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F.D. 12A.3 9.

No

Federal Reserve Bank

5'TOAJc

District No. 2
Correspondence Files Division

P it4PE RS

SUBJECT




I.) Si-ROA)

'7-0

Gc.i/ 7 7

.iS.AIDC30

August 4, 1914.
Hon. William G. McAdoo,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. McAdoo:I enclose a preliminary draft of the meeting of the committee of ten associated subscribers who have contributed to the
45,000,000 fund proposed to be sent by the U. S. S. S."Tennessee"
to England and EUrope, there to be used only and solely for the
purpose of payments against travelers' credits issued by all American concerns. Of course the cashing of such travelers' credits
will involve consideration of the responsibility of the banks or
bankers drawing such letters of credit, but no trouble is anticipated in that direction, and the fund is intended to meet the requirements of all responsible American travelers' credits.
The enclosed is a preliminary draft only, but it embodies the substance of the meeting held this afternoon and is subject to revision in form only.
It is the firm belief of the committee that the proposed
relief work would be much more effective if the same agencies handled, not only the relief contemplated to be furnished by the Government, but also the relief which is to come from the fund contributed by the ten New York City institutions. Therefore the
committee strongly urges the Government to appoint as its fiscal
agents which the committee has selected, namely, the Guaranty
Trust Company, Messrs. Morgan, Grenfell & Co., and Brown, Shipley
& Co., in London, and Messrs. Morgan, Harjes & Co. and the American
press Company in Paris. The selection of such agencies fully
equipped for such work by the committee was merely the selection
of the ones most available for the purpose. The institutions
represented here are acting in entire co-operation, no one trying
to seek special credit for itself.
It is highly essential that the shipment is not complicated by any other features than solely relief features.
It may be advisable to take up some form of receipt, or
some similar paper, to be given by the Government, of the nature
corresponding to a short form of bill of lading, to be given by
the Government or by the Captain as master of the ship, indicating
the consignor, who would be the Bankers Trust Company as agent, a
citizen of the United States, and giving the consignee, the Guaranty
Trust Company, a citizen of the United States stating that the
property consigned is solely a relief fund, limited in its use to
financing the needs of the holders of American travelers' credits all that to avoid the possibility of its being construed a commercial proposition and therefore involving possible contraband features.
This letter is written hurriedly, but to comply with your
wish that you have something from me before you tomorrow.




Yours very truly,
(Signed)

Benjamin Strong, Jr.
President.




MINUTES

(Temporary

Cover)

GOLD FUND CONTPIBUTED FOR USE IN CASHING TRAVELERS'

CREDITS ISSUED BY AMERICAN INSTITUTIONS AND BANKERS,

HELD BY TOURISTS IN DISTRESS ABROAD.

Minutes of Firet Meetin:Lof
liepresentativee of Contribut ore.
August 4, 1914.
.

A meeting was held this afternoon, at the office of
the Bankers Trust Company, at wiiich the following were present:
Messrs. W. L. Benedict, of Kidder, Peabody & Co.,
James Brown, of Brown Bros. & Co.,

A. J. Hemphill, of the Guaranty Trust Company,
S. P. Morgan, of J. F. Morgan & Co.,
Benj. Strong, jr., of the Bankers Trust Company,
Geo, C. Taylor, of the American Express Company.
The gentlemen present organized informally as a committee
with respect to considering the ways and means of transmitting gold

to England and Europe, to be used in connection with travelers'
credits for the relief of Americans now in England and Europe.
Mr, Benj. Strong, Jr. presided at this informal meeting
and explained the following plan:
He said that he was advised that the Government was prepared to dispatch the United States warship "Tennessee", upon

which could be sent gold for use in cashing traveler0 credits for
the relief of American tourists.
He stated that the Bankers Trust Company had available
45,117,000. in gold, which it was prepared to ship on such warship
in connection with the participation in such shipment by other
banks and bankers; that ten New York City banks or bankers were

prepared to go in pro rata on the basis of a contribution of




2.

$511,700. each, towards a total fund of $5,117,000., the Bankers
Trust Company to receive reimbursement from the other contributing
banks or bankers in gold.

Ur. Strong stated that the following ten institutions
were ready to so contribute:
American Express Company
Bankers Trust Company
Brown Brothers & Co.

Guaranty Trust Company
Kidder, Peabody & Co.

J. P. )organ & Co.
National Bank of Commerce
National City Bank
It was agreed that the gold so shipped should be in-

Farmers loan & Trust Co.
First National Bank

sured, if possible, against all risks except war risks, the latter
being not obtainable, and that if it was found impossible to
obtain insurance to cover the entire risk, but enough to cover
more than one-half of the risk, in that event the amount not
covered would be pro rated among the ten inatitutions contributing
to the fund; but that if it was found impossible to obtain insurance up to one-half of the entire risk, no action should be
taken with respect to the shipment until a further meeting of the
The matter of obtaining such insurance was left to
committee.
the,Eankers Trust Company and the American Express Company.

It was further determined that the gold should be delivered to the American Expreas Company for shipment on the
"Tennessee".
The Committee accepted hr.. Taylor's offer of the
services of the American Express Company, organizing a force of men

to supervise the shipment in transit and to accept delivery on arrival of the "Tennessee", on the understanding that the American
Express Company assume no risk except that attaching to its own
shipment.

Ir. Taylor stated that the force which he planned to
put in charge of such shipment would be litnder the direction of hr.



3.

.1-ee and Er. John Grier, the latter of C. D. Barney & Co.,
and Jr. Taylor's statement in that respect was approved by the
Henry

committee.

The Bankers Trust Company was appointed as the new York
fiscal agent of the fund. The Bankers Truet Company was em-

powered as such fiscal agent to deliver to the American Express
Company the fund (or that part of it) to be shipped via
"Tennessee.
The Committee voted the fund, as contributed, should be

used for payments agaiast travelers' credits, (i. e. letters of
credit and travelers' cheques) issued by American bankers or
banking houses and the American Express Company, or other

American institutions, in amounts necessary to relieve the needs
of the holders of such travelers credits, the sole purpose of
the creation and administration of the fund being for relief so
to be effected through cashing such credits for the holders
thereof.
It was the sense of the committee that the determination
of the amounts to be paid against travelers' credits as presented
from time to time should be as advised by a committee or =limit tees organized under the auspices of American travelers abroad,
as approved by this committee at a later meeting, such committee
so selected to be instructed and authorized by this committee to

reject, in its discretion, any particular travelers' credit pre..
sented for payment, and in its discretion to advise the fiscal
agents of the committee in London and Paris as to the particular
travelers' credits which shall be cashed from such funds.
It was deemed wise at this time to maee no public
announcement.




4.

On the question of the liability of shippers and the
risk of loss, the committee wan advised that there would be no
legal responsibility on the part of the United States Government
to reimburse the shippers in the event of loss of the shipment,
unless some definite arrangement was made to that effect.
It was agreed that at a subsequent meeting of the
committee specific inutructions would be formulated and sent to
tr. Fred Kent as represenLing the Bankers Trust Company, re-

specting the disposal of the fund.
It was decided to take up at a later meeting the details
of the manner in which the ten Original Contributors and addition..
al contributors were to be reimbursed for their contributions.
It was further suggested that each contributor receive,
on payment of his contribution, a certificate from the Banks
Trust Company as agent to evidence such paynient.
It was the unanimous agreement of the committee that
Co., Brown, Shipley & Co. and Guaranty Trust
Morgan, Grenfell
Company of New York be appointed fiscal agents of the Committee,
in London, and Lorgan, Aarjes Company and American Express

Company such agents in Paris, and that such fiscal agents be

entirely free to act as the fiscal agents of the United States
Government in the distribution of the contemplated relief fund to
be sent agroad by such Government,
The Committee approved the recommendation hitherto made

by Mr. Strong to the Administration at Washington, that the guaranty Trust Company of New York, Morgan, Grenfell & Co. and Brown,

Shipley & Co. be appointed the special fiscal agents of the
United States Government for the purpose of the United States

relief fund in London, and that Yorgan, Harjes Co. and the


a

5.

American Express Company be appointed such agents for like pur-

poses in Faris; as it was the unanimous opinion of the committee
that both economy and efficiency advised that all contemplated
relief work be done through the same agencies,




Adjourned,

1antMO of a. meeting held lednesdey, Augnst 5, 1914, of
Spectra Comnittee appointed to outline inetrnctions in connection

with the arplicntion of the aeld Yund in mashing Travellers' Credits.
111.43AnT:
r.Peninmin .itron44 Jr., Chairman. Ifeaere.
Benedict, Brown and Taylor.
The Chairman sttedthat he had added to the membership
of tne whole (ommittee, r, nhnrlee D. torton, kr. Jot'
Gardin,

of the Uhtional City Bank, Ur. C. 11. Agnew of the larmere Loan At
Truat Company nni Vr. :Ames S. Alexander, repreeenting the
National Lank of Commerce, mnking n committee consisting a ton

members, with a repreeentative from aeon of the tan inetitutions,
thereafter to be known no the 'Original Contributors".
The Cheiren2s motion was approved.
An informal discnacion wao had of tne eueutions to be

settled in connectien with the cashing of Travellers' Chequea
distinguicW,ed from Letter of Credit, and the ways and meta',
of Cne qold fund being re buried for the payment Node from it
in cnshing 7ravelleree,Chequee.
The rates of exchange to be fixed were discussed.
A preliminary memorandum irwa drafted and dietributed

for consideration, thereupon the evetine adjourned until 2:30
At 2:30 P. R. the meeting recmvened with all members
of tne 1Daeinl Cmemittee in attendance.
There wae aubmitted a memortendtsit with reference to
Trevellerst Chequee and the special Committee recommended




that both drafts drawn upon Letters of credit and Travellers'
Cheques should be cashed at the fixe,, rate of 4.90 per
pound sterling (the rate already fixed on ravelleray (Theque')
order that both Cheques and Letters of Credit be put upon
parity.
The Special Committee agreed to recamend that
the expenoea incurred in the administration of the Gold Fund
should be covered as follows:
FIRST:
Upon the drafts drawn against te Letters
of Credit by the holders thereof, the drawers of such
drafts ohould be asked an receipt of accommodation,
to a4rele by notation upon the drafts to pay the expenses
incurred by the Vund in cashing uch drafts in the. pro..
portion in which the amount paid on such drafts should
bear to the total amount of payments fro the Fund
against 2rave1lerot Credits; but irrespective of whether

or not the holders of ouch Letters of Greait should so
agree, the institutions, kcontributors to the fund),
should In=ly the expense incurred by the fund in cashing
nuch drafts in like proportions, and institutions not
contributore to the fund ahould be invited to pay the
expenses incurred in cashing their drakta in like
proportions.
&3COD:
Inetitutions iseuing ernvelleral Cheques
who F:re nt the same time contributors to the fund,
shell reimburse the fvud4for the expense incurred in
connection with cashiMe4nvellers' Cheques by puments
Mnom the fund. Issuers of Travellers' Cheques (not contributors)will
be invited to reimburse in same way such apense as to their cneques.
!UIRD:
In so tar as the fund ohall not be so
reimbursed as provided in ni'irat* and *Second°, the
contributorsehall be chargedikth the deficit so resulting pro rata to their respective contributions:

Report wan submitted to the Committee of the progress made
in obtaining insurance and the speciaL

onnittee recommended that no

shipment should be made of any part of the fund by the 'United States

teamship *Tenneseeea unlese the entire value of the Shipment was
covered by all marine risks, exclusive of war risks.




The aeeting of the

npecinl Conmittec thereupon

adjourned.

VINUTL5 of a meetin4 of the General Committee held at
10:00 OecloWg A. 11. Thursday, August 6th, 1914.
RUNT: liessrs. L;trong6 Chairnan; Benedict, A emphill,Br own,
korgan, Oardin, Agnew, Alexander and Taylor. There were P. loo present
Vr. HarriJon, Counsel for the 4xpreas Coarlany, mnd esers. Pay and
White,

The Chairunn read to the p,seting, a cable juet received
from Yr. Fred I. Kent., mkin g suggestions as to the method of
handling the gold fund, and criticising ouggestions made to him from
TV York.
The Committse voted that uo far as possible, the instruc.
time as stated in such cable to Ir, itrong should be carried out.
The Com -lttee voted thst Mr. Kent be authorized to work out e plan
of handling the fund, as he might see fit, under the 3 upervision
goverrteot of a London Gommittse to repreeent tnia Committe,:, which
should include in it mumberelip a representative from ieusrs.

Zorn, Orenfell - Company, from Brown, alpley & Company, from
Baring Brothers kiompany, iron Guaranty Trust Company of hew York
(maintaining br:Lnch in the City of London), and from American
Zxpress Cozany. Gucli. London Committee should also include itenry King
Umith ae repreueriting The Isomers Loan & Trust ,;ompany, Fred I. Kent

az representing Pankre Trust comi-any, and Lawrence Y. Jacobs as representing National City Bank (of Eew fork). Ur. strong and I r.
Brown were authorized by the Committee to carry out the detqlle of

inetructin
erect.




r. knt as to the action of this Committee in such
The

res.

1-Liairman and Lr. Brown were Althorized to formulate

2

the instructions of the Committeie to 14r. Kent and trenewit thew either

by cable or by lctter bearing in mind provision, if possible, to
secure reimbursement in New orc fund, payable in New York Gity, for
all 1:Jwunto of t fund used in caahing Travelers' eredits,

Hr.orgnn announeed that he expected to he establidhed a
geld credit with hin Jirie rir, ..ce*ne, korgan, Hareu ikympany,
the amount of 46 00 WO. end thnt hc we willing to set aside for
Fund, t3,000000. of such #6,000,000. gold credit
the purpogee of
if the tonOriginaI Contribut.re to the Fund would be willing to bee
dontributore to such 43,0000000. on the same basis on Which
they had contributed to the Fund to be sent to London. All the
members of the Committee on behalf of th inetitutione epresented by
them, accepted /er. torgan'e offer.
The Chairman outlined to the Caiiittee the epecial
Committee'a recommendationu covering rates or exchange to be followed
in cashing trove lers credits fram the fund, end method for reimburse..
co

went to the fund for exyensee to be incurred, etc., (ell us set
forth in the minutes of such epecinl Committee) which such Committee
had agreed upon at their rqeetinge, held August 5, 1914 and eueh re.
ccon;-lenda t oriu were

pproved.

