Mitchell stated that this was not so, end thereupon gave me a full state, ment of the facts, vie.' . - Me. elecnelipaity Bank, and Mr. Case, Federal Reserve Bank. 2 Several days ago he received a direct coreanicatioe from the 3tate Department in which they claimed that they had been advised that the National City Bank was extending a bank credit of .:12,000,000 to the Bankovni and vas about to offer a 50,0100,000 Czecho'ovakian bond issue in this country, upon which procedure the atate Department did not eeok with favor, kr, aitchell tnereupon wrote the 3tate Department that his institution had not been considering a flotation of a bond issue nor did they have a .1'12,000,000 (or any other amount) bank credit extenaed to the Baakovni, but merely made the statement that the City Bank had, a year or two ago, made the Bankovni a loan against gold deaosited an Belgium (Brussels)) that subsequently the loan was taken over by the Federal aeserve Bank nf 'ew York, and that he understood we now haksuch advance to the Bankorni in the amount of -40,500,000. Under date of August 10, Mr, Winston sent me the following quotation from ler, Mitchell's letter to the itate Department; " It is true that the National Oita Company has taken a prominent part in the flotation, of the two issues of Czoonoalovakian aonds which have peen lilaced In this market, The Government of Czechoslovakia has also ie the ea,t rtaci besinees traiisaotioas with the Lateonal City Bank, The latest tranlaction wee a loan aeainet the deposit of gold in Brussels rude ba the Bank in April 1924 in the amount of 310,000,000, whieh had been decreasee by the end of October 1924 to $6,0a0,000, This vas repaid .eninici in November 1934, tae 4overtrnai1;, ne underetvaa, tore partially used in connection with 8,ch repayment by borrowing $5,000;000 feom the Federal Reserve eaaks, waioh leen we believe Lo have been seaseventla inereasea by the Fedeeal Beseave eanks to 10,500,000 and to be still on their bolts," which seems fully to bear out the forenvinns c In thie connection Mr, Mitchell eitca a vora iatenestina episoae. He said that when their loan to the Bankovni was Dula off he was advised that the lean had been taken elsewhere, and he had the lepress!on, that tac loea hit bsen aede by aueclay's lank As he had a close encrust understanding with Mr. Goodenoueh of the latter bank, to enable them to "alay ball" together, he cabled Goodenough, exlressing surprise at his (Gooaenoueh's) taaing over that loan that the aity Bank had been carrying; and was of London. very muCh chagrined to have aoceenorna eehle bean that Le lie net aave the loan, and that, upon inquiry, he haa learned that the loan was taken over by the aederal aeserve 3ank of New fork, Mr, Mitchell then expressed his conviction that our making this loan at all ana especially at a lower rate than that Charged by the City Beak, was a highly improper proceediralend that he aen praviousla expre3sea his views on that subject to Governor 3tron 1 informed him that our foreign accounts were limited excaasively to beaks of 13 sue or, as in this case, to a arovisional bank of issue; that tae business had come to us entirely 'seat, after making careful inquiry as co the status of the '.ezikovrii and unsclioited, taking into consideraticn the fact that it planned presently to become a bank of issue, we had taken on the account in regular course, Further, that when we were asked to make the aankovni a lean secured by a deposit of gold lodnod in Brussels for our aceouet, we had carefully considered the matter, concluded that ette4 la loan wae ealasaane (siace ve were fully authorized under the law to do so,) we had made the loan in qUestien, I further stated that, as a matter of fact, the loan of the City Bank had heel paid off and the City Bank's claim against the gold in Brussels released before our advanc had been made, I s/11/25. and Mr. Case, Federal Reserve Bank. 3 that this was only mr. Mitchell then took ocoasion to say one of a number of 4140100weinswhida had oome to his attention and in whieh we were working eee interests of our member banks; that he, for one, did not like it and had been aeked ey several New York bankers,who felt as he didito take the initiative with a view to showing up the unfairnees of the competition Whieh the Federal Reserve 3aak of New York practices, directly against I told Len ITitchell that I was amazed that the president of the lergest bank in this country took gaon a limited view with regard to the value of mutual relatioes beteeen sae Federal Reserve Bank of New York and the important central banks of issue abroad; that these relatioes have already proved their value an,: erouslee to be of great public benefit in future,anu that it was most gurprisine to find himoarticularlyi, and the City BankAgonorallyyso critical o: our action in this ani other ivgards. I 4entione, membership in the 4stem was unquestionably a very valuable as3et to the City Bank that it had enabled all city banks to make larger profits by reason of the reduced reservesiand et without such a wystem at this time he and other institutions would undoubtedly be carrying much larger idle reserves. I stated frankly was a matter of wonder to many of us here that he, personally, appeared to assume so critical en attitude toward the Federal Reserve Bank and its officers in practically everything we did; that we had reason to know he was in the minority in such an opinion, and that of course his criticism of the bank and its management from time to the tact that thFt it time naturally sifted in to us. I then expressed the view that in the usual course of events certain of our transactions might appear to run counter to the interests of our member banks, but that the System was organized primarily for the benefit of commerce and industry, and that in benefittingcommerce and industry the banks were the largest participants. I assured him that we here in the bank looked upon ourselves as a service and that, so far as consistent, our whole policy, was designed with a view to giving the utmost service to our member banks; lso, that with one or two exceptions this policy was thoroughly understood and appreciated by the important larger banks. institution Mr. Mitchell then stated that we went ahead and consummated important transactions without consultation with our banking associates here in the city. I told him that, in the very nature of things, that would frequently be true, but the facts were that all transactions were carefully reviewed with the elected representative benksithAt the banks have always had competent representation on our board, and that it seemed to me he might have a bit. more confidence in the judgment of the men whom he and his essociates elected to represent them. of the New York City Mr. Mitchell spent approximately one and one-half hours with me; and while he did not make any definite statement of "repentance," he did say that he had enjoyed the discussion and that he would give some thought to the statements I had made. .1 told him that the reason I hed not previously discussed with him the substance of Governor Strong's letter of July 20 regarding the Rentenbank was because I had understood Mr. Winston to say, last week, that he (Mitchell) whs leevine. immediately for Europe, when, as a matter of fact, Mr. Mitchell now states that he does not leave until Saturday, August 15. J. H. CASE. THE NATIONAL CITY BANK OF NEW YORK ODFFICE OF THE PRESIDENT October 29, 1925. My dear Ben: Thank you for arranging Dr. Schacht's luncheon engagement. It would be a great pleasure if you too could join me and some of my associates on that occasion. May I expect you with Dr. Schacht at one o'clock tomorrow, Friday, October thirtieth. Cordially yours, Mr. Benjamin Strong, Governor, Federal Reserve Bank of New York, 33 Liberty Street, New York, N. Y. October W, 1925 My Oe'.r Charlie: Much Es I should like to come to luncheon with you and Dr. Schacht tod;i4, in fact as I ha.d planed to ao, I now rind that I must return to shington agsin this morning. So it ic unforturvItely quite out of the question. But I am eure you will understand. My secretry te1l8 me thst she ha8 dredy sent tenLative word that I might find it impoe.sibie on this account, 80 I hope no inconvenience retiults from the tardiness of this note. sincerely yours, Mr. C. E. Mitchull, 55 Wall Strt;et, New York. * , April 25th, 1916. My dear Mr. gtAi/man: This is my first opportunity to write you since my arrival home, as I was obliged to go to Washington at once and have been there until to-day. My stay in Paris and London was of the greatest possible interest and value to me. Without reviewing the matter in detail, I may say that our affairs in Paris were left in a most satisfactory condition, although no definite arrangements were made or were desirable at that time, but in London everything we wanted done has been tentatively arranged, subject to completion on being reported and approved here. iTow that I am back home careful inquiry into the situation abroad and I shall never regret having made the trip. it is possible to realize the value of a The situation here seems to be rather complicated: the Atlantic Seaboard is rather bellicose, this feeling shading off as one gets beyond the Alleghanies and into the prosperous 7!est. :Addle There are some evidences that Abundant crops sold at high prices constitute the greatest peace propoganda in the world. New York is just as stated by a friend who wrote me while I was in Paris - crowded by visitors so hotels, hor seats in the theatres. that rooms cannot be obtained, in This influx of visitors is well-furnished with money which it is spending with both hamds. April 25, 1916. -2- To James Ctillman, Esq. On the whole, it seems to me that the banker have kept their heads pretty well, however, and that the so-called war stock speculation has not inflated bank loans as much as one would imagine. Our surplus reserves are declining, standing now at *7100,000,000 for the Clearing House btnks, but that i3 not unnatural at this season of the gear and there is still a good deal of "stretch" in case any pressure develops. Of course, the resourues of the Federal Reserve Banks are hardly touched. Feeling in Washington in regard to the President's message is.a curious mixture. Those who think we ought to fight are disappointed with the bellicose. Those who believe in peace under any provocation