The Chairwn annotauti that incurance no yet nad not been
t d, but the tmderwritere were in conference endeavoring to
mange for at leant .30000,000 ineuranee.
The 001mmittee authorized eeerse, ayiov, darrieon and Fay
to onf or with the 3ubetreasury and formul.ate a receipt to be given
by the Government againet the gold to be shipped via the 4Tenneenee".
The Committee agreed that the shipment going via the
"Tonne ee" ehould be uent to the London City and Lidland Bank, Ltd.,



London., to be placed in ita custody, to be :ield by ouch SaLk nt the
disposal of the London Committee above mentioned.
The CAmairman atated that the Government officials hhd
1imited the number of agentn of the Committee to accompany the
i'enneseee* shipment to five men, end such five men were thereupon
designated by the eommittee as follows.:

;,eusra. John 1'. Urier,
Henry W. Lewis,
krthsr R. Jones,

Rliot Tuckerman,
Harvey D. Gibeon,

The Chairman woe authorized by the Committee to give all

lettere necessary no credentials of auCh rive agents.
The Chairman was authorized to prepare an announcement to

be given to the press and others intereeted. Thereupon, the Come
mittee adjourned until 4:00 P. N. the samn day.
The Committee at 4:00 P. U, reconvened, the entire Committee

except ir, Norton being present.
The Chairman stated that in view of the probability of the
43,000,00 gold credit to be establiehed, for the Fund in Peris,
with _.erisrs. korgan, Harjea Compeny, it might be desirable to limit
the shipment by the NTennessee' to .t3,000,000. in gold.
The Comedttee thereupon voted to limit the shipment via the
"Tennessee" to 43,000,000.

The Chairman stated that insurance to cover the entire value
of Stich shipment had been obtained, written in the name of the

Secretary of the Treesury of the United :tate, and that the receipt
to be given by the Government agninet ouch shipment provided that
each Zecretary of the Treasury would hold auch insurance for the

benefit of the Fund. 3uch aoti.n was approved.


The Chairman stated th t word had just reached him that
afternoon (August 6) that the United 3tatee croverment proposed to
make a freight charge for transparting the gold shipped on account
of the fund by the *rennesees*, and that he wae surprised at such
proposition in view of the entire fTtilure of the Government previouely to mention any auch cheese.
The Chairman mentioned that he had been conferring with
government officials since 7'ondey evening (kugunt 3); that at
Washington an that evening he hed informed them of the 4700,000, gold
shipment mede by the Bankers Trust Company then in transit; that kr.
Kent in London had been insistent to obtain for immediate use
$300,000. for relief; thettee Annkern Truet Company wee willing to
divert from commerciel Imes uo relief uses $300,000., so asked for
by kr. Kent, out of the 4700,00e shipment; such $300,000, to be
reimbursel from the then proposed government appropriation for

relief use.
The Chairman stated at all conference*, whether held at
ehington or over the te/eehone, end in all correspondence, the
e,Aief character of the fund had been brote*t to the government's

attention.
The Committee voted to acquiesce in the Government's present

intention to make a freieht chercle,but with the purpoue to bring all
the facts to U:i.e evernmentis attention, ahowing the propriety of
remitting such freight Ohargv.
A ram or preliminary ,eemorandum outlining the control of
the fund by the Committeo and the limitations of the risks assumed by
the Ten Original ";:ontributore, me thereupon executed by all ember
of the Camnittee on behalf of the inetltutiona respeotively repree
tented, constituting the Ten Original Contributors.



5.
The original of such kemorandum was ordered filed with the
Chairman.

It was understood that counsel should formulate, in reasonable detail, a statement of the Plan relating to the fund, setting
forth the powers and authority of the Committee in the receipt,

transmission and disposition of the fund, to all

the terms of which

the certificates evidencing contributions to the fund should state
that all contributions (whether

ori4na2. or additional) should be

subject.

The Committee was informed that the situation still required

an actual shipment to London, it still being impossible

to establish

by cable a gold credit in London against an offsetting gold credit

set up in New York.
The Chairman thereupon stated that everything was in
readiness to effect the "Tennessee" shipment.




On motion the meeting then adjourned.

Aka,



4

Friday, August 8, 1914.

kESSAGE TO THE aECRETARY OF THE TREASURY FROM
BEEJAkIN STRONG, JR.

*
*

In order that you may be fully informed, and particularly of the arrangements respecting shipment of gold to London by
cruiser Tennessee and its disbursement there, I quote the following
cable sent to kr. Kent last night:

"Personally delivered three million dollars in gold in
to United States Assistant Treasurer on Tennessee
tonight for relief American holders of Travelers' Cheques and creddouble eagles

its and she has sailed, destination English port to be advised to
you later. All insured without war risk. Gold accompanied by John
P. Grier, Henry W. Lewis, Arthur I. Jones, Elliot Tuckerman and
Harvey D. Gibson as accredited agents New York Committee, with written instructions for delivery gold to the London City and Midland

Bank on delivery of gold to them in England by United States Government. Committee is sending written instructions in duplicate
to London City and Midland Bank, London, to place gold at disposal
of your London Committee, increased by adding representatives nominated by Morgan Grenfell, Brown Shipley, Baring Brothers, Guaranty
Trust Company of New York, London, American Express Company, also
Henry King Smith, representing the Farmers Loan, and L. M. Jacobs,
representing the National City Bank, all in London, with yourself
representing the Bankers Trust Company. These appointments are official and necessary. Reimbursements of drafts against travelers'

credits are to be in New York funds in New York at 4.90 plus interest and all expenses when ascertained, and clause to that
be endorsed on draft. Reimbursement in New York of travelers'
cheques is to be made at their face; payments to be made exclusively to holders of travelers' cheques and credits, after verification
in usual way. All checks and drafts are to be cashed in Sterling,
under direction of London Committee. Checks and drafts are to be
forwarded to Bankers Trust Company for collection and reimbursement.
Endeavor to secure advance at once against gold in transit for such
amount as you will require before arrival. New York Committee recommends moderate advance to each applicant. Committee's only protection for repayment of advance is through collection of New York
drafts and checks cashed in London. Committee is advised Morgan
i.e arranging to deposit three to six million gold for credit Bank
of France, to be immediately disbursed in Paris for similar purpose
there. Particulars will be cabled you shortly, so that London Committee may cooperate with Morgan Harjes. Necessity for depositing
balance of gold here to establish Paris credit reduced London shipment to three million from amount originally advised. Understand
Government shipment on Tennessee one million, five hundred thousand,
regarding which cooperate with Government officials in charge. Have
endeavored to conform as near as possible to suggestions in your
latest cable. Hope above will fully meet situation. To authenticate this duplicate will be cabled to Brown Shipley & Company of

effect to

London.



Please compare.

(Signed)

Benjamin Strong, Jr., Chairman.

Message to the Secretary of the
continued -

Treasury from Benjamin Strong, Jr.

The above message replied to a message

received from Mr.

Kent that he must anticipate arrival of the gold by honoring all
good credits in London against its arrival, which credits the banks
will hold as collateral until the gold is received. He can arrange
at once to make payment on all good credits against the government
or general bank fund shipment. The hotels in London are doing
wonders in advancing credit but have reached their limit. Necessary
that he should have London Committee of bankers give assurance to
hotels that credits honored by them will be paid according to London
method when decided upon, such credit at present only being used by
board. It is his idea that the various London bankers on whom
credits are drawn should make out the drafts in the regular manner,
but to the order of the hotels which take them in settlement for
The banks will then certify such checks and the hotels will
thereby be assured that they can deposit them when cover is provided.
This will divide the work among the banks properly and prevent any
distribution of cash for boarding (this word may have been intended for hoarding) and will at once allow payment of cash in small
amounts. Quoting from cable he says:

bills.

"Government gold would only be held pending ultimate collection good credit and government would receive certified paper
referred to as collateral from banks in meantime."

their re-

He also says that people have about exhausted
at once. We are having some delay in
sources and must have
exchange of cables, by reason of the censorship which we are asking
the State Department to e deavor to eliminate by instruction cable
to Ambassador Page. We
id. appreciate Secretary koAdoo's cooperation.

relief

I am in receipt of definite advice from the London City
and Midland Bank, our bank correspondent in London, that they have
released to kr. Kent seven hundred thousand dollars of gold, which
I advised Secretary McAdoo and Secretary Bryan on Monday last we
would endeavor to place at the disposal of the government, and I
assume that Mr. Kent has met the emergency in London by the use of
considerable part of this gold in advance of its arrival, and of
the arrival of the gold shipped on the Tennessee by the Government.
It is quite possible that this gold has been used to complete the
credit of three hundred thousand dollars which Mr. Kent arranged
for Ambassador Page. I am, therefore, sending lir.. Kent the following cable:
Un"Government shipping million half gold. on Tennessee.
derstand will be disbursed in cooperation with your committee by officers in charge. This includes the three hundred thousand made
available to Ambassador Page by State Department. Wire immediately
everyif further instructions on that matter are required.
thing now in good shape."

In order that reimbursements may be effected, either to
Mr. Kent or to our London banks, to wham the gold was consigned, it
will be necessary for the State Department to cable explicit instructions to Ambassador Page and convey instructions to the repre


H

Message to the Secretary of the Treasury from Benjamin Strong, Jr.
continued sentatives of the Government in charge of the Government gold shipped
by Tennessee to apply so much of the million, five hundred thousand
dollars of the Tennessee gold to the repayment of whatever amount
was used out of the seven hundred thousand dollars of gold placed
at the disposal of the Government, pending arrival of Tennessee.
I am this morning advised that the arrangements for the
disbursement of the credit arranged with the Bank of France, through
J. P. Morgan & Company and Morgan, Harjes & Company are substantially completed. The money is already being disbursed and details in
respect of the method of effecting disbursements at Paris will be
conveyed to Secretary McAdoo just as soon as they are completed.
I believe it is exceedingly important that instructions
be conveyed to those in charge of the gold shipped by the Governinent on the Tennessee, informing them that the London and Paris arrangement which was in course of completion when the Tennessee sailed, will be perfected and in complete operation by the time of
and further instructing them to take advantage of
this machinery and cooperate with the London and Paris committee.

their arrival,

At our meeting in Washington Monday night I asked the
State if arrangements could not be made to furnish the
Commander of the Tennessee with credentials issued by the embassies
of the various foreign governments with respect to whoa any ques-

Secretary of

tion of belligerency or contraband might arise. While we in New

York regard

the possibility of difficulty on this score as very remote, we do feel that it must be covered. Might not this be done
by wireless communication if it was not covered before the cruiser
sailed?




August 11, 1914.

Hon. W. G. McAdoo,
Secretary of the Treasury,
Washington, D. C.

My dear Mr. MoAdoo:-

have your note of the 8th instant, and am arranging
to have a number of the members of a strong committee of foreign
exchange bankers, which has already been appointed in New York,
attend the conference at your office at 11 o'clock on Friday.

At the moment I am unable to advise you of the names,
beyond stating that both Kr. Max:Lay, of the Guaranty Trust Company, and Mr. John E. Gardin, of the National City Bank, will
both probably attend, and I am hoping that Mr. Ickelheimer, of
Messrs. Heidelbach, Ickelheiwer & Company, will also be present.
These gentlemen have already undertaken a thorough investigation
of the foreign exchange problem, and are in my opinion best able
to furnish the data required.
Will you permit me to suggest that a discussion of this
matter is bound to raise questions in regard to marine insurance,
which might well be answered on the spot by having a leading representative of marine insurance interests present at the meeting.
My suggestion would be Mr. Hendon Chubb.
have also taken the liberty of asking Mr. Olds, my
representative in Washington, to ascertain from your office
whether you wish me to make any other arrangements in New York
with respect to attendance at this meeting. I shall certainly
be there myself and do anything in my power in New York to make
the attendance a satisfactory one to you and to your associates.




Very truly yours,
(Signed)

BENJ. STRONG, JR.

WAliolztot, D. C.

To the Sit.WAlo

ann.

'

4, 1914.

c-Lez---7

)01krwirt, Pot4erAl 11,04rvo Soer4.

aomNit
eppointed 4. the conferenoo or Itkotkera appreciates to
dokOrmbty of relteiring the proment internntiomm3 imshonge nItantion and

pertioulnrly of regul01na the seflo* or ,!old. Iho Committee mt tho anmo
timo realties the noseseity of rreartly onetime thl shltg,ttiono Of !looks,

oorporetione, es4 indisiduAls to ?Orem. thereby meintsining the MO erx4it
ef this oomotry eme 4omonetreting itm OlIity to meat it obligetione.

Pr this :-arroes, enJ 00, this obet ie. vie', thi43 Committee. r000me,

GOode. to the rellerni, Neer", 114119 the renaming Amid

ThAt the Volts of tFie oouttry sereotelty theme looetqii in rewrive
of
led Cootrm1 Peoerve cities, tio rrzioeted.. to c:entrib4to
*
$1sc4w1v40, of *Nigh. $25,000 to be tems41Ately rfAA late the Jew
fAgit?ArY 4f tht Detnk of Tozlem4 in elm:mime for WA: pertittpnAtot
derosit reootrt 1411 be fUrntsb#4 to ems+ onntributint bet*. ?bin realtIm4or
of tho oontrihited emomnto to bo Able4t to soli by the Item Tf!3rt Commilt14
throu0 th4 leoni Committees 0 VA r44164A144ti4tind to Irk
for
in 44e York t!(ch-ofte.

amid fhow fork Comolt44e tt be elltint,J4 by the Nerm York Clamenr. Bno..i+e
Clemring Houro
kg4e4i4AINft, A.44. 404 ImeI1 Comoittles to 9 sproint.e4 hy
.Ulooim=tionst ef tho respoetts- oontrib4tin=r !Titles. The Committee anointed
b. the *le York Cleortag Roost Al4esiAlon to 1)4 oberged lith the 411ity of
banqiing th seid fuo4. or fume the priom et leb fordigni omthence
to he boucht en4 Nold end 14 to meite requisition frop, tAlo to time upon tho
r,dpsvwtive 4;ontrMting oltloft Vr*oth the loort1 sommittoos thitroot. Void

oolgitteos ahm11 hese eurervision in the resoottve cities of the
ahlroonts end reerei vlthtrnwt%14 or mad.

This 41)9vitto, tivostom46 WA the reAor?41 rteesto 'Swill take stets to
smatrteln the emoktot of en4141 tht eta be eoccribtoted by the 11eke i* the
roopective cAties, r414 th,0t it ume Its iminuense te YAV4 the nmAd b10(ts

sontribqta their -0-or pre,r4U.




,rtrong, Jr.
L. L. PIA,
Dr4n).

Sol 11,exer

Jrle. R. Tor5,,mn
Tho.mtn r. "IAA/

1111P

In!"

IIIPINIPP

CONFIRMATION OF TELEGRAM FROM 41.1.1111.111111111"1111111

BANKERS TRUST COMPANY,
16 WALL STREET

NEW YORK CITY

September et', 1914.
W. G. McAdoo, Secretary Treasury,
Taohington, D. U.

Will be at your house *MB P. U. Wednesday

rill

71.esp

67011111,3,

'allergen Schiff and

nile thirty arpointment Thursday.

Benj. Strong Jr.,
Charge:




Baners Tract Co.

1111111L

101

For the purpose of discussing the general situetIon, the Federal
Reserve Bonrd invites you to attend a conference of Bankers representing

the Federal Reserve cities, to be held at its offices at the Treasury
building, at rashington, Fridey, Sept. 4th at eleven o'clock. It is

suggested that each Clearing Douse send two delegates representing both

National end State institutions. Plans° telegraph promptly names of
delegntes.it is desirable that your represeetative bring along the letost
condensed etotement of your Clearing Douse institutions so as to be in a
position to impart such information as he may feel free to give.

The Federal Reserve Board is desirous of ascertaining as nearly
ns possible the amount of the present tinitod Stntes cash indebtedness to
Eueope end maturing obligations, and vice verse, similier injobtedness of
Europe to the United States. Any information that you mny be nble to
collect in this respect covering your own district will he apprecinted. It
is suggested that you auk Mr. Seth Dow and b. R. Towne to net with you as a
locel committee, which, by circular or through the press, would call promptly
for such information, which, of course,will have to he treated as confidential.
The names of foreign debtors or creditor° need not he given, but the amount
and Character of the credit and debit balance or maturing obligations in
dollars or in foreign exbhenge. It is prohnbIe thnt at the rnshin gton meeting n committee will be organized to study the question and to give advice
as to which debts are covered by moratorium and as how to deal with those that
are not covered.




CONFIRMATION OF TELEGRAM FROM

BANKERS TRUST COMPANY,
16 WALL STREET

NEW YORK CITY

September 8, 1914.
W. G. MoAdoo, Seoretary of Treasury
Washington,

D. G.

Mesers Morgan, Sohiff and

would appreciate your maldng appointment

for conference in Washington as early Thursdqy morning as possible.

If you desire I can leaw by early train In time for preliminary
conference Wednesday evening at your convenience entirely.
Ghar6e:

Digitized forBankers Trust Co.
FRASER


Benj. Strong Jr.

GOLD FUND COMMITTEE
NEW YORK CLEARING HOUSE ASSOCIATION BUILDING

NEW YORK CITY
.0.,7117

1/1111

APPLICATION FOR CHECK

No.

(WHEN APPLYING FOR CABLES USE OTHER FORM)

NOT TO 1,1E FILLFD IN 1, APPLICANT

The undersigned submit the following application for CHECK ON LONDON suAt to the rules of the
GOLD FUND COMMITTEE.
kcb

NAME AND ADDRESS OF APPLICANT

iii
SAME AMOUNT (IN FIGURES)

STERLING AMOUNT DESIRED (IN WORDS)
,

STATE BELOW NATURE OF TRANSACTION TO BE COVERED BY EXCHANGE APPLIED FOR .18 EE OVER)

kc)

cr.)

9.>

'44-\

42,'2

CHECK TO BE DRAWN TO THE OF*ER OF
DELIVERED OR FORWARDED #

9.9

IF APPLICANT IS NOT&DCATED IN NEW YORK CITY. STATE NAME OF THE NEW YORK BANKING INSTITUTION THAT HAS BEEN INSTRUCTED TO
MAKE PAYMEMY FOR THIS EXCHANGE, IF ALLOTTED, AND TO WHOM NOTICE OF ACCEPTANCE OF APPLICATION MAY BE GIVEN
REMARKS

WILL PARTIAL ALLOTMENT
BE ACCEPTED

AUTHORIZED SIGNATURE OF APPLICANT

SPACE BELOW RESERVED FOR USE OF GOLD FUND COMMITTEE
CLASSIFICATION

AMOUNT ALLOTTED
HECKED




DISPOSITION

RATE

CHECKED

DRAFT NO.

COMPARED

APPROVED

331711VIIMO3 014U9 C

D
74140Y WaVI

1CIAiLI8 4101TAiD022A 3aU0H alelIfi)

YTIO )ROY Wail
The Purpose for which the Exchange applied for is wanted should be fully explained.
-11

°fit lo

Indebtedness covering imports of commodities.
Corporate obligations; principal, interest or dividends due abroad.
Bills representing money borrowed.
Other purposes not mentioned above.
-

State on the reverse hereof under which of the above headings this application may be classified, and explain fully the nature of the transaction to
be covered by the exchange.

4014Allaxa rt:Ot

IANis,-,1

-

rxraustrevii Mali. SAM ymiiirytoriU Trreii ANDoi.40 HAG, W3M WWI
113Vt0 38 YAM Norri,:-.EhliqA

O:308.4A1.41:)..DA 40 301yom Mc)MW

.11

T Curie.

10RIALITAVHD18 WIS/FICIATUA

74 n




iMP403

c-ril VA WO-13E
-




WillEMAS, in the judgment of this conference the chaotic

conditions in our international trade resulting free the
sudden outbreak of i;uropean ear have created ail unprecedented

national problem, to tee solution Of which there aikould be
brought immediately the united strength of the government

and of the entire banking syetem of the country; and

wimmis, it Is of the very highest importance that the
public and private credit of the people of the United States
should be fully maintained, and, in order to maintain such

credit it is imvorative that the people of tae United States
ohould meet their publie and private obligations abroad as
they become due;

therefore, be it

REflOLVED, that to the end that the reeources of the

United States Any be made effective for the purpose of 'rely-

ing the foreign obligationo of our citizens, the Secretary
of the Treasury appoint a comittee from tne delegates to
this meeting, which committee shall at once confer and report
their recommendations to the Federal Reserve Board; and
RESOLVED, that if necessary, ouch committee shall ar-

range for tAe appointment of committees by the clearing

houses of tae various Reeerve eitieo of the United States

to accomplish the objects stated in this resolution.




WHEREAS, in the judgment of this conference the chaotic
conditions in our international trade resulting rroel the
sadden

outbreak of European

,ar have created an unprecedented

national problem, to the solution of which there should be
brought immediately the united strength of the government
and of the entire banking system of the caantry;

and

MIMS, it is of the very highest importance that the
public and private credit of the people of the United States

should be fully maintained, and, in order to maintain such
credit it is imperative

that

the people of the United States

should meet their public and private obligations abroad as
they become due;

therefore, be it

RESOLVED, that to the end that the resources of the
United States may be made effective for the purpose of pay-

ing the foreign obligations of our citizens, the Secretary
of the Treasury appoint a committee from tae delegates to
this meeting, which committee shall at once confer and report
their recommendations to the Federal Reserve Board;

and

RESOLVED, that if necessary, such committee shall arrange fOr the appointment of committees by the clearing

houses of

the

various Reserve Cities of the United States

to accomplish the objects stated in this resolution.




0'
Al
boon
V/f

Arrango ,ith the Tr000ury Deportment that we got fi-ot call on ,o many gold bar?
and os nocb ?lowly minted gold coin as possible. Baro oro preforablo.

Arran, by coblo, price of gold with Rank of nnoland and neooroto arrangement
tholkoold oill be rotornod union oxchanon rota warrant.
Can=ooN)

V

Arronoo with the expr000 comoonloa for opeclol rats, if /ossiblo, on ohipmonts
of sold to Ottawa.

t

The initial shipmont to ho for 415,000,000 to'.;20,000,000.
V/

Arrange, by coblo, for the opening of occolonto with a nuon r of the looding
London bnrko, Possibly five, favoring thole which have extensive dealings with Amorico.
The folloolno seem doairablo, in Ile ordr named:/*London City & nidlond Bonk, Ltd.
do Lloyds Bank, Ltd.
Patreg Bank, Ltd.
/On
no Union of London & Smiths lank, Ltd.
-

London County A WOotminator Rank, Ltd.

Notional Provincial Ronk, Ltd.
nooitol & Countioo nark, Ltd.
London Joint Stock lonkoLnd.
V/

Negotiate to obtoin moot favorable rote of intorest.on baloncoo.
The occoonto are to he opened ondor the following

"Albort q. in
William Woodward

J. S. Alexondor

Froncis In Hine
Bonjamin Strong, Jr.
P. A. Vondorlip

J. N. liallote

as a Committoo for curtain banks in the
Unitod Status, contribotoro to a gold fund."
rile opocimon olonotoroa of momboos of the Comrittoo with the London banks with
whom occoonto are to be ootabliohod, ond arrange that chocks are to be sionod jointly by
any two members of the Comnittoo.

Arrenoo for the protection of eablo meosagos by toot word or toot numb r.

ohoold be done Immediately.
Ni

This

Diotributo proceeds of initial nold Shipmont amongst the several London accounto

op nod.

Draw up nocoosary forms, drafts, odvicos, record fume, otc. ntronop for
noo York Cloorino Houoc and for a cloricol force and for the
services of a compotont norofgn nxchongo mon.to carry out the inotructtono of the Conmittn
and to suporviso the keeping of all rocords.

soitablo quarters in the

The Connittoo should moot ouch
to receive applications for exchanoo. nach
opolicotion should specify the need therefor, .rd the fonmittee should doternino whet
applicotiono should be granted and ohethor in full or in part. Lxchonoo requirements may
result from:-

natority of indobtodn000 for commodities purch000d abroad;
Eatu ring corporete obliootione;

Maturing finento bills;
Volley due for securities sold horo on noropoon account but not yet oulivorod;
Yoroign baloncos in hands of United Status banks and honk re.
Consideration should bo given to the rolotivo merits of thoso various closo 4 of indobt-dloos. whenever possible, maturing finance bills should be provided for by neootiatino
similar bills and other foros of indobtodnoos should be similarly orovided for ohen
possible, thereby making it noce000ro to provide poymont only for such obligations oe
would not be ron000d under norool conditions and for such amount of oth r obligations es
cannot be renewed under present conditions, the purpose of this fund to,ing to facilitate
a return to normal conditions in the exchange market.
Prop:r forms should be prepared to be followed in applying for exchange either
by moil or telegraph.
It mioht be well for the Comrittoo.to fix a EV:WI:AM amount of exchange that
should be sold in one ocok but possibly not adonsable to announce the amounts oo fixed.
A limit of, say, 41,000,000 might be fixed for the first week and a lorgor amount the
second woek, but it would orobably not be advioablo to sell in oxcoso of n2,000,000 in
ono nook

No single solo shall be for a smeller 000unt than 41,000.

Rats at which oxchango will be cold will be flood doily, and should be current

ootos or a fraction l000r, %ay 41' per Pound;
or
Ilion

ill be received, hut if, for moderate rovironents, oxcossion

bid, tl:n aoplicotions shoal, if granted, be at current rates.
'

1-- or,e;g oro

Poomonts for oxchanoo shell no made before drafto ore delivered or cables sent
be mon) h: ef,rtjfiaa chocks on Now York banks.




All applications, ,Ilothor granted or rojL;cted, shauld be recordod and the record
kept availAble for ready roferonco by any person entitled to auch information.

or bids.

The Cot/flattest reserves the right to refiuco or reject eqly And all 1:plications

Promtdo of oeloc should be deposited to the credit of the Cem!ttee with a
New York bank, subject to intorest at 2. Repayments to contributing banks should be
mode at frequent intorwas and as often it L1500,000 becomes available. Tbo receipts
issued to contributing banks are to be hfild by their New York correspondents, to wham
rapayments would be made, to be ovidenced by endorsement on the original receipt.

Present rates of cxcha,vo ore ,,luch that it would probably not bv necessary
make Old transfers elsewhere than to London, unless a modorate avoun-t
raquirod in

rrenco

The Cormittes will not purchase exchange, vill not seek profits and it sl.v will
be to influence the exchange varket toward loom- levels until nomal ratk-4) Tb eachod
and maintained.

The Gold Fund Committee announces that it is now prepared to receive applications
or checks on London, which must be made on forms whidh may be obtained on application

at the office of the Committee in the New York Clearing House Building, or from any
member of the Committee, as follows:
Albert H. Wiggin, Chairman,
William Woodward,

J. S. Alexander,
Francis L. Rine,
Benjamin Strong, Jr.,
Frank A. Vanderlip,
James N. Wallace.

Applications will be considered by the Committee daily, commencing Friday, October

2nd (Saturdays excepted) at an hour to be fixed by the Colemittee, which. until farther

notice, will be 3.30 P.M., and applications must be filed with the Committee not later
than noon of the day on which they are to be considered.
The Committee will notify promptly its decision as to applications,with the

rate

to apply as to those favorably acted upon. Payments for amounts allotted must be made

not later than 10:30 AZ. on the following day by certified checks drawn to the order
of "Gold Fund Committee" on New York banking institutions, and failure to make such

payment prior to that hour will be considered a rejection of the allotment.
A later announcement will be made when the Committee is prepared to sell cable
transfers.