think message because it is not more definite and that the message has developed an impasse from which neither side can extricate itself. Outside of official circles, there seem to be none who adopt a conservative mid,le course in expressing their views. Having kept a careful record of weather durin,:: #j trip, I find that I had five days of sunshine between the 2nd of Febru- ary, when I sailed in a snowstorm, and the 14th of April, arrived home in a heavy rainstorm. when I It has since cleared up, how- ever, and we are enjoying most magnificent Spring weather which I wish you were here to absorb. Jim Woodward has just been in the bank particularly after you. and inquired very He seemed greatly pleased when I told him April 25, 1916. -3- To James Stillman, Esq. of my few days visit with you. Jack :organ expressed very keen regret at having missed you when you were in paris and I delivered your message immediately on my return to London. So far, I have not seen him since returning to New York but understand he is well. If, as I hope will be the case, you are able to get home this aammer, you will I am sure give me opportunity to see you and possibly I can coax you up to the country to visit us. With kindest regards, believe me, Faithfully yours, James Stillman, Esq., 4 Cannes, France. BS Jr/CU a o21, -7,jv oril 25th, 191' my dear ur. *A-417ATI: This is my first opportunity to write you since my arrival home, as I was obliged to go to Washington at °ace and have been there until to-day. My stay in Paris and London was of the greatest possible-interest and value to me. . .Without roviewinF..; the matter in detail, I may say that our affairs in Paris were left in a most satisfactory condition, although no definite arrangements wore made or were desirable at that time, but in London everything we mated done has been tentatively arranged on being reported and approved here. subject to Completion Now that I aM back home it is possible to realize the value of a careful inquiry into the situation abroad and 1 shall never regret having made the trip. The situation here seams to be rather complicated: -L-lantic Seaboard is the- rather bellicose, this feeling shading off as one gets beyond the Alleghenies. and into the prosperous :liddle 7est. ',There are some evidencea that P.bUndant crone sold at hish pries constitute the Greatest peace .propoganda in the viorld. New York is just as stated by a friend vho wrote me while I was in Paris - crowded by visitors so that rdoms cannot be obtainedkin hotels, her seats in the theatres. This influx of visitors i well-furnished with money which it is suendin with both hands. April 25th, 1916. :Ay dear Mr. gWIrpn: This is my first opportunity to write you since my arrival home, as I was obliged to go to V;ashington at oace and have been there until to-day. My stay in Paris and London was of the greatest possible interest and value to me. Without reviewing the natter in detail, I may say that our affairs in Paris were left in a most satisfactory condition, although no made or were desirable at that time, definite arrangements were but in London everything we wanted done has been tentatively arronged ,subject to Completion on being reported and approved here. Now that I &a back home it is possible to realize the value of a careful inquiry into the situation abroad and I shall never regret having bade the trip. The situation here seanls to be rather comnlicated: the Atlantic Seaboard is rather bellicose, this feeling shading off as one gets beyond the Alleghanies and into the prosperous :Tiddle West. There are some evidences that Abundant cro,.)s sold at high prices constitute the Greatest peace propaganda in the world. 17ew York is just as stated by a friend who wrote me while I was in Paris - crowded by visitors so that rdoms cannot be obtainethin hotels, hor seats in the theatres. This influx of visitors is well-furnished with money which it is soendingwith both hands. -2- To April 25, 1916. James Stillman, Esq. On the whole, it seems to me that the bankers, have kept their heads pretty well however, and that the so-called war stock speculation has not inflated bank loans as much as one would imagine. Our surplus reserves are declining, standing now at ::100,000,000 for the Clearing House banks, but that is not unnatural at this season of the gear and there is still a good deal of "stretch" in case any Pressure develops. Of course the resources of the Federal Reserve Banks are hardly touched. Feeling in "ashington in regard to the President's message is'a Curious mixture. Those who think we ought to fight are disappointed with the message because it is not more definite and bellicose. Those who believe in peace under any provocation think that the message hasdeveloped an impasse from which can extricate itself. neither side Outside of official circles, there seem to be none who adopt a conservative mid'le course in expressing their Raving kept a careful record of weather during r,.5y trip, I find that I had five days of sunShine between the 2nd of February, when I sailed in a snowstorm, and the lilth of April, when I arrived home in a heavy rainstorm. It has since cleared up, how- ever, and we are enjoying most magnificent ?pring weather which I wish you were here to absorb. Jim 7:oodward has just been in the bank and inquired very particularly after you. He seemed greatly pleased when I tolehim -3- 1. To April 25, 1916. James Stillman, Esq. of mg few days visit with you. Jack 2,:organ expressed very keen regret at having missed you when you were in paris and I delivered your message immediately on my return to London. So far, I have not seen hir. since returning to New York but understand he is well. If, as I hope will be he case, you are able to get home this Summer, you will I am sure give me opportunity to see you and possibly I can coax you up to the country to visit us. With kindest regards, believe me, Faithfully yours,. James Stillman, Esq., Cannes France. BS Jr/VCII 4 November 6, 1917 . andum for Mr. James Stillmaa, Chairman: 4. Refervlag to my memorandum of Oatot:er 20th (supplementary to ,rsndum of the 59th) showing the percentacs rhish th,, estimated subscriptions to the Liberty Loon, by Federil Reserve diAtriets, bore to,the.1912 -12th of those districts respectively, 1 am now able to hand you a SimiiLr statamqnt based or firs aplearing in to-day's jourarl of Commerce, 'shish are apprxestly Official stateviate of the mounts manor:Med within the various Fedora heserve district*. 51,1230B1P2I01D TO :MOND LIBEDTY 10144 3TAT14D BY FaDEBAL RASSRVE DISTRICTS, AND TIN R.ATIO '4,11011 3UCH auscamp- TIORS BEAR TO TRg 3TAD WEALTR ER 1922 OP THE BSSPECTIVE DWRICT8 t 1 10 fl' Seaton 2. New York 5. Phildelphia 4. Cleveland 5* 60 Fichmond Atlanta Chicago 3t. Louis Minneapolis Knsa3 City Dallas 5au FvAselesc lth la ,?, -(0easna, 11,225,000,000 30,264.000,000 11,236,000,M0 15,67n,000,000 2d 'Liberty Lona 3ub- AripIlons 076,950,050 8,070,000,00 1b,78,)00,000 1,550,453,450 500,450,250 466,106,800 201,212,500 90,695,750 585,653,350 164,260,750 140,232,650 150425,750 77,599,550 292,671,150 4167k47,000,000 0,617,555,000 10,698,00,000 ,-4,356,000,m0 54,027,000,000 11,955,000,000 11,560,000,00 17,069,000,000 Percentage whieh Oetober 1917 subscriptiona boar 19 wealth of 1912, 4.2k. t 44 a. 3.59 3.06 1,88 .97 1.72 1.54 1.22 .66 .97 1.66 2.46 55 WALL STREET NEWJPLRK () being here -- although they would doubtless have done the same eventually, but time in every way counts for so much at present. November Eighth Nineteen Seventeen I am trying to impress upon every one I can the importanoe of speedily getting all the national and state banks, as well as the trust companies -- even if they do not open accounts or join the Federal Reserve system -- to take their pro rata share of Treasury Notes and to have a market for them as commercial paper, which is practically what they are now that the Government is such an enormous factor in almost every kind of Albusiness in connection with the war. though you write you are loafing, I know perfectly well that you are using your great It influence to accomplish this result. means, and should be brought about by then the Government can take its time as to when it is advisable to bring out another The longer that this can be put off loan. One of the depresprudently, the better. sing factors in the situation is the talk and apprehension about another Government loan in a short time at a higher rate of All talk of this kind should interest. not be indulged in and, if possible, should be squelched. Governor Benjamin Strong, Jr., The Homestead, Hot Springs, Virginia. My dear Governor: I was delighted to receive your letter of Tuesday evening, especially as I infer from it you are simply taking a well deserved rest. all I had a long conference this morning with Mr. Morgan at his library, and have urged him to take a more active part in financial matters here as his father did because they both occupy a unique position of not being directly connected with any one financial institution. It is very difficult to manage an institution of any size without daily Nothing would give me more pleasure than to accept your kind invitation to share your loafing with you. I fear, however, that I will not be able to avail myself of your kind invitation. There seems to be something of importance ,Ip pass upon every day. Now that Vanderlip ig away and McRoberts expects also to go to Washington for an indefinite period, I feel as if I should be on deck. f17- If you have not already heard you will be pleased to know that thegkiited States Trust Company has opened of -an apdount with the Federal Reserve Bank, -gnd tiro Marston, after a talk with me toddy, decided to do the same, and is -1 sending nine millions of gold to the Bank. So you see there is some little use of my 00 ,f,111 55 WALL STREET EhAtv NEW YORK -3- personal attention and I am going to remain on this job as long as I can. unless it should become sheer folly to 4o so on account of my weak heart. I think, however, that in a month or two it will be so organized that I can feel free to turn the management over to others. I envy you your rest but am delighted that you were wise enough to take it. I trust you will return greatly refreshed in mind and body. Yours sincerely, December 7th, 1917. My dear Yr. Stillman: went to Hot Springs with a firm resolutien not to lot mail get ahead of me or worry