Washington, September 19, 1914.

To the HONORABLE THE SECRETARY OF THE TRRASURY
and the
FELERAL RESFRVE BOARD.
Gentlemen:-

Referring to the recommendations contained in our communication of
September fourth:

We have, in compliance with your suggestion, given further consideration
to the present international exchange situation, taking into account the changed
conditions arising from the completion of plans for meeting the obligations of the
City of New York payable in Europe.
This Committee is of the opinion that the continuance of the high credit
of this country abroad will be demonstrated, and that normal conditions of the foreign

exchange market will best be re-established, by the prompt creation of a large gold
fund for export if necessary as suggested in our former report.

We, therefore, re-

commend that the Central Reserve and Reserve City Banks of the United States (both
National and State institutions) be requested to contribute to a gold fund of
100,000,000 instead of

7.50,000,000, as originally proposed.

5,000,000 should be made immediately available.

Of this amount,

The administration of the fund

should be conducted in the City of New York, by a resident committee, where the prin-

cipal foreign exchange transactions of the country take place, and we suggest that the
recommendation of the Clearing House Association of the City of New York for the appointment of the following gentlemen as such Committee be approved, namely:

Albert H. Wiggin, CDairman
William Woodward,
J. S. Alexander,
Francis L. Hine,
Benjamin Strong, Jr.
F. A0 Vanderlip.
We propose to arrange the details of the plan of administration with the New York



(2)

Committee so that the requirements of all parts of the United States for foreign exchange will be fairly and impartially dealt with, and we suggest, in the event of any
complaint on the part of any contributor to the fund in connection with the distribution
or use thereof, your Board shall appoint a committee of bankers to pass upon any such
question, whose decision, under such rules and regulations as you may prescribe, shall
be final.

We further recommend that the National and State banking institutions in the
Central Reserve and Reserve Cities of the United States be requested by you to contribute to this fund, due regard being given to their present holdings of gold as recently
ascertained by your direction.
As recommended in our report of September fourth, we believe that a committee
representing the Clearing House Association of each Central Reserve and Reserve City
should apportion in its district the amounts and supervise the payments of gold or gold
certificates for the creation of this fund; and we, therefore, suggest that you address
a letter to the chairman of the Clearing House Committee in each of these cities recommending the appointment of such a committee, urging prompt cooperation in this plan
and stating the amount of gold which you may consider to be the proper quota to be
furnished by that city.

In order to facilitate the transfer of gold or gold certificates to
New York by the contributing banks, it is recommended that they be permitted to deposit
their contributions with the nearest Sub-Treasury of the United States, and that all
expenses incident to transfers, whether made through Sub-Treasuries or otherwise, shall
be an expense of the fund and shall not be borne by the respective contributors.
The Committee representing the New York Clearing House Association
should have authority to call upon the contributors for gold or gold certificates from
time to time in instalments as required (provided, that the contributors shall not be
called upon to pay any portion of an instalment which may make their investment in the
fund at any one time exceed twenty-five per cent, of their original contribution) to



(3)

arrange for shipments of gold to other ccuntries, to sell exchange and cable transfers against such shipments at such prices as they may fix, to determine to whom and

under what conditioneforeign exchange may be sold, to distribute the proceeds of such
sales among the contributing banks in New York funds, and to fix a date for the termination and final settlement of the fund.

We, therefore, recommend that the gold or

gold certificates be deposited in trust for the contributors in the vaults of the

Clearing House Association of the City of New York, subject to the control of the New
York Committee, and that such Committee issue to each contributing bank a certificate
evidencing its contribution.

The proceeds of sales of exchange may then be distributed

by the Committee among the contributing banks in New York funds and the amount of such
repayment endorsed

upon eadh

certificate.

We have recommended that contributors to the fund be confined to the banks
and trust companies in the Central Reserve and Reserve Cities so that institutions
which are members of the Federal Reserve System may make their payments at the time
of the

'organization of
We attach

the Federal Reserve Banks

out

of their awn cash.

forms of pledges to be signed by contributing institutions and

certified resolutions to be passed by their Boards of Directors or Trustees.

In case

the plan should meet with your approval we resnectfully suggest that you enclose copies
of these forms in your letter to be addressed to the presidents of the Clearing House
Associations.




Respe6tfuliy submitted:
(Signed)

JAS. B. FORGAN,...CHICAGO

LEVI L. RUE, PHILADELPHIA
BENjAMIN STRONG. JR. NEW YORK

THOMAS P. BEAL,BOSTON
SOL WEXLER, NEW ORLEANS
Committee.

(2)
Banking institutions in Omaha
Pittsburgh

Portland, Ore
Pueblo

Richmond.
Salt Lake City
Sia Antonio
San Francisco

$

750,000

3,000,000
1,500,000
100,000
750,000
250,000
150,000

3,500,000

Seattle
Sioux City

No returns.
750,000
100,000

South Omaha. ......

No returns..

Spasms

St. Joseph
St. Paul....
Taooma
Topeka

Waco

Washington, D.C.
Wichita

500,000
150,000
1,000,000
250,000
50,000

50,000

No returns.
50,000

These amounts (exclusive of cities from *hich no figures have been received and

contributions, therefore, could not be estimated), if all contributed, would

produce a

fund of $108,350,000, and se suggest that any amount pledged in excess of $10090009000

should be applied to a pro rata reduction of all contributions to the fund.
Respectfully submitted:




Committee.

Washington, September 19, 1914.
To the HONORABLE THE SECRETARY OF

Ad.b.

TREASURY

and the
FEDERAL RESERVE BOARD.
Gentlemen:

Referring to our report of this date:
We have made the following calculations of contributions to a fund of
4100,000,000, based upon the figures submitted at our meeting today, and suggest
thst you adopt them in case you approve the plan and decide to carry it cut:




Bankiag institutions in New York City
Chicago
Philadelphia
Boston
St. Louis

445,000,000
16,000,000
8,000,000
7,000,000
5,000,000

No returns.
Albany
500,000
Atlanta
1,000,000
Baltimore
50,000
Cedar Rapids
1,500,000
Cincinnati.
1,750,000
Cleveland
500,000
Columbus
500,000
Dallas
1,000,000
Denver
200,000
Des Moines
750,000
Detroit
No returns.
Dubuque
50,000
Fort Worth
100,000
Galveston
500,000
Houston.
500,000
Indianapolis
1,000,000
Kansas City, Mo
Kansas City, Kan. Jo retarna.
50,000
Lincoln, Neb.
1,000,000
Los Angeles
500,000
Louisville
1,000,000
Milwaukee
1,250,000
Minneapolis
50,000
MUtkogee
600,000
New Orleans.
100,000
Oklahoma City

,

Sept.

, 1914.

The undersigned Banks and Trust Companies hereby subscribe to a
fund of One RUndred

Billion

Dollars, to be payable in Gold or Gold Cer-

tificates, and to be held and administered in accordance with the terms
of a report dated September 19, 1914, made by a Committee representing
Central Reserve and Reserve City Banks of the United States, a copy of
which report is attached hereto.
by each of

the

undersigned

institutions is

The amount pledged for contributio
set opposite the signature

of a duly authorized officer thereof affixed hereto, and such pledge
is made by authority of a resolution of the Board of Directors or Board
of Trasteme (or a duly authorized Committee thereof)of each of the
undersigned.

Name of Bank or Trust Company




Amount of pledge

Sept

Bank,

1914.

On motion, it was resolved that the President, Vice-Presideat, Cashier or Treasurer,
or any one of then, be, and he hereby is, authorized, in behalf of this bank (company) to

Dollars, payable in gold or gold oertificates, to a Gold

subscribe

Fund to be created and administered in accordance
of the Committee, dated

September

with

19, 1914, appointed

the terms set forth in the report

by the delegates to the conference

of Clearing House Associations of the Central Reserve and Reserve Cities held in Washington
on September fourth, which Committee reoommended that a gold fund of One Hundred Million

Dollars be contributed by the banks (both National and State

institutions) located in suCh

cities, laid report having been approved by the Federal Reserve Board as set forth
their letter of September

, 1914.

I hereby certify that the above is a true
Board of Directors or

in

extract of

the minutes

of a meeting of the

Trustees or of a duly authorized committee there or
held

, September

of the
1914.

Secretary of the Board.
(Seal)




We.shington, D. C.,
September

, 1914.

Chairman of the Clearing House Association,
1

We enclose copies of reports of a Committee appointed by delegates from the
Clearing House Associations of the Central reserve and Reserve cities to the Conference
of September 4th, which recommend that a gold fund of one hundred million dollars be contributed by banks (both national and State institutions) located in

recommendations of this Committee

such cities.

The

meet with the unanimous approval of this Boort, and we

recommend that in accordance therewith, your Association appoint a committee to secure

pledges for contribution of gold or gold certificates to the fund by the national and
State institutions of your city, aggregating $

We deem this amount the

proper quota to be contributed by your city based upon the holdings of gold and gold
certificates by the banks of the Central Reserve and Reserve cities, as recently reported
to us.

The prompt payment of obligations payable in European countries by banks, corproatione, firms and individuals of the United States, is essential to the

maintenance

of the cradit of our country and the further development of our commerce.

Such action

will restore confidence and relieve the business community from the heavy burdens under

Which it now

labors, in consequence of the prevailing high rates of exchange.

The

evidence of the ability and desire of American bankers to furnish the means of discharg-

ing the foreign

debts of the merchants and manufacturers of the United States will re-

open avenues of credit and facilitate the payment of this country's foreign indebtedness
through the export of its products.

We would request that you secure the necessary pledges for contributions, accompanied in each ease by a duly certified resolution of the board of directors or
trustees on the forms enclosed, and return them to the Secretary of this Board so as to be
in his hands not later than October 1st.
Respectfully,
Secretary.




Governor.

The following statement of Cash Reserves is based upon the report of the Oamptroller
of the Currency, showing tho condition of National Banks on December 3, 1907.

Central Reserve OitiesNew York City.
Chicago

t. Louis

Cash

Cash

On Hand
Required
*206,098,000 *180,448,000
56,591,000
54,792,000
26,774,000
21,826,000
289,463,000 4257.066,000

Excess

Deficit
*25,650,000
1,797,000
4,948,000
*32.397,000

Percentapp
Sxcess Gash
S.

Reserve CitiesBoston

Albany... .... .
Brooklyn .. ...
Philadelphia

Pittsburg
Baltimore

Washington
Savannah

New Orleans....
Louisville
Dallas
Fort Worth
Galveston

Houston
San Antonio
Waco

Cincinnati
Cleveland
Columbus

Indianapolis...

Detroit

Milwaukee

Cedar Rapids
Des Moines
Dubuque

Minneapolis

St. Panl.

Kansas City, Kan.
Wichita
Kansas City, Mo.

St. Joseph
Lincoln
Omaha .

Denver

Pueblo

Salt Lake City..

Los Angeles
San Francisco

Portland

Seattle.




420 974 000
3 058 000

47 468

1 726 000

2 046
/8 807
17 030
5 579
4 785
261
3 025

24 704 000
18 056 000

000
2 000 000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000
000

4 3 506 000
1 058 000

025 000
2 703 000
2,082,000
170 000
91 000
536 000
2 489 000
60 000
2 408 000
2 468
1 499 000
184 000
1 683
1 162
965 000
197 000
231 000
255 000
486
1 464 000
613 000
2 077
907 000
1 957
1 050 000
272 000
383 000
655
6 141 000
6 046
5 718 000
5 156
2 332 000
176 000
2 508
3 072 000
2 046 000
5 118
2 957 000
2 471
4 512 000
4 264
697 000
535
1 296 000
1 162
325 000
323
624 000
5 468 000
6 092
922 000
3 726 000
4 648
1 033
1 044 000
518 000
633
115 000
4 990 000
3 799
1 199 000
1 071
832
129 000
703,000
6 934
2 848 000
4 086 000
2 459 000
5 061 000
7 520
108 000
019 000
1 127
609 000
209 000
1 818
4 051 000
2 422 000
6 473
4 482 000
5 118 000
9 600
1 979 000
4 306
2 327 000
4 090
1 197 000
2 893 000
4157 876 000 4169 048 000 426 124 000
6

00

520 000

5 897 000
1 026 000
446 000
11

.

77%

S.
et

110.3
ir

115.7

95 000
562 000
486 000
248 000
162 000
134 000
2 000

.5

66.6
00
41.0

0

SO

11 000
00

1,191 000
128 000

00

00411

69.7
48.5
*O.
000

59.7
87.7
*00

414 952 000

117.5

2

Oath
Required

Country Banks-

4/ 876 000

Dew York

New Jersey
Pennsylvania
Delaware
Marylamd .

Dist. of Columbia

Virginia
West VirginiaNorth Carolina.
South Carolina..
Georgia

Florida, ...... -..
Alabama.....Mississippi...-.
Louisiana

Texas
Arkansas

Kentucky...-.
Tennessee
Ohlo

Indiana

Illinois...-.

Michigan
Wisconsin

Minnesota...-.
Iowa .. 0. ...
Missouri

Wyoming

Idaho
Utah
Nevada

Arizona
Alaska




20 424 000
10 666 000
32 796 000
1 057 000
2 593 040
196 000
67 532 000

3 636 000
1 996 000
1 115 000
714 000

5 832 000
3 551 000
2 418 000
1 444 000
4 581 000
1 836 000
3 879 000
1 240 000
1 212 000
12 518 000
1 466 000
5 440 000
4 734 000
48 141 000
14 704 000
10 574 000
15 854 000
6 418 000
6 046 000
6 394 000
7 795 000
2 786 000
70 571 000

5 608 000
6 328 000
6 929 000
2 598 000
1 803 000
2 668 000
2 526 000
1 522 000
28 382 000

.

Deficit
so.

±EMEILIMMft

Excess Cash

49.2
71.7
63.6
58.6
58.2
82.4

25 283 OCO

I 692 000

1 007 000
1 442 000
610 000
765 000
5 100 000
684 000
1 885 000
2 414 000
22 858 000

9 096 000
5 246 000
8 925 000
4 020 000
4 243 000
3 726 000
5 469 000
3. 464 000

Kansas
Montana

California

14 066 000
7 720 000
20 255 000
653 000
1 650 000
64 000
44 306 000

42 189 000

North Dakota
South Dakota
Nebraska

Washington
Oregon

4 924 000

42 800 000
1 908 000
1 499 000
10 707 000
1 946 000
5 697 000
424 557 000

1 111 000
916 000
6 748 000
1 230 000
3 123 000

Massachusetts
Rhode Island
Connecticut

New Mexico
Oklahoma

Excess

15 004 000

Maine
New Hampshire
Vermont

Colorado

Cash
On Hand

1 402 000
1 296 000
2 806 000
3 230 000
1 718 000
705 000
2 102 000
627 000
2 245 000
16 151 000

2 321 000
1 035 000
3 611 000
661 000
348 000
272 000
321 000
80 000
8 549 000

2 352 000

4 545 000
6 087 000
3 752 000
1 651 000
5 568 000
1 344 000
5 150 000
52 705 000
5 348 000
2 674 000
7 876 000
1 360 000
581 000
704 GOO

748 000
65 000
19 356 000

797 000
583 000

3 959 000

4..

716 000

2 674 000
4, 553 000
6 358 000
2 946 000
12 543 000
504 000

sat.

45.2
36.1
S.

61.9
91.1

104.5 000

45.

132 000

206.2

23 236 000
2 296 000
1 555 000
1 305 000
730 000
2 989 000
829 000
2 437 000
630 000
447 000
7 418 000
772 000
1 555 000
2,320 000

'
0
,10

61.6
101.5
77.6
69.6

o
0

930 000

1 098 000
1 739 000
2 757 000
2 034 000
926 000

3 466 000
717 000

*00

699 000
233 000
432 000
427 000

42.4
71.6
42.5
90.3

66.3
84,6 2 396 000
61.9
86.0
118.5
131.5
164.8
114.3
129.6

2 907 000
16 674 000

3 027 000
1 669 000
4 365 000

65.
77.9
117.2
102.2
187.7
82.3
169.
103.2
58.4
145.4
112.8
82.4
96.1

.

/0822000

15 000
15 000

4149 037 000 4262 962 000 4115 940 000

+15 000

150,4
169.9
124.3
105.7
66.9
158.8
133.

76.

September 24, 1914.
Ron. W. G. ,aedoco,

Secretary or the ',reasurY.
Washington, L. O.

ely dear Mr. Secretary,

The enclosed statement will be illustrative oe the criticism
which you made to me by telephone yesterday of the attitude of certain banks

In regard to their reserves, and will vivo in condensed form a concrete
Illustration of the facts upon which your statement of yesterday seems to
have been based.

The enclosed figures were compiled in our office last December,

in connection with pertain information we ware asked to prepare bearing on
the new Federal Reserve Bank system.

We have first figured the exact amount of cash reserves that Central
Reserve city, Reserve city, and country banks (by States) were required to

keep in their awn vaults in order to comply with the reserve law, based upon
the amount of deposits reported as of December 3rd

1

In the next column we

showed the actual amount of cash reserve held by the banks in their own vaults.

The results show that, while the banks in the three central reserve cities were
2,397,000. deficient in their res)rves, the banks in the reserve cities were
over 311,000,000. in excess of their reserves and the country banks held
$113,e4o,000. in excess or legal reserve reauirements, being no less than
76% in excess of what the law required them to hold. These country banks
could have carried an average excess reserve over their legal requirements

of 5, and the balance divided among the three central reserve cities would
have made up the entire deficit of 42,000,000.




This is the primary cause of high money rates in the banking eentres.

Boston is charging 7-3/10% interest on Clearing 1Touse loan certificates;
Chicago, I believe, 7%;

New York 6%.

I doubt if any Now York institution

is charging more than 6% to any of its rogular customers an either call or time
loans, notwithetanding that 6% involves a loss to such of the New York banks

charging this rate as are obliged to use Clearing House loan certificates to

settle their debit balances.
It is a fact, however, that some of the banks am charging as high
as 6% on stock exchange collateral loans.

This policy has created an

incentive for brokers to strengthen their position by calling upon their
customers for cash payments, which could not have been created by any other
method.

$o far as 1 can discover the policy 5s not a uniform one, nor do

know of complaint being made by the brokerage houses that the rates charged them

are too high.

They, or course, are able to recoup themselves by charging a

corresponding rate to ,,hoir customers.

This matter of interest rates is, of course, ono of policy which
seem to be open to argument on both sides.

I feel certain, however, that

the New York bunks as a rule have not taken unfair advantage of their customers
and that the eonsensus of opinion among the stock exchange houses, who are the

ones that are paying the high rates, is one of grateful aporooietion to the
beaks for their efforts to save them from what might have proved to be a real

disaster.
I am prompted to send this letter by tho tame of your statement in
the morning papers. which appeals to me very strongly.




Yours very truly,

AWESTE Pre UNION
kkilENT

Form 260

WESTERNUNION

111

.

RGE W. E. ATKINS, VICE-PRESIDENT

TEL

AM

NEWCOMB CARLTON, PRESIDENT

TIME FILED

,ECEIVER'S No.

-

BELVIDERE BROOKS, VICE-PRESIDENT

CHECK

;END the following Telegram, subject to the terms
on back hereof, which are hereby agreed to

November 9, 1914.

NIGHT LETTER
Hon. W. G. McAdoo,

Secretary of the Tres!iuryw
Washington, D. C.

After fall discussion with iggin believe considerable risk that NeA York subsc ibers
to,s.att2ppLlpfund mqv attenpt in some oases to Althdraw from prceent obligation

If effort is nade to increase anaant. This may not be trie a little later, but
reluctantly obliged to recommend followinc, Wiggles advioe that nothing be
done just now to obtain additional oommitment). He is willing to make another




ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TEL.
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegrai
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond
the sum received for sending the same, unless specialty valued; nor in any case for delays arising from unavoidable interruption in the working of its lines,
errors in cipher or obscure telegrams.

In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the nondelivery, of th
gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued,
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary
reach its destination.
4. Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other
cities or towns. Beyond-these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his
expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to
such office by one of the Company's Messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the tele-gram is filed with the Company for transmission.
No employee of the Company is authorized to vary the foregoing.

THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT TELEGRAMS
Accepted up to 2.00 A.M. at reduced rates to be sent during the

night and delivered not earlier than the morning of the next ensuing
business day.

DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard night letter
rate for the transmission of 50 words or less and one-fifth of the

initial rate for each additional 10 words or less. Subordinate

to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.




Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that sufficien
time remains for such transmission and delivery during regular offic
hours, subject to priority of the transmission of regular telegram:

NIGHT LETTERS
Accepted up to midnight for delivery on the morning of the next

ensuing business day, at rates still lower than standard night telegram
rates, as follows: The standard day rate for 10 words shall be charged
for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or
less.

Must be written in plain English. Code language not perMail delivery, postage prepaid, permissible.

missible.

WESTE

ror

fea, Z
drao

UNION

TEL- AM

Form 260

WESTERNUNION

WV -

GEORGE W. E. ATKINS, VICE-PRESIDENT

NEWCOMB CARLTON, PRESIDENT

TIME FILED

RECEIVER'S No.

BELVIDERE BROOKS, VICE-PRESIDENT

CHECK

SEND the following Telegram, subject to the terms
on back hereof, which are hereby agreed to

Aovember 4, 1914.
Hon. W. G. McAdoo,
Washin&ton, D. G.

Would appreciate telegrarthic advice today if possible of total amount
now pledged for cotton loamLUnd. At Feeting of New York bahkere

tonight will discuss this matter.
Benjamin Strong, Jr.
Charge Federal Reserve Bank)




11.10.111111111111111

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERM
-

'

'

To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for corn
'AA..
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAL AND
FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
PAID
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond the
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED tele,ram, beyond f ` times
the sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lint
or for
errors in cipher or obscure telegrams.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to
reach its destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his
expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to
such office by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty daysafter the telegram is filed with the Company for transmission.

THE WESTERN UNION TELEGRAPH COMPANY

No employee of the Company is authorized to vary the foregoing.

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

TELEGRAMS
Accepted up to 2.00 A.M. at reduced rates to be sent during the
night and delivered not earlier than the morning of the next ensuing

Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that sufficient
time remains for such transmission and delivery during regular office
hours, subject to priority of the transmission of regular telegrams.

business day.

,

NIGHT LETTERS

DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard night letter
rate for the transmission of 50 words or less and one-fifth of the
initial rate for each additional 10 words or less. Subordinate
to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.

Accepted up to midnight for delivery on the morning of the next
ensuing business day, at rates still lower than standard night telegram
rates, as follows: The standard day rate for 10 words shall be charged
for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or

INIGHT




less.

Must be written in plain English. Code language not perMail delivery, postage prepaid, permissible.

missible.

Form 260

NEWCOMB CARLTON, PRESIDENT

GEORGE W. E. ATKINS, VICE-PRESIDENT
RECEIVER'S No.

TIME FILED

BELVIDERE BROOKS, VICE-PRESIDENT

CHECK

SEND the following Telegram, subject to the terms
on back hereof, which are hereby agreed to

effort later this we

having already done so with some of the la,rge institutions

without success last week. He and I both appreciate desirability of carrying out

your suggestion ani his reluctance to make another effort is entirely due to his
fear of the consequences.
enjamin Streik , Jr.
(Ohre Federal Reaerve Bank/
Goverment rate



ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERM
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for co-mparisoZ
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of .any UNREPEATED telegram, bey,
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times
the e sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for
errors ire cipher or obscure telegrams.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paidor agreed to be paid based
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to
reach its destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his
expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to
such office by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any ease where the claim is not presented in writing within sixty daysafter the telegram is filed with the Company for transmission.
No employee of the Company is authorized to vary the foregoing.

THE WESTERN UNION TELEGRAPH COMPANY
IN

NEWCOMB CARLTON,

PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT TELEGRAMS
Accepted up to 2.00 A.M. at reduced rates to be sent during the

Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery o,
the same on the day of their date subject to condition that sufficien
time remains for such transmission and delivery during regular offic
hours, subject to priority of the transmission of regular telegrams

night and delivered not earlier than the morning of the next ensuing
business day.
NIGHT LETTERS
DAY LETTERS
Accepted up to midnight for delivery on the morning of the next
ensuing business day, sit rates still lower than standard night telegram
A deferred day service at rates lower than the standard telegram
rates, as follows: The standard day rate for 10 words shall be charged
rates as follows: One and one-half times the standard night letter
for the transmission of 50 words or less, and one-fifth of such standard
rate for the transmission of 50 words or less and one-fifth of the
day rate for 10 words shall be charged for each additional 10 words or
initial rate for each additional 10 words or less. Subordinate
less. Must be written in plain English. Code language not perto the priority of transmission and delivery of regular telegrams.
missible. Mail delivery, postage prepaid, permissible.
Must be written in plain English. Code language not permissible.



November 5# 1914.

Hon. W. G. McAdoo,

Secretary of the Treasury,

7Ash1ngton, D. O.

Dear Mr. Secretary,

Your two telegrams in regard to the cotton itnd

If the
matter is allowed to restfa few days I think it would be quite
were duly received and answered by telephone this morning.

possible to take it up again here, particularly if further considerable responses are received fpom the other aties.
Very truly yours,

3-W.




0
Mr. strong:

On reprint the form of
subscription will carry lines
all the way to the bottom of the
page and will be closed in at
the top.
Our instructions were
not followed.
TTC

,

September

,

1914.

The undersigned banks and trust companies hereby subscribe to a fund of $100,000,000, to
be payable in gold or gold certificates, and to be held and administered in accordance with the
terms of a report dated September 19, 1914, made by a committee representing central reserve
and reserve city banks, of the United States, a copy of which report is attached hereto. The
amount pledged for contribution by each of the undersigned institutions is set opposite the

signature of a duly authorized officer thereof affixed hereto, and such pledge is made by
authority of a resolution of the board of directors or board of trustees (or a duly authorized
committee thereof) of each of the undersigned.




Name of bank or trust company.

Amount of pledge.

Form 25.

, September

, 1914.

The undersigned banks and trust companies hereby subscribe to a fund of $100,000,000, to
be payable in gold or gold certificates, and to be held and administered in accordance with the
terms of a report dated September 19, 1914, made by a committee representing central reserve
and reserve city banks, of the United States, a copy of which report is attached hereto. The
amount pledged for contribution by each of the undersigned institutions is set opposite the

signature of a duly authorized officer thereof affixed hereto, and such pledge is made by
authority of a resolution of the board of directors or board of trustees (or a duly authorized
committee thereof) of each of the undersigned.




Name of bank or trust company.

Amount of pledge.

Form 24.

WASHINGTON, September 19, 1914.