me. The first four deys I spent erincipally in bed and those four days proved tea much for ma eo I not only did not answer mail but I did not even read it. Noe I am eack in New York until :;uneey an., want to thank you for your letter of the 8th of November. You will doebelees lauea at receiving advice from one who is =eel° to practice his own ereachings but I cannot help thinking th,et yo e are overworking, stickine too close to that bank and imposine ueon yourself too violent a &lenge of habit after these in yeare ef reet and freedon feom direct buziness and rezoonsibility. If you had ry good heert and I had yeei geed lungs we might make a Whole man between us and accomplish something, but 1 feel terribly handicepped,ae you doubtleee do, limping along on one lee, so to speae. The admiceio Of tee iled State -ruot f;onrene was an achieverert of the first order for the Federal Reserve I ',thee eafeetly eoll what inrlueeced the 'Iceleion SYzrtzeli. from a conversation I had with Mr. Sheldon. As he expressed it to me, 'it wat, a eeeice between the 7ebte,': tatee neeern- ment and the United States '"rust Company" and once that war plainly in els rind I never had ary doubt as ta the decieior. tondee and TheLdae 1 eeeeel ie dccesr,irg the financial program and expect to be there all next week. I have urged (and i teink witA CGMQ euccess), tee ereert carrying out of sore of the suggestions which you and I have frequently dcuseed and 1 will gt,: or eo you either thrbegh ZJr. -Jarerlip or directly by letter just how thin, s develop next week. The load now beieg carried by Utw York is not more than it can successfully handle and what we need beyohd everything else is courage and this even more than money. a To Dec. 7, 1917. Mr. Stillman. It woold be a notable service if both you and Yr. Yorgan as well as Yr. Baker could make it a rractice to be in 7ashinoton once every few weeks to discuse natters with members of the Reserve %aro and the Treasury Department officers. They welcome calls of thAt nature and will talk freely and will not hesitate to 1114 advice. The tire has lono pant Then cuestions of coorteoy or pride end prejLoUoe can be permitted to interfere in bringing our minds toeether in the nation's problems. I am just one of the yonnFLoInt renruits and yor and fr. taker have vestly more exnerience than I and cen do the nation a service by placing thlt experience at tha disposal of the Treasury Department. I nide some uma of the figures that you were good onovh to eon.' ma3 in nriti,17 rha' n Clerk. He has not roelied an rrobably evill not do SO. Nmong ()nor roeults of th- exnerienre of *he re-+ three !Jeers in the corviction, and a very etrong one in my mind, that every time a demagogue or Polii:ce3 sh:,-+er throv.ro. hrimk et ew York, Yew or should throw it back rromrtly. I hone vou did not disarprove of what I said My oln rlens are a little indefinite. I am pro- posing to go to Aiken for a few weeks after finishin, in 'oe.ehington e.od if iryl, any eh-nee yoon nlens take you South, won't you let Te know so that I can join yru somewhere for a litLle 7Vith kindeo:t regards end again urging that you have some regard for your on health in which your friends are interestod oven thopgh you Tee, nemlect it, I ant rpliehfolly yonra, p James Stillman, Esq., 55 nall rAreet, Eew York City. BS*VCIT g 414'4 55 WALL STREET N EW A RK qp," ,6,4 °471.4 November Eighth 'Nineteen Seventeen Governor Benjamin Strong, Jr., The Hopostead, Het Springs, Virginia. My dear Governor: I was delighted to receive your letter of Tuesday evening, especially as I infer from it you arc simply taking a well deserved rest. Nothing would give me more pleasure than to 'accept your kind invitation to share your loafing with you. I fear, however, that I will not be able to avail myself of your kind invitation. There seems to be something of importance to pass upon every day. Now that Vanderlip iS away and McRoberts expects also to go to Washington for an indefinite period, I fool as if I should be on dock. If you have not already heard of it, you will ho pleased to know that the',Pnited States Trust Company has opcIned an apeount with the Federal Reserve Bank, nd Mr'i, Marston, after a talk with me toady, ha',.s decided to do the same, and Is sending nine millions of gold to the Bank. So you see there is some little use of my 0 being hero -- although they would doubtless have done the same eventually, but time in every way counts for so much at present. am trying to impress upon every one I can the importance of speedily getting all the national and state banks, as well as the trust companies -- even if they do not open accounts or join the Federal Reserve system -- to take their pro rata share of Treasury Notes and to have a markot for them as commercial paper, which is practically what they are now that the Government is such an enormous factor in almost every kind of Albusiness in connection with the war. though you write you are loafing, I know. perfectly well that you are using your great it influence to accomplish this result. should be brought about by all means, and then the Government can take its time as to when it is advisable to bring out another The longer that this can be put off loan. One of the depresprudently, the better. sing factors in the situation is the talk and apprehension about another Government loan in a short time at a higher rate of All talk of this kind should interest. not be indulged in and, if possible, should be squelched. I had a long conference this morning with Mr. Morgan at his library, and have urged him to take a more active part in financial matters here as his father did because they both occupy a unique position of not being directly connected 'with any one financial institution. it Is is very difficult to manage an institution of any size without daily 55 WALL STREET NEW YORK 0 -3- personal attention, and I am going to remain on this job as long as I can unless it should become sheer folly to do so on account of my weak heart. think, however, that in a month or two it will be so organized that I can feel free to turn the management over to others. envy you your rest but am delighted that you were wise enough to take it. I trust you will return greatly refreshed in mind and body. Yours sincerely, 2-1A,ern 6 Novz::::Vmi 0, 1917 / n::::,:x4=1,-:.4,1=.,r1 for 1.:r.su i;t11Ir.Au, to my of the f ec.,,tot-or (s7n.21.,10--..,1,,27 thn or.l.ttea sAlb331.ip t I Or49 to thtO 1,1barrt 7.0sa, by Fo.letir 1 :flovIrvo diltriotq,horn to tha 1:112 ISOC= 1 t2riof tbw dti1ctre;::etIvi1y, .1.nr atntat baao4 1.V-4112 1cr i$hC.ro t1y offiaL11 tbr3 vario f.r.!oif-,131 VI!' 11.F.aIl y0 a a tlk-ii- tc.....a,'ic 5iouu1 Of C tIb of to iTiO4tp. Z(5 1.'01 s 1,113,f,, rlbad Ved,Krill-,:e3ervo c1.1;t1-Iota. S1.13:3,n1';721013 o97.A.,`,On 1,011-1 77,1"-E,TAL 11:11-0T1jjr 3tUJ.:1.0 11=1141172:, ri 1912 0? 01.0r3 D1,Z-1'211.10'23 romertt-7,-,;;;O Zealth 14 r:"; now Yoy% 3. 1-11.1.114.)hia ov?Arq.r1 41. 5. 1;;3,,.33mni 6. ;`,0:ta. 7. Ohlonc..o 9. Iiia01113 10 Z)6 0OCO 10896Q0 11 1 1,,va 900!)3,7:do rnr, le4,2C0v750 U --"z0 g op, 0 0.37,047 Lt /17 50o c0 Sr.,x; FrLuoIza nul-alr5pLiow b,a,zr t :5 -G: f; 12. 2ub.. 4i-11,225,0Co,ccio 130,,lton * - fotbor :017 Pa /5K:',X3570 7 t Y,-i,Ei2.0 pD2 .r.11 .97 1.72 Is 1.22 .97 c:v. 1312 f/vP December 7th, 1917.- I My dear Vr. 9tillman: 71: '":21 -13t 'I'vent't6 LO.CS:6rings with a firm resolution not to let Of me or worry ma. The first four dy I sp,tilt .TYrincipally in bed and thoee four days proved I too much for"me co I not only did not ansrer mail but I did Now- I am back it.: New York until 1,untay and want'to thank you for your letter of the 8th of November. not even read it. You will doubtless lawril at receiving advice from one who is unable to practice his o'zn breathings but I cannot help thinking th,..lt you are overvfork:41g, stickinr: too close to that bank and imposing u-on yourself too violent a change of habit after theaa long yPare of rest and den from from direct business and resensibility. If you httd ry good heart and I had your p:.00d lun;cs 17:1 mal:e a thole an betraen us and accomplish toroething, but I feel terribly hendicappod,as you doubtleue do, Li-ping along on one lc, co to speak. Tnu admicsioe of the iJ. I LffnI States -ru:it Con7_.,n7 as an achieverent of the first order for the Federal Reserve Syetoa,. .p..ht,4, Oefr4etlY woll what inlua,.p.;-2d the ?..icisien from a conversation I had with rr. Shelden. As he exbressed it to re, "i; w,tt, a :,icb between the ,:nite4 :rtstas neat and the United States '-'rust Contany° and once thatC'oiernwao plainly in 'ii a rind I never had ary Out tp the dccleion. Lbnday end in Vahinten diSerssing the financial program and expect to be there all next week. I have urged (and I ti nk witn tome tusoase), t'he proTTt carrying out of sore of the suggestions which you and I have frequently discussed and I will get worU to you either through rr. Vaner- lip or directly by letter just hothings develop next The load no-,,t,.1wing week. carritd by i.ew York is not more then it can: succest-Sully handle and that we need bayhd everything else is courage and this even more than money. \ Dec. 7, 1917. Vr. Stillman. To It v.),21d be a notable serlice if boVA you and Vr. Yorgan as rell as Yr. Baker could make it a practice matto be in 7ashington once every fo. - weeks to discuss Treasury the Reserve Board and the tors with members of Depertment officern*. They relcomo calls of that nature will not hesitate to n131 advice. and will talk freely andher questions of courte6y or cri(3e The tins has long past en(; prejuiice can be peripitted to interfere in bringing ' Our minds to.7.ther in the nation's 7robIem3. I F.71 just one of the youni:n-it recruits an yvu and Yr. ?pker huvc plied- ves'Ay nere sxnerience than I and can do the nation a service by placing that exnerience at the disposal of the Treasury ePartr-lent. made sme uss of the figures that you were good anouirh to son, me, in nritins! Ohanp Clerk. Re has not remrld orobably will not do so. kiong ethor reoults of experiencs of the pa-t three years i3 the corvicticn, and very stroncr, one in ny mind, that every time a demagoF;Po or shytar thror a brick et I:ow York, New York should throw it back Pronntly. I howl you did not disapprove of rhet I sai:1 I an proNy cm ;-1..er,:f; are a little indefinite. after finishing in 'ishposing to go to Aiken'for a few weeks rlsns take you South, von,t ington P.u6 if by any ch-nce yorr you let ic.) know so that I can join you sonevhere for a lkttle vi have 7'att kinds :-t regards snd again urging that you era- .some regard for your on health in which your friends :let...ay irterestA :Wel though you rf:.ry recrlect it I an, Faithfnllv James Stillmsn, Eel., 55 171ll Street, Vow York City. r 17 .1919.