To the honorable the SECRETARY OF THE TREASURY and the FEDERAL RESERVE BOARD.
GENTLEMEN: Referring to the recommendations contained in our communication of September 4:
We have, in compliance with your suggestion, given further consideration to the present
international exchange situation, taking into account the changed conditions arising from the
completion of plans for meeting the obligations of the city of New York payable in Europe.
This committee is of the opinion that the continuance of the high credit of this country
abroad will be demonstrated, and that normal conditions of the foreign exchange market will
best be reestablished by the prompt creation of a large gold fund for export if necessary, as sug-

gested in our former report. We therefore recommend that the central reserve and reserve
city banks of the United States (both National and State institutions) be requested to contribute to a gold fund of $100.000,000 instead of $150.000.000, as originally proposed. Of this
amount, $25,000,000 should be made immediately available. The administration of the fund
should be conducted Jill the city of New Yorkney a resident committed where the principal
foreign exchange transactions of the country take place, and we suggest that the recommendation of the Clearing House Association of the City of New York for the appointment of the
following gentlemen as such committee be approved, namely:
Albert H. Wiggin, chairman.
William Woodward.
J. S. Alexander.
Francis L. Hine.
Benjamin Strong, Jr.
F. A. Vanderlip.
We propose to arrange the details of the plan of administration with the New York committee so that the requirements of all parts of the United States for foreign exchange will be
fairly and impartially dealt with, and we suggest, in the event of any complaint on the part of
any contributor to the fund in connection with the distribution or use thereof, your board shall
appoint a committee of bankers to pass upon any such question, whose decision, under such
rules and regulations as you may prescribe, shall be final.
We further recommend that the National and State banking institutions in the central
reserve and reserve cities of the United States be requested by you to contribute to this fund,
due regard being given to their present holdings of gold as recently ascertained by your
direction.
As recommended in our report of September 4, we believe that a committee representing the
clearing-house association of each central reserve and reserve city should apportionAthe amounts

and supervise the payments of gold or gold certificates for the creation of this fund, and we
therefore suggest that you address a letter to the chairman of the clearing-house committee in




($)

4

each of those cities recommending the appointment of such a committee, urging prompt cooper-

ation in this plan and stating the amount of gold which you may consider to be the proper
quota to be furnished by that city.
In order to facilitate the transfer of gold or gold certificates to New York by the contributing banks, it is recommended that they be permitted to deposit their contributions with the
nearest suhtreasury of the United States, and that all expenses incident to transfers, whether
made through subtreasuries or otherwise, shall be an expense of the fund and shall not be borne
by the respective contributors.
The committee representing the New York Clearing House Association should have authority

to call upon the contributors for gold or gold certificates from time to time in instalments as
required (provided, that the contributors shall not be called upon to pay any portion of an
instalment which may make their investment in the fund at any one time exceed 25 per cent
of their original contribution), to arrange for shipments of gold to other countries, to sell
exchange and cable transfers against such shipments at such prices as they may fix, to determine to whom and under what conditions foreign exchange may be sold, to distribute the
proceeds of such sales among the contributing banks in New York funds, and to fix a date for
the termination and final settlement of the fund. We, therefore, recommend that the gold or
gold certificates be deposited in trust for the contributors in the vaults of the Clearing House
Association of the City of New York, subject to the control of the New York committee, and
that such committee issue to each contributing bank a certificate evidencing its contribution.
The proceeds of sales of exchange may then be distributed by the committee among the contributing banks in New York funds and the amount of such repayment indorsed upon each
certificate.

We have recommended that contribut r o the fund be confined to the bankin the central
w1TK are members of the Federal reserve system may
reserve and reserve cities, so that
make their payments at the time of the organization of the Federal reserve banks out of their
own cash.
espectfully submitted.
JAS. B. FORGAN, Chicago,
(Signed)
LEVI L. R uE, Philadelphia,




BENJAMIN STRONG, Jr., New York,
THOMAS P. BEAL, Boston,
WExuER, New Orleans,
Committee.

Rider A
We attach forms for pledges to be signed by contributing institutions and certified resolutions to De passed by their boards of
In case the plan should meet with your approvdirectors or trustees.
al, we respectfully sugLcst that you inclose copies of these forms in
your letter to be addressed to the presidents of the clearing house
associations.

cf.st-,, -71,', *44)

to-,'"
6

Proof of October 2, 1914.
1




GOLD FUND

REPORT AND PLAN
AND

APPROVAL THEREOF

FORM OF CERTIFICATE ISSUED BY COMMITTEE

-0

REPORT AND PLAN

WASHINGTON, September 19, 1914.

To the honorable the
Secretary of the Treasury and the Federal Reserve Board.
GENTLEMEN:

Referring to the recommendations contained in our communication of September 4:
We have, in compliance with your suggestion, given further consideration to the present international

exchange situation, taking into account the changed conditions arising from the completion of plans for
meeting the obligations of the city of New York payable in Europe.
This corn nittee is of the opinion that the continuance of the high credit of this country abroad will be
demonstrated, and that normal conditions of the foreign exchange market will best be reestablished by the
prompt creation of a large gold fund for export if necessary, as suggested in our former report. We therefore

recommend that the central reserve and reserve city banks of the United States (both National and State
institutions) be requested to contribute to a gold fund of $100,000,000 instead of $150,000,000, as originally
proposed. Of this amount, $25,000,000 should be made immediately available. The administration of the
--fund should be conducted by a resident committee in the city of New York, where the principal foreign
exchange transactions of the country take place, and we suggest that the recorn-nendation of the Clearing
House Association of the City of New York for the appointment of the followiag gemle.pen as such committee
be approved, namely:
Albert H. Wiggin, chairman,
William Woodward.
J. S. Alexander.
Francis L. Hine.
Benjamin Strong, jr
F. A. Vanderlip.

We propose to arrange the details of the plan of administration with the New York committee so that
the requirements of all parts of the United States for foreign exchange will be fairly and impartially dealt with,
and we suggest, in the event of any complaint on the part of any contributor to the fund in connection with the
distribution or use thereof, your board shall appoint a committee of bankers to pass upon any such question,
whose decision, under such rules and regulations as you may prescribe, shall be final.
We further recommend that the National and State banking institutions in the central reserve and
reserve cities of the United States be requested by you to contribute to this fund, due regard being given to
their present holdings of gold as recently ascertained by your direction.
As recommended in our report of September 4, we believe that a committee representing the clearing
house association of each central reserve and reserve city should apportion in its district the amounts and
supervise the payments of gold or gold certificates for the creation of this fund, and we therefore suggest that



-0
you address a letter to the chairman of the clearing-house committee in each of those cities recommending
the appointment of such a committee, urging prompt cooperation in this plan and stating the amount of gold
which you may consider to be the proper quota to be furnished by that city.
In order to facilitate the transfer of gold or gold certificates to New York by the contributing banks, it is
recommended that they be permitted to deposit their contributions with the nearest subtreasury of the United
States, and that all expenses incident to transfers, whether made through subtreasuries or otherwise, shall be
an expense of the fund and shall not be borne by the respective contributors.
The committee representing the New York Clearing House Association should have authority to call
upon the contributors for gold or gold certificates from time to time in instalments as required (provided, that
the contributors shall not be called upon to pay any portion of an instalment which may make their investment
in the fund at any one time exceed 25 per cent, of their original contribution), to arrange for shipments of
gold to other countries, to sell exchange and cable transfers against such shipments at such prices as they
may fix, to determine to whom and under what conditions foreign exchange may be sold, to distribute the
proceeds of such sales among the contributing banks in New York funds, and to fix a date for the termination
and final settlement of the fund. We, therefore, recommend that the gold or gold certificates be deposited in
trust for the contributors in the vaults of the Clearing H use Association of the City of New York, subject to
the control of the New York Committee, and that such committee issue to each contributing bank a certificate
evidencing its contribution. The proceeds of sales of exchange may then be distributed by the committee
among the contributing banks in New York funds and the amount of such repayment indorsed upon each
certificate.

We have recommended that contributors to the fund be confined to the banks and trust companies in
the central reserve and reserve cities, so that banks which are members of the Federal reserve system may
make their payments at the time of the organization of the Federal reserve banks out of their own cash.
We attach forms for pledges to be signed by contributing institutions and certified resolutions to be
passed by their boards of directors or trustees. In case the plan should meet with your approval, we respect.
fully suggest that you inclose copies of these forms in your letter to be addressed to the presidents of the clearinghouse associations.




Respectfully submitted:
(Signed)

JAS. B. FORGAN, Chicago,
LEVI L. RUE, Philadelphia,
BENJAMIN STRONG, Jr,, New York.

THOMAS P. BEAL, Boston,
SOL WEXLER, New Oricans,
Committee.

APPROVAL
FEDERAL RESERVE BOARD
The President Clearing House Association,

At the invitation of the Secretary of the Treasury and the Federal Reserve Board, a conference of
delegates from clearing house associations was held at the Treasury Department in Washington on September

4 for the purpose of considering problems growing out of the extraordinary derangement of our foreign
exchange markets following the outbreak of the European war. This conference, after a day's deliberation,
anpointed a bankers' committee charged with the duty of recommending to the board a plan for dealing with
this situation. The committee so named submitted on September 4 its first report, which advised the creation
of a gold fund of $150,000,000. This recommendation, owing to changes in the situation, was modified in a

subsequent report, dated September 19, favoring the creation of a gold fund of $100,000,000 to be
contributed by the banks and trust companies located in central reserve and reserve cities.

The board has carefully considered the committee's report, and concurs in its conclusions and
recommendations. The board is convinced of the necessity of an adequate plan of national cooperation to
meet a situation which is of national dimensions, and it has no hesitation, therefore, in giving its approval to
the plan proposed by the committee, and recommends your earnest cooperation.
The board shares the committee's belief that the creation of a large gold fund at this juncture will have
a far.reaching effect for good, and will prove an effective factor in restoring confidence, in bringing relief, in
protecting and strengthening the country's credit, and in facilitating the exportation of our products.

The board, therefore, recommends that your association appoint a committee to secure from the
national banks and State banking institutions of your city subscriptions aggregating $
to the proposed gold fund. The board regards this amount as the fair quota to be raised in your city, based
upon the holdings of gold and gold certificates by the central reserve and reserve cities as recently ascertained

he allotments provide a fair margin above the total amount named. Any sums pledged in excess of
$100,000,000 will be applied to a pro rata reduction of all subscriptions to the fund.
Forms of subscriptions and certified resolutions to be executed by participating institutions have been
prepared by the bankers' committee and are forwarded herewith. This board recommends that the sums
specified be pledged as promptly as possible, and that you send the pledges and resolutions, duly executed, to
the secretary of the Federal Reserve Board at Washington, D. C., in order that they may be available for the
committee not later than October 1.
For the terms and conditions upon which the subscriptions to the proposed gold fund are made your
attention is particularly, called to the report and plan signed by the bankers' committee and handed to you
herewith,
Respectfully,
C. S. HAMLIN,
Governor Federal Reserve Board.

I am in accord with the views of the Federal Reserve Board and recommend the adoption by the banks
of the proposed plan.
W. G. McADOO,
Secretary of the Treastnii.

WASHINGTON, D. C.,



September 21, 1914.

FORM OF CERTIFICATE ISSUED BY COMMITTEE

ORIGINAL SUBSCRIPTION CONTRIBUTION
Instalment paid on issue
of this Certificate

No.

Certificate of Contribution and of Payment of Initial Instalment
GOLD FUND
Contributed pursuant to Report and Plan set forth in the letter of September 19, 1914, addressed
to the Secretary of the Treasury and the Federal Reserve Board by a Committee, consisting of James B.
Forgan, Chairman, and others, and approved in the answer of September 21, 1914, to said letter, made by
said Federal Reserve Board and approved by said Secretary.

The undersigned Gold Fund Committee named in and appointed pursuant to the Report and Plan
above named, hereby certify that

has subscribed for an Original Contribution to the Gold Fund provided for in said Report and Plan, in the
, and has paid to the undersigned Committee on account of such
amount of $
. Payments of further instalOriginal Contribution, an initial instalment of $
ments towards said Contribution shall be evidenced by endorsement thereof hereon by the undersigned
Committee, or their duly authorized agents. All such payments are received, and are to be administered and
disposed of, as a part of said Go!cl F nd, subject to the terms and conditions of said Report and Plan, and
subject solely to the directions of the Gold Fund Committee, as it may be constituted from time to time.
The holder hereof by acceptance of this Certificate agrees to all the terms and conditions of said Report
and Plan and of this Certificate. This Certificate is valid only when signed by two members of the Gold Fund
Committee. Any repayments from the Gold Fund on account of said contribution shall be made only for the

account of the holder hereof, as registered on the books of the undersigned, upon presentation of this
Certificate at the office of said Committee, No. 77 Cedar Street, New York City, or of its authorized agents at

places within the United States of America, as may be designated by it, for endorsement of any such
repayment hereon. No final repayment on account of said Contribution will be made except upon surrender
hereof for cancellation.

Dated, New York City,




191

.

ALBERT H. WIGGIN, Chairman;
WILLIAM WOODWARD:,
JAMES S. ALEXANDER.
FRANCIS L. HINE.
BENJAMIN STRONG, Jr.,
FRANK A. VANDERLIP,
JAMES N. WALLACE.
Gold Fund Committee.

Two members of such Commit.

E2G9

>2 CA N2N




NC.1.114 SS!

EC!' lEed f,NIN3A3 3H1

lioverber 10, 1914.

Hon. 4, G. McAdoo,

8ecretary of the Treeenre,
Washington, D. C.

Dear 1::r. Secretary,

'Pour favol.s of the 6th and 7th were reoeived yeeterday:
aed

Ei advised by wire, as per oonfirneetion eholoeed, I took the matter

up at once with lUr.
Which the New York

hoping to Off oot ea arrangemeet with him by

thoiibcs riiabt

4tte1n'ellkiqoadried at Onoe

increase the

wount of their subscription to the ootton. loan hand. He inferrsed me that he
had already enunded five of the largest subscribers and was reluatantly compelled
to dieoontinue his s teffcrte along that line, fearing that some of than would make
an effort to withdraw from their pre-seat oomaitrient. He has indicated, however,

thzet atter the lapse of a few days he will teke it up with then aeel n, and endeavor to ,secure such'e,souranoes from them as will facilitate the completion

of the fund without further delay.

I feel very confidant that he is heartily in empathy with
your efforts, and will do everything in his power to further them. atter today I hope to telephone you a, ain on thie !setter, after sounding the officers
of some of the other banks.
The situation in Boston seems to be eateetionlarly unfortunate,

oo fker as I can gather from reports received hereTheit still seems to be some

doubt in their minds as to the legeetty Of the operation, concerning which,



Hon. W. G. UoAdoo.

of couTrie, there shorad be no doubt whe.tever.
Yours very tru1y,
3W.




now**

.

Mb& V., G. VeAoo

;;Jeesstory f the - rgs,aloun *
'40ableutos,
,

04,

4 tietret IT

ott

glieent oNsremallig.

Sok.* Otte rivaeiber
1

5

th fArr 1,4tardt, efulAti nnd SvArel
xmoi.

mu* esiftituxe tokv. Jame onntli,, /we

6oubt1essivoyeenteU* et* et do qaite

atr1

t

%lone hrAvnliVr.iling ObantAi aim* the
dote abon these dlariseeince
*

ondl,

Ofonev rates erre

eanier etelliw; .Nsehcate ban declined to 0
it lo no loador profitable to evert
adit, and the rbeeet for

iaveetmost SmewrItim bp.o breade,nod et
111.01er .prieee.
9sr disomentote sith dir Gooey
?slob and Ur. aloe:1%M
Suited in outilaim: a tesbutiet plan tptizb
lAca discieeed no of peselble
metitaa adorepteco la ortuti'litwoo ilkooittott to reopen thg?
York 2100e 21zalbseow ter Dintvvtrtotiad
tragai:Couad

c.onation ao nicht

swat la that

Loam oil

elne4 looeh

noure014.10.

30 ter as MO 0.,:tr new 016viaed *ere
Se no present
Intenti

./K salhoror the emeheskset0 to nolialed

tag se 0441m0 that
06 thin adamant a promoter
renponee tie the oddeptition bon hOtvs Sound
tar:tensible*

glom Of these foots* 4ould it
net be advisable, without
UroakieL tin) nftetiettorill, to postrobe
ferWel. dleasobton for tke

tine bane Codigtioen4Z doublieeto
later enable either intorost




to resumed be




-81315Jr./15W

rs yOU Respectfully
advantage. mutual
may

neotiations time
-2-

what and Whether determine to

McAdoo. G. W. ii0/1«




August 2nd,1915.

My dear Secretary McAdoo:

The memorandum enclosed herein was started shortly after
I last saw you in 77ashington, and would have been sent you some

time ago had it not been that both of the matters covered by the
enclosed letter were being actively discussed by the Directors of
this

bank and I wanted to consult the Board on the subject before

sending it.

It now takes the form of a letter addressed to you
-

Ret %.<

=

by a Committee of the Board and I regret that it is so long.
The present sense of financial security which prevails
in the country is undoubtedly due to a large degree to the existence of the Federal Reserve System.

It would be a sad shock to

this country if we should, notwithstanding our best efforts to
A

avoid it, be drawn into the war, and it be fuuld that we were not
fully prepared at all points to meet the situation.
It seems to me the Federal Reserve System is somewhat in
the position of the British fleet; it is not fighting great battles
and doing spectacular things, but the fleet is there just the same,
and its mere existence enables the british commerce to continue.
it is with our System.

So

Business is proceeding as normal in this

country, as the country generally has confidence in our preparedness
for any eventuality.

The question is, are we fully prepared?




2

Hon. William G. McAdoo.

August 2, 1915.

I hope you are having a thorough rest and appreciate
how much you need and deserve it.
"gith kindest regards, believe me,

Sincerely yours,

Governor.

Honorable William G. McAdoo,
Secretary of the Treasury,
North Haven, Maine.

BS Jr/VCM -3

PERSONAL.

August 25th, 1915.

My dear Mr.

Secretary:

Referring to my separate letter of
to the acceptance regulation,

I think I

this

dage in regard

should advise you that the

Board of Directors of this Bank has given instructions that the advice of coelpetent counsel should be obtained as to whether transac-

tions in banker

acceptances, soma part of

the proceeds of which may

be ap:died to the purchase of munitions of weer and other

contraband

articles in this country, might, through the banks, involve the

erg

ernment in

violation of

neutrality.

The question is

gov-

presented

in two forms:
First:

When such transactions are conducted solely by the

national banks,
econd:

Then the acceptances resulting from such trans-

actions are purchased by the Federal

reserve

banks or rediscounted

with the Federal reeerve banks by member bfenks.

Permit me to sugeest the desirability at this time of our

having from
formation on

the proper officers of the government

this subject as will enable both the Federal

Board and the Federal

reserve

banks to

reserve

govern their proceedure in ac-

cordance with the wishes of the administration.




such advice or in-

Hon. 7illiam G. McAdoo.

As stated to you last Frid:,y, the same question arises with

regard to loan which may be negotiated in this country by belligerent
foreign governments, notwithstanding that the proceeds of such loans
may be used, or, in fact, specifically appropriated for making payment
for articles of export.

Since our meeting, I have studied Secretary

Bryan's letter of January 20th and feel convinced that it should not
be made to apply to transactions undertaken at this time under present
conditions.

This view is strengthened by reading Oecretary Lansing's

letter of August 12th addressed to the Government of Austria-Hungary,
in ahich the sale of munitions of war to belligerents is described as
"legitimate trade".

i had hoped to write yea fully on this matter to-day, but
find it impossible to do so until the latter Dart of the week.
With cordial regards, I beg to remain,
Very truly yours,

Gove.:mor.

Hon, 71111am G. :IcAdoo,

erth Haven Llaine.

35 Jr/WM-8




P.F.E.VUAL

August 25th, 1915.
C.

My dear Mr. Secretary:
Our conference of last Friday seamed to develop that we

held substantially the same views in regard to certain features
of our foreign commerce and the foreign exchanges thiCh are now
developing.

These :ere

First:

That our export; trade balance has now reached

the point where it may exhaust the aii1ity of our foreign customers
to mace promet settlement unless special facilities for doing so
can be promptly developed.
Second:

Failure to develop such facilities might result

in a considerable curtailment of our exports, and,
Third:

That it might possibly develop that the surviving

export trade would be Confined to those necessary articles of com-

merce co urgently required abroad that their ,urchase would be continued to the exclusion of other commodities which form a large part
Of our normal export trade,
think we were also, in agreement that gold payment would
be unnecessary and possibly -unsound, as tending to expand our own

situation at hone and likewise to curtail the buying power of our




-2-

To

Aug. 25, 1915,

Hon, William G. McAdoo,

foreign customers.

To meet the situation in part, it as sag,ested

that the existing regulation Of the Resolve Board governing accept-

ances should be somewhat modified so as to re ove certain restrictions that aro now imnosed upon that business and develop greater
freedom in the arranging of commercial credits between the banks of

this country and )rope.

To put this suggestion in concrete shape,

Curtis and I have re-drawn Regulation J, no'.; in force, and I beg
to enclose two copies of the same herein.

This is respectfully sub-

-lifted for your considenatIon.
Very truly yours,

Governor,
Hon. 7:111 inn

Mckdoo,

:To rth Hnven, Mine.
BS Jr/VCM-6




TITAlia.

Aug at 28th, 1915.

My dear Mr. McAdoo:
You doubtless noticed by the daily papers that a Committee
of English and French bankers, and possibly some government officials

is planning to visit this country in the near feture with a view to
discussing the foreign exchange situation.
visit is a purely voluntary one.

So far

s I am awar

It will, however, raise the question

in regard to foreign loans in a most important way.
I am writing to inquire whether it may not be well to have
a letter addressed to you making inquiry

to

whether our

government

secs any objection to the arrarxgement of a large credit in this coun-

try for the purpose of enabling payment to be made for our exports.

The question

hns not yet been pressed, nor need it be at the moment,

but this letter is simply a preliminary inqukry to ascertain whether
you see any objection to a letter of that character being addressed
to you prior to the arrival of these gentlemen.
I hope you keep well and enjoy the few moments of rest on
ypur working holiday.

Vincerely yours,

Hon. 7111iam G. McAdoo,
North Haven, Maine,



Ap;

September 2nd, 1915.

dear Mr. Zeerotary:

Various inquiries have been addressed to me as to the attitude
of the Administration in respect to credits which may be asked from our

banks and bankers, by belligerent governments and their citizens.
You have doubtles noticed the reports in the Press that a

Committee of '.'eaglish and French officials and bankers is about to visit
this country for the purpose of discussing with American bankers what

measures can be taken to correct the present disarrangement of the foreign exchanges, such disarrangement resulting, as you are aware, from
the unprecedented increase in the amount of this country's export trade
balance.

The necessity for undertaking some cemprelensive plan which

will accomijish this, becomes apparent by an examination of the stetis-

tics of our foreign trade fur the period commencing January first of
this year as compared with similar figures for the eame period last year,
which are enclosed.

The difficultydin arranging payment for our mounting balance

of exports is evidenced by the current prices of exchenge on various foreign markets which are now as follows:




"terling: 4.51
es:
80.75

Francs:

6.01
Roubles 34.25
Guilders: :39.67
'ronen: 15
6.55
Lire

(.uotation of September first).

representing a premium of 7.324 for dollars,
if
ft
ft
if
"
PP

ft

ft

if

It

U

ft

ft

ti

ti

it

tf

ft

ft

" 15.96%
" 33.41%

6.25
" 25.97
" 26.36

"

ft

"

It

"
"
"

"

e
Pt

Sapt. 2, 1915.

-2-

To

Hon.

G. McAdoo.

This exhibits a complete reversal of the conditions which pre-

vailed less than a year ago when the British Government at your invitation sent Sir George Paish and Mr. Basil B. Blackett to this country to
discuss methods )f correcting the disarrangement in exchanges which then
existed.

Various suggestions have been made for overcoming the difficulties of the present eituation, (which will react seriously upon our export

trade unless they are promptly corrected), and while ayme of these

various steps can no doubt be taken, and to some extent are being taken
from time to time by our bankers, none of them will be effective in the

writer's oeinian, without the early conclusion in addition of a comprehensive plan by which a large credit, or credits, can be successfully
placed in this country in the near future.

The writer recognizes that our government can have no part in
transactions involving the menufecture, sale or exeort of articles which
are contraband of war.

The various communications of our government,

(notably the President's proclamation of neutrality dated August 4th, 1914,

the circular of the State Depertment dated October 15, 1914, Secretary
Bryan's letter of

April

21st, 1915 addressed to the German embassador,

and Secretary Lansing's letter of August 12th, 1915,
the

Government of Austria

Hungary),

addressed to

have, however, made clear

that the sale by our citizens of articles which are contrabend of

war

ie7

lawful trade and will not be interferee. with by the Federal

Government.

The present danger to our commerce lies in the fact

that the addition of this vest trade to our usual normel export trade,
is making it increasingly difficult for the foreign customers of citizens
of this country to make payment for our exports without paying prohibitive



To

G. McAdoo.

Hon,

premiums.

The bellignrent nations will continue to buy those articles

required for war purposes; munitions, food stuffs, motors, horses, etc.
If payment cannot be made for all that we are exporting, however, the

reduaion in our export trade wiall not be in munitions, but in those articles which are not necessary for sar purposes.

The loss will fall on

those who have nothing to do with trade in contraband and upon classes

probably. least able to stand it.

in.fact, Call on
The question, therefore, arises

The loss will,

the norTmtl export trade of the country.

as to whether loans negotiated by belligerent nations in this country, to
enable these payments to be made, would be a violation of neutrality or

would be contrary to any wish expressed by the President or other officors of the government.

1.gr'

4.:47\

v\

Tf

The enolosei memorandum contains a summary of statements of
7s.

'policy which have so fsr been made by officers of our governmentsbear-

ing on this matter since the outbreak of the war.

During this period,

loans estimated to be in excess of 300,000,000 have from time to time
been negotiated in this country by various foreign governments.

Prac-

tically all of these lossas were publicly announced throughout the country and those to France, Germany and Canada were advertised for public

subscription.

Those made to belligerent governments, which also in-

cludes Russia, are all reported to have been for commercial purposes
and to enable those governments or their citizens to make payment for
commodities being purchased in this couttyy, the whole proceeds of

these loans, therefore, being used to further American trade.

The

amounts, however, have been far from a equate and, as stated above,




4-

Sept. 2, 1915.

Hon. W. G. McAdoo.

the approaching visit of a Committee from 7. nglaild

and France to deal

with this matter makes it highly important that the bankers

this

country should have a clear understanding of the law which would up-

ay to business of this character and of the policy announced by the
L:xecutive officers of this country.

You will appreciate that the

expressions so far published

are rather indefinite and haiedly furnish a guide to our bankers in

conducting negotiations

vital

with the

Committee.

The matter is of such

importance to the COMEIMO of Uhe country that I an taking the

liberty of addressing this letter to you for the purpose of ascertaining

whether, in

the opinion of the Administration, there is now

7 reason either of law or policy, which makes it inadvisable for
our bankers to undertake the negotiation of loans to any belligerent
nation or nations.
Very truly yuurs,

Ton. G. 11cAdoo,
Secretary of the Treasury,
-lashing:ton, D. C.

BS Jr/VC14







December 2nd, 1915.

My dear -r. Secretary:
a.n writing to inquire whether you could
spare Mr. WilliJm Woodward, one of our Directors, and
me, a few minutes of your time next Tuesday morning?

We are expecting to be in '.eshington early that morning,
possibly meeting witi, some members of the Federil Re-

serve Board about twelve o'clock.

Thnnking you in anticipation, I bog to remain,
",ory truly yours,

Governor.
Hon.

G. 71cAdoo,

Secretary of the Treasury,
- ashington, D. C.
BS Jr/VCIA

May 18th, 1916..

My dear

r. Secretary:
During visits which I made at the offices of the

bank of England and the Bank of France, some interest was dis-

played in the character of workmanship, etc., of the new Feder-

al reserve notes, and it occurred to me that it might be a

courteous thing, if it could be arranged, to send a set of the
die proofs to each of these institutions if they could be spared
and it was proper to do so.
After receiving many courtesies from the officers and

directors of these two institutions, I would like, if possible,
to send them these sets with my compliments, and write to ask if

they could be furnished, and if there is any reason why it should
not be done, I will rely upon your advising me quite frankly.
Respectfully yours,

Governor.

honorable Ti. G. Mc Adoo,
Treasury Department,

ashington, D. C.