- ONAL: My dear kr. Stillwell: At the last meeting which Jr. nd 1 Committee, you will recall we had some discussion of tt the 1 house e provision of he con- etiLution of the Clerine Hu. e Association governine rates of interest allowed by members of the Clearin liou,e upon out-of-town bank deeosits. mcetin Since the I have learned of no proposal for a recon,iberation of this matter along the lines of our discuion and am writing to aek if there is arypossibliity of a review of the !iltject being made. Of course you undrretand tht, it is ime ssible for Us to forecast what may from time to time be tne ci1oy of the Reserve bank as to rates, but it has long :eemed to me to be undesirable that the rates allowed upon these balances by New York banks should be automatically associated with the discount rate of the Federl Reserve Lank. Should our policy nccessit te further cilvnces in rates the conc:eeunce would be an autematic increase in rates foe out-of-ten deposits, fear thet once such advances are made by Now lurk tanks competitive rate es will take place in other cities and the whole ,arbject of competition for 1N3mk deposits at constantly increasing rates will again coma up to Luther u.. There may be a number of methods of dealing with this matter, SOR6 01 them, posj.bly, better than the one which was sue, ested at our meting, but perhaps may repeat that suggeetion which certainly is based ueon the useful exAerienc& of many years by the London banks. Whenever the bank rate changes in Ldneon, tle / clearing bankers' committee meets, and, in the light of the change in the bank mte -fixes the rate to be alIo,ed upon bankers' 'balances. automatic, The char) i. , hoeever, not d the only thine thet is automatic is the review of the situation whici0 Jane b A. ftiliman, Esq. -de by e bankers' committee. 12.17.19 Might it not to i_ossible for our Clerin 410 gouse to adopt some sini1r lvl, or a bettor one if it can be found, and, before in it the subject of a chance in constitution, ascertain in detail from the members of the CLi.-rinc Hou e whether the ;in will not meet with their \\I suort? ' I believe you undoubtedly realize, the officers and director e of the 4darl1 Reserve bank consider it a part of their duty to their members to promote in every way the eetablishment of deunder banking :i..acticas in this dis- trict. Our pro:o,als in this matter are designed to that end, and I believe, meet with the hearty.a44reval of the Federal Re6erve Eoerd. I will 'b, glr,d to learn from you hat are the views of the .members of the Ce&riag 'louse Committee and whether it is likely that ar4thin will be done in the matter. Very truly yours, James `Ailiman, Esq., The -National City Bunk, 55 Wail Ftreet, New fork. B 1 ed, atlek, ,(7/iyyk - /O1vi $ 25.000.000. CAPITAL SURPLUS & UNDIVIDED PROFITS $ 30 000.000. CABLE ADDRESS -CITIBANK- JleioW0)-4 December 11th, 1913. Mr. Benjamin Strong, jr., Vice-Presdt., The Bankers Trnt Company, No. 16 Wall Street, New York City. Dear Er. Strong: Answering the four questions submitted to me this morning, I regret to say that the time at our disposal is so brief that we cannot run down all authorities. But I believe that the answers here given are as trustworthy as the nature of the information desired makes possible. 1. Estimate of amount of Aperican securities held in Europe and authorities for same. Articles by Sir George Paish in the London Statist of June 19, 1909, and December 24, 1910. He uses the returns of the Excise Commissioners of England as a basis for his estimates, which were at that time that the total investment of British capital in the United States and Canada were c5,000,000,000. In view of the fact that large holdings of American secUrities by British investors are kept in this country, the statistics of which are not available, it is safe to assume that these holdings are very much larger. This does not take into consideration the investments of Prance, Gelmany, Holland or other European countries, which in the aggreeate probably are nearly as great as those of Great Britain. 2* How much in short-time notes is now outstanding by the various railroads and industrial corporations, and if possible, how much of that is held in Europe? I enclose a portion of the weekly financial section (pp 2 to 6) of the Journal of Commerce, NeW York, November 19, 1913, which contains complete answers to this question, giving in detail all maturities under three years of railroads, traction and iyidustrial corporations. The information is very complete. This paper has been taken from our files and is the only copy that we have. I should be glad if you would return it when you have finished .ith it. 4 -2- The amount of annual expenditures by foreign travelers in Europe. About five years ago, after careful estimates based upon payments made under travelers' /etters of credit by the principal banks abroad, the amount spent by American tourists was placed at E 80,000,000 annually. Since that time American travel has increased perhaps fifty per-cent, owing to faster steamers and better accomodations. But it would be perfectly safe to place this estimate now at an annual expenditure of This is exclusive of the incomes of many wealthy $500,000,000. American families who live permanently abroad, and of the incomes of wealthy American girls who have married abroad. Concerning this there can be no accurate or authoritative data procured e::ce.ot eventually by the Government when the income tax is in operation. These figures do not include remittances made by foreiHners laboring here:, which in the aggregate are very large. In 1911 the Post.Off ice Department records showed that remittances in small amounts of, say, less than $100, showed the aggregate to be above $70,000,000 of international post office money-orders. The amount paid by Americans to foreigners for freight on imports and exports per annum. I am unable to lay my hands on any authoritative statistics, but the in-and-out commerce of the United States nnnually is around $3,000,000,000. It is safe to estimate the amount of freights paid, exclusive of fire and marine insurance, Would be at least ten percent, or, say, $300,000,000. This is under, rather than over, the mark. For further information in reply to these four questions, I would suggest that you commicate with Lr. Bailey. Yours fait ully, Vice-President. .Xi/t&e1rG?_1;107bff/(e,y/LV(T/i? Aleer-°Ap% $ 25.000.000. CAPITAL SURPLUS & UNDIVIDED PROFITS $ 30.000.000. CABLE ADDRESS -CITIBANK- December 13th, 1913. 6",--t#1 Dear Hr. Strong: Replying to your letter of December thirteenth, I beg to say that the average cash reserves of the National City Bank during the period of panic in the year 1907 were as follows: For the month of September, ft 1/ tl " October tt November " It 1/ December " January (1908) 11 27-46 26 % 23-?1'L 24,40 31iS The lowest point reached by this Bank in its reserves was on October 26th, 1907, when the reserve was 20:41%. Yours very truly, 1r. Benjamin Strong, Jr., Vice-Presdt., The Bankers Trust Company, New York City TH ettc 44' /gift` /if/ - c /92,- 2/ Q.1°.19-----clraa07/,(7//K44,crJ 0 CAPITAL FU LLY PAID SURPLUS t 25. 000. 000. 25. 000000. . c__,!/>kefe:elg(07';')(/; CABLE ADDRES,CITI BAN I, March 2, 1911. H. Giles, .C/o Bankers Trust Company, 7 Wall Street, New York City. Dear Sir: I enclose herewith copies of letters which you forwarded to me at Hr. Strong's request. Will you kindly thiank Mr. Strong for me and tell him that I heartily endorse his attitude in the matter. Yours very truly, Enclosures Ms -W OFFICE OF October 17th, 1913. THE PRESIDENT Mr. Benjamin Strong, Jr., Bankers Trust Company, New York, N. Y. My dear Mr. Strong: I enclose copy of a confidential letter from Senator Weeks. I will be greatly obliged if you will turn the matter over in your mind, for I would 1iie the advantage of having yours judgment before I answer him. You will, of course, treat the letter as confidential. Yours very truly, Dictated but not signed by Mr. Vanderlip, as he had to leave the office before it could be written. "; (c o r Y) 'MIMI) STATES SENATE, Washington, D. C. Confidential. October 16, 1913. F. A. Vanderlip, Esq., President, National City Bank, New York, N. Y. Dear Mr. Vanderlip: I am very much your notations and consideration by obliged to you for the copy of the currency bill explanations. It will be of muoh service to me with during its the committee. I have an impression that the practical thing for the committee to do is to report in favor of four reserve banks Which probably would be located at New York, Chicago, San Francisco and 7Tew Orleans. That would seem to take reasonable care of each section of the country. If this is done and assuming that all National banks come in;on a ten per cent assessment that would mean a capitalization of C100,000,000. your bank to contribute think two and a half It would be necessary for million dollars. What would you of dividing this contribution to the capital among the four banks In proportion to their- tal capital rather than having all of it applied to the capitalization of the New York bank? If this were done, you would have the some relative interest in all of the banks and naturally would have one vote in the election of the banks' directors. At the same tire it occurs to me that it would remove to some degree at least the objedtion Which rests against requiring one bank, owned by one set of men, to core to the assistance of another bank owned by another set. This has occurred to Me. as a possible course to follow and I would like your unbiased Sincerely yours, (Signed) John W. Weeks. opinion of it. P 07 44-H?L-17 DIRECTORS. OFFICERS. JAMES S. ALEXAN GE R, PrestNat.Bank of Commerce in N.Y STEPHEN BAKER. President Bank orthe Manhattan Co. SAMUEL G. BAYNE, President Seaboard Nat.Bank. EDWIN M. BULKLEY, Spencer Trask & Co.Bankers JAMES G. CANNON, President Fourth Net Bank. E. C. CONVERSE. President. THOMAS DEWITT CUTLER, Prest.CommercialTrustCo.Phila. 1-1,"RY P DAVISON, J. P. Morgan & Co., Bankers. R ULPH ELLI S, President Fidelity Trust Co. Phila. E.11AYWARD FERRY Vice President Hanover Nat Bank. WALTER E. FR EW, President Corn Exchange Bank. F RE WI, T. HASKELL.V.Prest.III.Trust&Savings Bank Chicago. E.C.CONVERSE, President. BENJ.STRONG,J,VicePresident. BANKERS TRUST COMPANY $ 10,000.000 10,000.000 CAPITAL A. BARTON HE PB URN, ChairMarahase Nat.Bank. SURPLUS THOMAS W. LAMONT. J. P Morgan & Co. Bankers. EDGAR L. MARSTON. Blair & Co Bankers. JOSEPH B. MARTIN DALE, President Chemical NatBank. CABLE ADDRESS: BANKTRUST, NEW YORK. FRANCIS L. HIM E.President First NatBank. GATES W. MC GARRAH, PrestMechanics'& Metals Nat Bank. CHARLES D. NORTON, Vice Prest.First NatBank, WILLIAM C.P01 LLON. Vice President. DANIEL E. PO MEROY, Vice President. WILLIAM H. PORTER., P Morgan &Co. Bankers. 16 WALL STREET WILLIAM C. POI LLON, Vice President. D. E. PO M E R OY, Vice President W . N DUAN E, Vice President. F. I. KENT, Vice President. HAROLD B. THORNE, Vice President. F. N. B.CLOSE.Vice President. GEO. G. THOMSON, Secretary. GEORGE W. BENTON, Treasurer-. GUY RICHARDS, Asst. Secretary. H.W.DONOVAN, Asst.Treasurer. BETHUNE W. JONES, Asst Secretary. F. WI LSON, J R., Asst.Secretary. R. H.G I LES, Asst.Treasurec PERRY D. BOGUE. Asst.Secretary HARRY N. DUNHAM, Asst,Treasurer M1C HAELS, Trust Officer. ---,SEWARD PROSS ER. Prest Liberty Nat.Bank DANIEL G. REID, Vice President Liberty Nat Bank. BENJ. STRONG, JR.Vice President. EDWARD F SWIN N EY, PrestFirSt Nat Bank,KansaS City. GILBERT G. THO R NE, Vice President Nat Park Bank. N E W Yo R K EDWARD TOWNSEND. Prestimp& Traders' NatBank. ALBERT H.WIGGIN, President Chase NatBank. SAMUEL WOOLVERTON, Vice President Hanover Nat Bank October 20, 1913. My dear nr. Vanderlipte. Referring farther to yours of the 17th, the saggested prorate ownerehlp of ?edera/ neserre 3anhe must be considered upon one of two Nwootheeee>. One: Thet all =libel, batke would perticipate in the manhgement of all Federal Reserve Banks; the other, that they would own stock In all Federal Reserve Be/Ike, but have no Voice in the manegement of any outside of the One in their ,vat district. . Ae to the first hype:.heris 4' jib preeent bill would require titorou.0 revieion in respea of boards of directors, federal reserve board, and adviserr beerd, to to the chenge feeeible. To give proper reprasentetion and administration euld require a general board, elettted by all member banks, :ith a central office end eanagemett. It would net be a lone flop to the creation in the 1, f oee certral benk, as teese would develop to be it fact.J rould eo a lone way differennes arisieg toward harmonizing poesEhle secti betreen the renagererte el* redevel veserve Banks, but would open the door to differencee of-eepinien within the Joeal boards of the vnrious Federal Reserve Bank's: one or two direc- tors representing outside distriatiaxlight have interests at variance with the intereete,of the-districts within rhich the particular bank was loceted; It is hard to tee haw a plan of a plan of ownership, management can be devised tO emit .- with branches. eitheut °mating in the end 'out one 1 ro is may OMB sound As to the second hvpotSe a principle unen ehAch eneitel le aefely employed erd bnoinoss is profitably conducted. The owner who has capital at rish must and will always insist upon velicipation In the management. l'ven the management of our,Orve corporations, with the vast powers delegated to direbtors, is in the end governed by this ftuelanental relatiow,hlp between ovner and reneger. But where does the suggestion 11 us in tilde case, upon the nr institution and mina d not only wa1t th e econd hypoesise have no WICO in the policy and materement adopted at an 61v Francisco or new Orleans, but it is possible - in fact well 10-2013. F. A. Vandorlip, Eeq. nigh certain - that interests and policies radieally different from and seriously conflicting with those of our DVTL district would at tlmos prevail, and. the oapital furniShed by our on stoCkholders would then be applied to furthering intereets other than those- of its owners. The injurious effects of leek of harmony of operation of the Pei:lora), Reserve Lanka 'would be Intensified by the financial interests of the etodkholding banke of foreign districts, and would neoessitate the cxerolso of even greater mandatory pwaers by the federal reserve board. I do not feel willing to state that the idea could not be developed in some way 60 that it rould prove superior to the plan ts; now prepared. he diffIcaltios above tmcmated might be net by changing the Character of the advisory board &nd enlarging its powere. If, for instanoe, representation of Federal Reserve Banks on the advisory board ware mule somewhat it the proportion of faze of the various Pederal Reserve Bunke, and thefederal reeerve board's power to rpouire discount made oubjoct to the approval or disapproval of the advisory board, it would possibly meet the difficulties outzected - but the pevor of veto alone would accomplish most that is needed, rithgat the pror.4a ownership. Thesuggeution, however, is encouraging. One member of Via Cenate Committee seems to realize the T.-Gal:noes of the proposed plan of oontrol. I b6ple it :lay prove to Tx) the beginning of a bettor understanding by the Committee of the desire that you and I arid mery others here have always felt to assist and not hinder this important work. Very truly youre, IZ-.1113 P. Vtndorlip, c/o The liational City Be,nk New York City.. 7( OFFICE OF e.117geli'WO'i% THE PRESIDENT A November 6 1913. Mr. Benj. Strong, Jr., Bankers Trust Company, 16 Wall Street, New York City. My dear Mr. Strong:Your letter of November 5th has been received. I am much obliged,to you for suggesting to Mr. Kent that he send me his testimony before the Committee. I shall be very glad to read it, as I have the greatest respect for the financial knowledge of the Bankers Trust staff, with more particular reference to your good self. Very truly yours, NIGHT LETTER ror n 2 89B E WESTERN UNION TELEGRAPH COMPANY INCORPORATED 25,000 OFFICES IN AMERICA CABLE SERVICE TO ALL THE WORLD is Company TRANSMITS and DELIVERS messages only on conditions limiting its liability. which have been assented to by the sender of the following Night Letter. for errors or delays In ^rors can be guarded against only by repeating a message bark to the sending station for comparison, and the Company will not hold itself liablecase beyond the sum of sloe or delivery of Uurepeated Night Letters, sent at reduced rates, beyond a sum equal to the amount paid for transmission ;. nor in any the sender thereof, nor in any ease where the elai.xn is nub presented in writing within Eift lollara, at which, unless otherwise stated below, this message has been valued by sixty days after the message Is flied with the Coffany for transmission. This Is an UNREPEATED raGirr LE ER, and is delivered by request of the sender, under the conditions named above. - BELVIDERE BROOKS, GENERAL MANAGER THEO. N. VAR., PRESIDENT RECEIVED ARXETFR. N. H meott,.. At/ wfraT. 16 4 )1/;i2-i-utzt. ktiA./a-44-1J4 a.v. 0 1S12 UNITED STATES SECURITIES AND GOVERNMENT FINANCE NEW YORK, November, 1913. Sa result of questions and suggestions addressed to him by members of the Senate Cornon Banking and Currency during his first hearing on the currency bill, President Vanderlip of The National City Bank of New York has presented to the Committee the following suggestions for a Federal Reserve Bank: The Government shall grant a charter to the Federal Reserve Bank of the Amittee United States with capital stock of $100,000,000, the charter to extend for a period of fifty years. The head office to be located in Washington and twelve branches to be located in the cities selected by an organization committee, and sub-branches wherever designated by the Board of the Federal Reserve Bank. As soon as practicable after the passage of the act the President is to appoint a committee of five to be designated as the "Federal Reserve Bank Organization Committee." This committee will divide the country into twelve commercial districts, and designate one city in each district as the seat of a branch of the Federal Reserve Bank, and generally be charged with the responsibility of organization. The stock of the Federal Reserve Bank may either he subscribed for entirely by the Government with funds raised by the sale of bonds, or offered for public subscription, the success of such subscription to be insured by requiring all national banks to be liable for the purchase of their pro rata proportion of any stock not taken by the public. The stock shall have no voting power and no rights of any kind shall attach to it except to receive dividends. There need, therefore, be no restriction on its purchase or sale or accumulation, either by banks or individuals. The Federal Reserve Bank will be wholly under the management of a board of seven directors to be appointed by the President with the advice and consent of the Senate, with terms of fourteen years, but the first board to be classified and the term of one director to expire every two years. The bill should provide that the President will select men qualified by experience and training for the proper discharge of the duties imposed and make no appointments in order to confer political rewards. At least three of the members should be recognized to have had wide financial and banking experience. Appointments are to be distributed geographically so as to give due weight to the commercial sections of the country. The President, with the advice and consent of the Senate, will designate one director as governor and another as deputy governor, and the governor, or in his absence the deputy governor, shall act as chairman of the board and be the chief executive officer of the bank. Members of the Board to retire automatically at the age of seventy. The Board of the Federal Reserve Bank shall appoint for each branch an Executive 'Committee of seven members. The bill will contain the same general directive clauses as to their character as in the case of the Board itself, including the provision that at least three of the members of the Executive Committee shall be recognized to have had wide banking and financial experience. The term of office of the members of the Executive Committee will be seven years, but in the case of the first Those desiring this circular sent to them regularly will receive it without charge upon application. November members appointed they shall be classified so that one director shall retire each year. One member of the Executive Committee will be designated chairman and one vice-chairman and the chairman, or, in his absence, the vice-chairman, wirl act as chairman of the committee. All actions of the executive committees will be subject to the approval of the Board of the Bank. Each executive committee will elect a president and other executive officers to conduct the business of the branch, the men filling these offices to have no official or financial relation with any other bank. The earnings of the Bank shall, in case the Government subscribes to all the stock, be first devoted to an accumulation of a surplus of twenty per cent and :thereafter one-half of the earnings will be devoted to a further increase of the surplus until it reaches fifty per cent and the other one-half to go to the Government. go to the Government. After the surplus has reached fifty per cent all the earnings will In case the public subscribes to the stock the net earnings will first be devoted to paying a six per cent cumulative dividend, then to an accumulation of a surplus equal to twenty per cent of the capital, after which one-half of the earnings will go to the government and one-half be devoted to the accumulation of a further surplus until the surplus reaches fifty per cent of the capital, and thereafter all the earnings beyond the dividend requirement will go to the government. All earnings received by the Government will be devoted to the retirement of the government debt. The customers of the Bank shall be the Government and qualified member banks, which will include all national banks and may include state banks and trust companies. The Government shall deposit all of its general fund with the Bank and constitute the Bank its fiscal agent. The reserve requirement for national banks will be so changed as gradually to transfer all reserves away from correspondent banks now acting as reserve agents and after this gradual transfer has been fully accomplished all reserves will be held in the vaults of the banks and with the Federal Reserve Bank. The reserve requirement will be the same for all member banks and shall be ultimately twelve per cent. The reserve to be held by the Federal Reserve Bank shall never be less than fifty per cent of its demand liabilities, including note issue, in gold or lawful money. The Board of the Federal Reserve Bank may, in an emergency, suspend all reserve requirements for thirty days and continue such suspension for periods of fifteen days. The Federal Reserve Bank may rediscount for member banks paper self-liquidating in character to be defined by the act. It shall not rediscount for any one bank an amount exceeding the capital and surplus of such bank. 00 1913 creasing rate upon discounts, until said discounts shall have amounted to a maximum, permitted by the act, fully equal to the capital and surplus of said bank. As fiscal agent of the Government the Federal Reserve Bank shall be charged with the duties now imposed upon the Treasurer of the United States and the Bureau of Redemption in the office of the Comptroller of the United States in respect to the custody of bonds securing national bank notes and the redemption of such notes. The five per cent redemption fund now in the general fund of the Treasury shall be transferred to the Federal Reserve Bank as a special trust fund and shall be held intact and shall not count as a part of the reserve of the bank. The Federal Reserve Bank shall be authorized to issue its circulating notes. Such notes shall be secured by the segregation of rediscounted paper as described in the act equal to one hundred per cent of such notes outstanding and or one year exchequer notes of the United States Government hereinafter provided for and by a reserve in gold equal to fifty per cent. The notes shall have the same qualities as the present national bank notes, shall be redeemable at any branch on demand in gold and shall be the obligation of the Bank. There shall be no restriction upon the issue of notes by the Bank when the notes are fully covered by gold coin or bullion, it being intended that to the extent that the outstanding notes of the bank are not fully covered by gold they shall be secured by one hundred per cent in rediscounted paper and or exchequer notes and by a reserve in gold equal to fifty per cent. Gradually and over such period as the Federal Reserve Board may decide upon, the Federal Reserve Bank shall offer to purchase 2 per cent bonds of the United States deposited to secure circulating notes of national banks at par and up to an amount equal to one-half of such bonds deposited with the Treasurer of the United States as security for national bank note circulation. It shall pay for these bonds by assuming the responsibility for the redemption and retirement of the national bank notes secured by them. Upon acquiring these bonds the Federal Reserve Bank shall receive from the Government of the United States in exchange for the 2 per cent bonds an equal amount of one-year exchequer notes bearing 3 per cent interest. The Federal Reserve Bank shall give an undertaking to the United States Government that it will renew such one-year exchequer notes each year at maturity for twenty years. These notes shall be made to mature at various periods during a calendar year. So long as these notes are outstanding, the Federal Reserve Bank shall pay to the United States out of its earnings, and before any dividends are paid upon the stock, a tax of 154 per cent on an amount of circulating notes equal to the amount of exchequer notes outstanding. The bill should provide for a national clearing house. The charter rights of national banks should be so enlarged as to permit banks to have branches within the city in which they are located, to establish branches abroad and to exercise general trust company functions to be defined in the act. National banks shall have the right to accept drafts, of a character to be defined, up to an amount equal to one-half of their capital. The Bank may buy in the domestic market from member banks, non-member banks, and individ, uals self-liquidating paper under conditions to be defined in the act, bearing the endorsement of a member bank, and may buy in the foreign markets prime banker's bills. State banks and trust companies may be admitted to membership by conforming to the same capital, reserve and inspection requirements that national banks are obliged to meet in similar localities. The Federal Reserve Board shall have power to examine any member bank. The Bank may also deal in gold coin and bullion, and in obligations of the United States The circulating notes of the Federal Reserve Bank shall be a first lien on all the assets of the Bank. Government and its insular possessions. The Board of the Federal Reserve Bank shall establish a minimum rate of discount, which shall be uniform at all branches and sub-branches and which shall be changed from time to time as conditions demand. While the minimum discount rate shall be the same at all branches and to all banks, that minimum rate will only apply to the rediscounts of a bank up to an amount equal to a fixed percentage of its capital and surplus, thereafter such bank shall be charged a uniformly progressively in- The Federal Reserve Bank shall have a first lien upon the assets of member banks for any indebtedness due from them. As far as feasible the Federal Reserve Bank shall be exempt from the payment of all Federal and State taxes, except taxes upon real estate. As far as feasible the stock of the Federal Reserve Bank and the dividends thereon shall likewise be free from all Federal and State taxes. THE NATIONAL CITY BANK OF NEW YORK .4-,ecil/64, 14Cd(64 OFFICE OF _Izrel,PW0164 THE PRESIDENT t°4(//14 February 28 1914- Mr. Benj. Strong, Jr., Bhnkers Trust Company, 16 Wall Street, New York City. Dear Mr. Strong:Your letter of February 27th h7s been received. I certainly appreciate yOur courtesy in taking the time to give me,the bene it of your advice. It is of great value Knowing 4- personal way, Mr. Curtis as I do so closely in and having this relation with Mil. Vanderlip, it ake a perfectly has been rather hard for me to equitable analysis of the mat er. I have, however, just written Mr. Curtis suggesting that a reasonablO fee would be $1000.00 and expenses. Of course, I have not brought you into the matter. With deep aptreciltion of the trouble which you have taken, I am, Very truly yours, , :t Park, Oolo., October 5th, 1916. Dear lir. Vanderlip: he following, I believe, ummerizes our discussion in regard to currency legislation but I must ask you to have in mind that no suggestion of a plan of legislation to cover this difficult subject can be considered comelete without a much more careful study of the experience to date in the adjustment of denomAngtions of our various kinds of currency as well as other feetures of the subject for which data is not cvailable to me here: The title of the TNederel Reserve eot states that one of its objects Is to furnish an elastic currency and by inference it does not attempt a complete reform of the 2Ailting currency. It does authorize an "elastiO'" note - the Pederal Reserve Note, but except for the purchase of 45,000,000 4% bonds every year by the Reserve Banks in order at the end of 20 years to retire approminntely ;A500,000,000 of the present National 'Sank note currency it leaves the currency of the past untouched. As a meesure of safety, the privilege of iseuing National Dank notes was eetended to the Federal Reserve banks on subetentially the ea= terns as now enjoyed by Sationel BanXs so that they mieht not be too heavily oomnitted in the ownership of Government bonds without means of issuing notes against them. Assuming that the Federal Reserve Banks availed of this .9 ivilege of issuing bond secured notes, the currency situation would. remain unaltered save or the fact that the Pederal Reserve extem could in time of need issue Feeeral Reserve Notes secured by contnercial paper in addition to all ex:sting issues of notes in oiroulation. This would mean that nearly SAxteen Hundred Million Dollars of currency would remain indefinitely In circulation in the Vetted Ltates without adesuete gold reserve or adequate machinery for prompt redemption in gold when demanded. This currency consists oft 2 A - Greenbacks, that is, United States Notes - $346,000,000 B - Silver Certificates 484,000,000 - Treasury Notes D - National Bank Notes Total about 2,000,000 735,000,000 #1,567,000,000 The real currency problem is, therefore, to transform the character of this 4,567,000,000 of currency so that it will have an adequate gold backing and be capable of expansion and contraction; or, stated differently, the problem is to eliminate existing inflation in the form of our variegated currency already in circulation. Viewed collectively, National Bank Notes, greenbacks and silver certificates should all be classed as fiat money issued by the Government, as the gold reserve for its redemption consists simply of $153,000,000 in the trust fund and the small amount of gold commonly held in the general fund (which includes the 5 redemption fund) - the silver bullion having no value for rederartion purposes since the Act of 1900. The following general method of dealingtwith this currency might, upon closer study, be found feasible: GREENBACVe An act might be passed providing that these should no lenger be raid out when receiVed by the United Aates Government in collecting its revenues or by Federal Reserve Banks when received on deposit. As rapidly as received through either channel there should be issued in substitution a like amount of Federal Reserve Notes anti simultaneously the Government turn over to the Reserve Banks upon nome pro rata basis, ratable proportions of the 453,000,000 of gold and of a new issue of low interest-bearing Government Bonds to cover the difference between the face of the United States notes retired and the amount of the gold received. The apportionment apportionment between the Reserve Banks of the amount of Federal Reserve Notes to be issued in exchange for United States Notes Should be fixed by statute probably based upon the capital or capital and resources of the twelve Reserve Lanka, each bank thereby receiving its pro rata of the gold out of the trust fund and of the new issue -3-4 United Letates Bonds. As this operetion would nitimately result in a holding of nearly f200,000,000 of United States Bonds by the Reserve Banks, it would be necessary that a conversion privilege at a higher rate of Interest be embodied in the plan so that the Reserve Banks could divest themselves of a part or all of their holdings of these bonds in th course of time. Objection may be made that even at the rate of 2% this would put a large interest charge, totalling near/y 44,000,000, on the Treasury Against that it may be said that the Government would save all of the expense of printing a considerable item. and sisuing greenbacks, which is The Treasury would also be relieved of the menace which the green- backs have always caused in time of currency difficulties, particulerly when gold is wanted for export. Another important object which vouid be gained by the retirement of the green- backs is to accustom the people of the country to the use of notes Which can be immediately redeemed in gold upon presentation. This has. not been the case with the greenbacks. It is also '95, 1907 and 1914 redemptions In gold were not glob. In important that the Government should finally pay the non-interest bearing debts incnrred during the Civil War. some concern has already been expressed in England that unlimited issues of fiat money in the form of present currency notes will create cheap money" by the Government. the temptation will at times R demand for the "manufacture of As long as greenbacks remain in circulation Ir this country arise to enlarge the isnun. so as to "t,Inufacture cheap money". AS TO THE SILVER CERTIFIOAUS: The country must be taught to regard those as subsidiary coins issued for convenience in the form of paper notes but in fact having the same position in our citculating medium that 25 and 50-cent pieces have. find their way into bank reserves. Too large a The obligation proportion of these silver certificates of the Government to redeem them in gold is too indirect to have practical value in times when gold is in demand. that the necretary of the Treasury must keep all our currency on a parity with gold gives The requirement him e certain discretion in determining Whether a situation exists which calls for exchanges - 4- An. silver certificates zo that the Art lips no practical force. If, therefore, the issue of large denomination silver oertifleatee can be gradually discontinued, in time the groat bulk of this part of our ourreney will be carried in people's pockets and no considerable amount be held by banks az reserves. In order to accomplish this, the denominations of our various kinds of currency must be Changed and a vacuum created by the 4thdrawal from circulation of other feinm of currency now issued in small denominations - rincipally ten dollar cold certificates, five and ten dollar Eational Bank Notes and five dollar greenbacks or ..eederal Reserve otee iseued in exChanee therefor. NATIONAL BART ROITS:, The Federal Reserve Aot now provides that the Reserve Banks shall buy not less than 25,000,000 of 2's every year and these they may convert into 3% 30-year bonds and into one-year notes - the latter subject to renewal upon demand of the Secretary of the Treasury for e period of 20 years. The 30-year bonds and one-year notes have no circulation privilege. The interest limitation of 3e on the 30-year bonds Is likely during long periods to prevent their being marketed by the Reserve Banks at or above their cost and the Act should be amended so that larger amounts may be purchased annually by the eeserve Banks and larger amounts converted annually by the Reserve Banks and when necessary higher rates of interest allowed on the new bonds so that the Reserve Banks may be able to sell them without loss, otherwise the effeet of the present law may be distinctly unfortunate. If the 30-year bonds cannot be sold on a 3% basis, the investments of the 'eeserve Banks in the course of 20 years eay consist principally or wholly of United etates Bonds. Any danger of that occurrence would result in failure of the Reserve Banks to convert their bonds and their being obliged to issue National Bank Notes in order to carry them; 'they would thereby simply perpetuate the present bond secured currency. qeserve Banks are put in position to If, however, lie liquidate these bond holdings as rapidly as they accumulate, it becomes exceedingly important that means be created for issues of notes to take the place of the retired National Dank Notes. http://fraser.stlouisfed.org/ to issue Federal Federal Reserve Bank of St. Louis Uerein is afforded the opportunity Reserve Notes in large amounts to fill the vaeuum caused by the withdrawal 5 _ Aational 3ank Notea. reserve. Thee() issues should nave fur their redemption a very large gold as the law now stands, if the Federal neserve Banks should retire 4500,000,030 of National Bank Notes, without reissuing them against the same bonds, there would be a currency famine in the United States which could only be met by issues of 2ederal Reserve Notes ueon the security of commercial paper. The time will come when the amount of National Bank Notes retired (provided, of course, the Reserve Ranks are successful in marketing their 3's) will cause an actual shortage of currency and there being no machinery for issues of currency other than Federal Reserve Notes - the amount of must be secured by commercial paper, will become unwieldy. the issue which This can be met by dealing with the fourth problem; namely, - 0ur present currency laws provide that one-third of the total issue of gold oortificates may be made in denominations of ten,'teenty end fifty dollars. There ia in circulation at present. 1 should judge in round figures, about Vie% Hundred Million of gold eertificates of these denominations. They are carried largely in people's pockets. If the Government discontinues the Josue of gold certificates of these the large denomination notes issued in their place will small denominations, drift into bank reserves inevitably, thereby affording opportunity not only for the :National Banke to increase their gold hold- ings and reduce their holdings of greenbacks and silver certificates eut for the Reserve Banks, when the law is properly amended, to make large issues of Reserve Notes against gold. The enlargement of the note reserve by that method would later on justify issues of IA)deral Reserve Notes to fill the vacuum caused by the withdrawal of National Bank Notes.- A similar vacuum will be created by readjusting denominations of silver certificates. With these changes in our laws, the ability of sederal Reserve Banks in cooperation with the Treasury Department to regulate the proportion of money of different kinds in bank reserves end the proportion in general circulation, by adjustment of the denominations of the various issues, can be exercised to bring about a result that would be satisfactory to every orltic of the elan eith Two and a half billions of gold in the a(14!ary, no eoEsible objection eoule be ,lede to the eccumnlation of s total fund of, say, One Thousand Million Dollers in bsnk reeervee by the plan proposed, ehiell would leave, as at present, Recut Three Hurered 'Zillions en the genera] fund of the United States, (if we include the Truet Fund) and %.hut Twelvo gunired Millione eivided between the reserves of flational and state Banks End In current circulation. To summerize, therefore, whet is required is. Firet:- To retire the greenbecks. eecond:- To reduce the denominetion of silver eertificetes. 2hird:- 7o eccelerate the retirement of National Benk itt-- Fourth:- To discontinue iBS1108 of small denomination cold certifieL-tes Fifth:- To make Federal Reserve Notes reserve money for member banks. FEDERAL RESKRVF NOTSee AS REeERTES: If the 'leserve Banks ere ermitte to cediee a lerge enough fund or eold behind their note issees to make the .esue coemarable in quality with the gold certificate or with the notes of, say, the Bank of 'Trance in normal times, there is no sound objection that can be raided to having Iliederal ?emery° otee count as reserves from member banks. It is admitted that the above plan is imeossible, hover, unless we are willing to accert the erinciple that 'Pederel Reserve Notes can be made satisfactory for tee cash reserves of National 11,anks. The ler as at present drawn is anomalous. tiember banks may count balances with Reserve Banks as a part of their reserve and under regulation of the Reserve board may deoposit their entire reserve with a Reserve Bank, including all of their vault cash, all of which will teen count as reserve. vederal eserve Notes, however, do not count as reserves although they are eeeured by the segregation of nolleteral for 100% of their face value. of 40%. The eeserve Banks muet in addition carry a minimum reserve ef gold The Notes are a prior lien on all of the sweets of the bank and must be paid before the deposits are paid. Every Reserve :lank must redeem the notes of every other Reeerve Bane and, lastly, they are the obligation of the United etatos Government. Yhe whe.e theory of giving a bank deposit a different reserve quality from a Wall& note is wrong and iniqne in banYing history, exoept in our National Lank Act. The real objaation and nraotioally the only one whieh may be advanced to their counting as reserve liee la the possibility or inflation. If the ,leserve Leaks acquire, say, Five nundredaillions additional gold by the issue of nye Hundred leillione of otee, as the law now etaads it might be claimed that they could expand their loans and note issues combine by about Two Billion Dollars. This sounds dangerous and inflationary, In the last analysis, the only protection against expansion of tnat aort rests In the character and. qualitY of the management of the banks. required, however, it muet be if some st.at;a6ory eheck is at the point where the expansion Originates. on the note issue would be of no value with the Reserve Banks on such an expended basis. The ,Reserve Bank e would at such e time pay large profits to the Government and it reuld exorcise no reetraint on the weneeement if some p,art of these profits were paid to the Government in the form of a tax in nlace of being paid as eurplus earnings. Reetraint must, therefore, be applied upon the borrower Who is the cause of inflation and it eilit be Wise to incorporate a provieion in the Vederal Revere.° 'Act which would necessitate an increase in the rate of dleconet whenever the reserve got below a certain minimum. Our system of minimem reserves M1V have protected the country against reckless banking. It has had the seeendary effect of deferring tne educetion of bankers. They do not rely upon pod judoment nor do the people of the country demand the exeroiee oE good judgment such az ia exercised in other countries where statutory minimum recorvou de not exist. No statutory restraint can be mede to work perfectly but if one must be Applied, it should be In connection eith the discount rate rather then In the form of a tax. ,ftderal Reserve Notes under the proroued conditions, with a large gold reserve, will be a much sounder reserve for !;ational Banks then Are National BPra: Neter for state banks or greenbacks or silver certificates for National 'Zemke, particularly if the reserve is customarily carried at 75 or 8, as might be the ease, if the gold holdings of the Reserve Banks were substantially larger. By Way of illuetration of the faulty structure of the Pederal -3Reserve Act in this eetoct, - the greet 0 etrEl ben-es of Marcie aceulre from 75 to almost 100',4 of their eola holdings throeeh ISM'S of notes rather than from the denosits of ouetomers, who furnish vhe central tanke with only 21 or lens of their gold holdings. veieeal Reeerve eystem todey ecgairee only 7% of it general reserve of gold from issues of notes and W. from the deposite of member banke. Theoretically, the member banks might withdraw practioelly every (Lollar of ,old from the Reserve Benks In one day by drawing cheeks on ehom - a situation vihich oannot &Hee when the gold is held against a note cirouletion ehieh is aceepaele to the people All the notee of the bank will not be nresentel at one time.for redomntion, in fact, tn time of trouble, exnerience shows that the notes of the central bariee ire hoarded. Coelarison minht be made of the situation which would arise in this country in case of war and that which exists in the belligerent nations today velem the concentration of gold behind the note issues of the central banks has afforded some of the belligerent governments the means of protecting the foreign exchanges to an extent whioh otherwise would heve been impossible. Another change in our law Which I am not as yet prepared to recommend without eeservation relates to the practice of the Treezery Department in purchasing imported gold bullion end coin. By VOA present methods, practioelly all gold imported from elurope and erOdueed by our domestic refiners is sold to thr, essay Office; payment is made in gold oertificates, that is to say, by check on the Sub-Treasery An payment for the gold feeefetieenil certificates oen be demanded End subeequently thrennh the mecl-inery of the banks end clear- ing houses these old certificates get into general circulation. adonted the raiglieh system or some modification of it. It would be better if we Gold imported or produced from domestie mines should, if eoseible, be hadlod by the Reserve Inanke or the heser/e Banks ohould be afforded some advantage so that the Reserve Bulks might, if they desired, acquire this gold before it eot into circulation. The simplest plan rveld be to discontinue ineuing checks In immediate nayment for 99% of the arsumed value of the gold and mate the depositor wait until the actual cold was coined. This would eneble the Reeerve Banks to make epot payment es the Bank of England now does and give them some control of the new -9-. Other envIndments to the Poserve Ant not relating to the currency but which would imnrovn the Act end 'tet the system tn its nolitioal fektnres are urinoinally two. NO ,..L.cicer of the lovermment shon/A be pn ex-officlo nember o! the r'edorel lbaerve Boari and, consequently, the office of OTIP4''Mar should TIP held by the qovernor of the 3oard And the 2ecretar7 or the Trevsury should not be R member of the Board. Comptroller of the Currency. TheSA,111 would 73oly to the Sulervisten and examination of member banks should be conducted under the supervision of the wederal *Rannive Board. -,ctual examinations being alade by the twelv,: Nerve banks. A Bien of the Aeard should do ftll the business of the Colsptrollor's office, excnnt that having to do wtth the currency and the bank exauiners should be subject to tho direction of the vederal Reserve aents. The other amendment should make it mandatory 'croon the reoretary of the Trepsury to deposit all of the Government's rev.nues in the Reserve 3Fnk, except a fixed ouergency fund :of gold. If two vacancies should occur in the Bo4rd by the with-drawal of ex-officio weg,bers, they should be filled by rotation from the twelve Reserve Banks, two of the Governors serving in rotatIon for A nortion of each year. An eaternative plan would be to Lave two exnerienceJ 1,ankers apnointed PS medbors of the Board either by nomination of the ,fer banats or b;s, direct election by the member banks. The above Is Grade but I believe includes the imuortant features of our discus ion. Very truly yoars, 2r. F. A. Vanderlip, The Leviston., Estes Park, Colo. 4 Denver, Colorado, January 4, 1917. Dear Prank: This is to thank you very heartily for t : wonderful Christmas gift which you sent me and which I can :ssure yo use out here in this mountainous coun ry, also for and good wishes. .-11 be put to good Christmas card 114441" You will be interested my two boys, Katherine and I spent the holiday week wit t Hewes-Kirkwood, Where we took possession of the Whole place and icking once or twice in the o the experience. We got a wonderful tine. It was a novel snow, by automobil and from there we to the Hewes' with a 4-horse team, part of the t me hanging on t he side of the rig to keep it from turnin6 over n the hospit ow banks, b people prepa got there safely and found those week of real mountain hospitality. thong of you a great y times and believe you would have enjoyed it even much as the boy id. The Hewes wanted to be remembered very on. warmly am forward to a visit from George Roberts in a'few days and you can understand the keen pleasure it will give me. Now for you dear frank, I wish every good thing for the New Year - success and ha,rpiness and lots of other things. Wont you give my warmest good wishes to Ur. Stillman? Faithfully yours, VanderlIps-, Esq. National City Bank, New York City. http://fraser.stlouisfed.org/ BS/CC Federal Reserve Bank of St. Louis wq. WC Ca et /L& P 1;Cts5 ct:tfo co-triph,1 /Nei 27kf (ttm ./ttt CUD CCAAVre 0,7C-C i r/kakocul rev' cS-0 1), ( 74A- 71-4 IF --Sciti (id low? Jecittk 771,t 6/1,4 fro .i>"1/' cirN c2Y-a/9 E4to On 1111 6/.-iert-t. II 14--- Cil,1-.Cul C..../57-1),--..e) f, . it "kt171 0-)A- . . / C-/-Cfr) aka,,,h:( .1tetkt ajo.ca -.0 qt, ct_. rt-24,0. 4,-c4,07).a. (f . 1 i 11-fr-Z41,,,.: .2(fy,...1c,;ey---.:) 69a_L(.); . Clitatti..C. .1. PP19,.. ,f. (o (C Ct._ '.4'tr,: , )--(.. l'EL.Ls- ,:alk6 ' .,?;4,1_, 1 'ayttlx.,-(aL.. .aino --46--lat 1:61",_. Kbeil{' Cr4)-(:..k: PA. ''.n,I.,.:),c: cira.1,.. i frA, Act _t.,7A,) ilAk ,C. _ ^ 0;) at,,rv la.ctat./ /X04_42 ( Ceoctiil Ceix: ta triLa_cia, 71 ih Atik a/0v 6-'67 Itirk 5717:1.) aLt 4ivii 2Vf ft 4614J a" 470,47..k. crirTanNet -t/sik Aine 3, :Ian. My dear Mr. Vandsrlips fe have only within the last few- weeks been able to conclude the inal accounting of the expenses of the various Liberty loans, and determine to what extent, if any, expendituree made by the organization could not be reimbursed by the Treasury under existing law, or rules of the Department. We find that the total amount of such items that cannot be reimbursed is Of this sum, the Federal Reserve Bank is able to absorb $2,%29.74. $2,535.97. The remainder,4308.23, I have paid personally. The Liberty Loan Committee passed a resolution, agreeing personally to assume certain charges, up to a limited amount, which as I recall was 10,000. If the members of the committee care to pay their respective shares of this sum, the amount of each committeeman's proportion will be W.55. Had these operations been Act, it Iould nducted since the passage of the Voletead not have been necessary to ask the committee to make any contribu- tion. Tours very truly, Frank A. Vanderlip, Esq., 111 Broadway, iew fork, .4. T. ES: MM June 18, 1921. My dear Mr. Vanderlip: I thank you for the remittance of . .23.55, which was received to-day. Yours very truly, Frank A. Vanderlic, Esq., 111 Lroadway, We York, A. T. U1:5:462