135 Jr/VGA




TREASURY DEPARTMENT
WASH I NGTON

May 20, 1916.

viANA

\Q\C*

\40

k14°11'1?°

.1141)%14*

My dear Mr. Strong:

I have received your letter of May 18th, and I have given some
consideration to the question of transferring the various accounts
of the Post Office Department to the Federal reserve 16Smks.

I am

advising the Postmaster General today that the Foderal Reserve Bank
,/

of New York will be in a position upon reas9teb1e notice to take over
the Post Office accounts.'

The question of permitting the nitional banks to make their de,/

posits on account of the 5 per ce t fund through the Federal reserve
banks was taken up some time

o with the Federal Reserve Board, but

to answer has been received/ton the communication-of-thiw Department to

-

them.

I will be pleased
in advance of any a
be required to pe

o comply with your request to be advised well

itional service which the Federal reserve bank will
orm for the Government.
Very truly yours,

Hon. Benjamin Strong, Jr.,
Governor, Federal Reserve Bank,
New York, N. Y.







May 23rd, 1916.

Dear tr. Secretary:
Thank you for your note of the 20th
regarding die profs of federal reserve notes.
Of course, I understand that these should not be
scattered about, but I hope you inderstand the
circumstances which led me to make the request.

Very truly yours,

Honorable W. G. McAdoo,

Secretary of the Treasury,

Washington, D. C.
35 Jr/VOM




Estee Park, Colo. August 1, 1916.

Hon. W. G. McAdoo,

Treasury Department,
Washington, D. C.

Dear idr. Secretary:
h and July
Your very kind notes of June
ten to acknowlhere and I
26th have just reached me
edge them and to express my desp7trtit de for your me
at blow to
was-ET-sympathy and encouragement.
me
'\necessa
when I learned that it wouI iod articula orat a to
time
accept banishment for a;t5'
beginning to realize
when it seemed as thoug
e rewards of two years
the benefits and get
the advice of doctors
of very hard work. Pol
or so' In doing absolutely
I have spent thea,a4
and, as you may imagine,
nothing but lo
a powerful lo
The

confidence i

lari-f 0- the

salt of
he ult

h se cogitations is the growing
and popu-

e complete success
serve System. Of course there
to be overcome, but these I
have been met with energy and good

tzny diffi
th k you will agree it will be shown with success.
ri it and I elieve

we

If

up
est af

s I expect, it is possible for me to take
again, it will of course be with added interenforced holiday.

er this

encouragYou and your associates have been mostto be a
attitude has been and will prove
ing and your
getting me back where I belong.

great influence in

Thanking you most warmly for your kind letter
and for your interest and sympathy, I stn, with kindest

regards,

faithfully yours,




December 11th, 1916.

Dear Mr. Secretary:
You may occasionally give a moment

thought to an

exile out here in the mountains and wonder h

In addition to

my time.

following ,ne

ine a eortain &mount of time

u,

convincing mystelf that th

d

nited States are a wretched

e and

icent opportunity

ily I have bee
these matter

your asso

among other ethings,

finance

thut

laws of the

now is a magnif-

tempted to write the Presibut so far have been content-

the Federal Reserve

Board pretty

.ppered with co respondence.

I am
in you

rciee,

rent pieces of lbgislation.

dent about tome o

well

s orders, mean-

so well started by the

Federal Reserve

ed to

oc o

to rest, mild

etc., 1 have been doing a

Occasio

am occupying

now add

pinion tie

currency 1

ssing you personally to irquire whether
is any prospect or possibility of further

on by the present

administration,

and whether

in connection with legislation of that character the President
is willing to consider

duce the budget system.

undertaking a

determined effort to intro-

As to the first, my own

pretty well crystallized and what is needed is a

views are

responsible

sponsor, or preferably, the support of yourself and the e'ederal

Dec. 11, 1916.

Hon. W. G. VcAdoo.

To

with that of the President. I really
feel that the subject is so thoroughly understood by those who
are actively engaged in operating the irederal Reserve System
that no special inquiry,or further study of t e subject is nec-

Reserve Board together

essary beyond the usual proceedure to Commit

s of the Senate

and House.

e t system, I

As to the second matter, th

have been astonished in discussing this

matter b

ers and those connected with t

ent to find h w little

the subject is understood,
of view as to .possible

somewhat better point

time to studying

have been giving a little

the me

y the British

an well afford to take lee-

utmost value to t

sons in Mr. ()lads

he government's revenues into

stem.

much interested in this metler

ter is being e

sure o
gress in

introduce soon-

are ever to

omies and

this

,Government.

ye legielatiOn of

Here is op

our WI

ith bank-

our time, to
se two

t to

you notwiehstanding

that

the great pres-

quire whether there is any hope of proejects, and if so, whether

I

can

be of any

service.

The propsect of greatly enlarged expenditures, necessi-

ty

for larger revenues and the lack of any

statutory system by

which the amount of our revenues and expenditures are brought




3
TO

Hon. W. G. McAdoo.

Dec. 11, 1916.

into balance will likely expose the country to an era of Congressional extravagance beyohd all precedent unlees some reasonable check can be introduced in the near future.
I hope you keep well and returned
fortified by a good rest this past Summer.
With kindest regards, I beg to rcma
Respectfully y

Hon. W. G. McAdoo,
Secretary of the Treasury,
Washington, D. C.
BS/VGM




your labors well

Denver, Colorado,
February 19, 1917.

Dear Mr. Secretary:

ahat you say in your letter of February 13th about a Budget System

is unfortunately only toe true. Amy people seem to believe that the word
"budget", were it enacted into statute law, would work some mysterious cure
of our government's financial malady.

But most of than

don't =ow what a

budget is!

The fact is that the word "budget" really signifies a typically
British government institution, the evolution of centuries of experience,
which has never been alloJed to develoe in our government, but which is
nevertheless just as possible with us as with England, because the constitutional basis of the 1,..ng1ish Financial System is substantially

identical with the constitutional basis of the financial powers exercised by our Congress.

The raising and appropriating of money for the British government,

solely by authority of l'arlia.eent, had. its earliest origin In Ilagna Carta.
King John's oath, taken at Runnymede, undertook that "so scutage or aid
shall be imposed in our Kingdom unless

of our

Kingdom",

by the general

council (now Parliament)

and in the 4aglish Bill of Rights it was stated "Henceforth

shall 1110 man he compelled to make any gift, loan, or

benevolence, or tax,

without common consent by Act of t'arliament". And it was proclaimed to be
unlawful for the Crown to levy money "for and to the use of the Crown by

pretence of prerogative for other tine and in other manner
was granted by Parliament."




than the same

To -Hon. W. G. McAdoo.

February 19, 1917.

The British Parliament alone has the Constitutional right to raise
money for the Crown and the Parliament alone has the ri6ht to vote expenditures for the Crown. t long series of contests between the Commons and the
Lords culminated in 1911 in giving the House of Commons exclusive poeer over

money bills, and the louse of Lords since that date is practically deprived
of the power even to reject a money bill.

I refer to this simply to indicate that the constitutional basis
for the exclusive power of the British Parliament (and in recent years
actually the Commons) to raise and aeoropriate the exnenditure of money,

had its origin in the earliest days of the develonnent of the Lnglish un-

written constitution anti is no less rigid and restrictive than are the
?revisions of our more modern written constitution.

Up to this point there is distinct similarity, almost complete in
fact, betwoen the royale/0 raising and the spending nowere of British Parliament and of our Congress, but from this point on a tremendous divergence

in practice appears. A stedy of the English System discloses how experience
has enabled the British Government to adopt methods of finance Which are

within the constitutional powers of the Government (executive), do not abridge

the constitutional powers of the Commons (Legislative), but are nevertheless

practical, effective and economical. This our Government has never succeeded

in doing, largely on account of the jealous and selfish exorcise of the
-spending", I might say the wasting", power by Congress. Our Government

in financial matters is in the position of the unfortunate head of a racily
who has been dragooned into permitting a wife and extravagant daughters to

draw checks on his bank account regardless of the condition of his balance




- Hon. W. G. McAdoo.

iebreary 19, 1917.

and the amount of his earnings. As exhibiting the strength of the anglish

Zystem ia contrast with the weaeness of oers, I enclose a quotation from an
authoritative work published in 1915 on the 4:glish Finance System, by a
wellknown aaglish author, who is a member of ',Parliament.

ehether tho method which should now be adopted is called a 'Budget

Systed" or by se other name, will MKS little difference SD lane as the
chief object to be attained can be accemplishede This object, so carefully
evolved in

land, is to bring the revenues and exeenditures of the Nation

into balance, and to do s3 by providing a certain amount of -stretch", if
you please, on both the revenue and expenditure sides of the account and to

control or restrict present unlimited Congressional appropriations. I think
1 am correct in sayine that the 4hole British budget system rests upon a few

simple principles which I will endeavor to briefly state:
A great part of the revenue of the fiegdom is fixed., constant
and continuing under permanent statutes which apply to practically all
sources of income, such as customs, excise taxes, licenees, stamp taxes,

taxes on rents, etc., etc., with the exception of the two great sources of
revenue Which are adjusted each year by Parliament in order to effect a

balance with the estimates. These two sources are the inoome tax and the

tea duty. Therefore, when the Llinisters of the Crowe prepare the budget,
the "vetee" are brought to a balance with the income and the income to a

balance with the "votes" principally by an adjustment of the rates on these

two items of taxation, taken in connection with the fixing of the estimates"
for the annual "Supply" votes.

All revenues of the British governeent are paid into one fund,
Icncrim as the "'Consolidated Fund", and all monee spent must be paid out of



4.
Po - Hon. W. G. McAdoo.

February 19, 1917.

that fund upon authority of appropriation acts of Parliament. This is
sabstanially the same as our "General Fund."
A very large proportion of the Government's expenditeres, the
same as a very large proportion of its income, is bused upon permanent

and continuing statutes, thus reducing the annual votes authorizine such

regular exeenditures to pro forma appropriation bills, ehile most of the
expenditures for the annual "supply service", as distinguished from the
"continnine services", which hold over from year to year, are based upon annual "estimates" or votes.
lay the Ministry can propose a vote of money to the House of
Commons. No member of the House can offer a vote of money be a private

bill, or even introduce an amendment to the aepropriation hills offered by

the Ministry, ehieh would necessitate an increase in the Ministry's estimates. Any member of the House can offer a vote to striet out a proposed

expenditure, or to reduce it
Zhe Ministers are the representatives of the Crown (executive) so

that this situation, which seems quite extraordinare to an American, appears

Ln a measure to defeat the purpose of the Bill of BleFets to vest in Pernawent ilegislative) exclusively the right to raise and agpropriate money.
That is not, however, the case, - as the powers of the Minlstre are based
upon & Self-den:eine ordinance" of earliament (leeislative) which in effect
resuleps in Parliament redeleeatine to the Ministers of the Crown (executive)

the exclusive rieht to propose votes for revenues and expenditures, Parliament

reserving the rieht, on the other hand, to reject the proposals of the Crown
in whole or in pert, but not to increase them. Of course, at ane time



5.

To-

W. G. LeAdoo,

February 19, 1917.

?ar1iarmnt could change all of this by repealing the act of "selfdenial". An act to repeal the so-called "self-denying ordinance" load

in fact deprive the Hinisters of the Crown of the privileges Which this
statute has conferred upon them, but as the continued exercise of these

privileges is dependent upon the Ilinistry maintaining a pajority in the
House of Commons, the rejection of a Ilinistry's budget and entieate would

have the wee effect as would the repeal of the powers now exercised by
the leinisters of the Crown, because the Government would "fall".

The estieates for all exeenditeres are prepared annually by
the ministry (executive), as well as supplementary estimates, which es-

timates are the result of a lene series of careful study made by each
department of the government in conjunction with the Treasury, and it is

only upon these estimates that votes for expenditures are based. May must,
however, be authorized by an Act of Parliament, in whice the power of the

House of Lords is now limited simply to the right of suegestion and critiAs the bulk of the revenues of the Kingdoe are collected in two
comparatively alert periods each year and as the system of budget and es-

timate, after long experience, has brought the Laccue and expenditure of the
lUngdom to a very nice balance, provision has to be made for a wide fluctua-

tien of income throughout the fiscal year, for the British Government is
cenducted in normal times upon a very narrow balaace in the "Consolidated
Fund."

This is done by a carefully safeguarded system of short borrowing,

conducted either directly with the Bank of angland, or with the money market
through the Bank of England.



To - Han. W. O. McAdoo.

rebruary 19, 1317.

7. The Unisters of the Crown Who preoare the estimates and the
budget, perform in considerable measure the work now performed by our
Congressional Commdtteee and, of course, being meMbers of the House of

Commons, they, or their representatives, are always present to explain
and defend the government's financial program.

It ma:y soem at first glance as though the adoption of anything
comparable with these methods weuld be absolutely out of the question in

this country, but I am very sure that they appeared to be quite as imoossible in ingland before tir. Gladstone undertook his treoendous task of
financial reform, which he succeeded in accomplishing and which loce re-

sulted in the perfection of the present anglish System.
how the question is - what changes are feasible under our constitution and how nay we profit by their experience? There should really be

no fundamental legal difficulty because the constitutional bases of the
ovo Systems are substantially identical. A real reform however Rill require
oany acts of self-denial by Congress IL voting expenditures and some radical
changes in our methods of raisio, revenues. The following might summarize
',ghat is needed:

All legislation involving appropriations of money which are

not continuous (such as interest on the debt, etc.) to be mado solely
moon the initiative of the administration.
Complete budget to be submitted by the administration an-

nually, the estimates of income thereunder to be calculated so as to
cover the expenditures reoaanonded for the current year by the adminis-

tration (executives.



7.

- Hon. W. G. Ecedeo.

-ebruary 19, 1917.

The President should be authorized to veto seecifie items
in the budget and in the appropriations, and both the bedget and appro-

priations should be se classified and subdivided by items that the veto
of any part would net defeat the entire program.
The secretary of the Treasury to be authorized to borrow

regularly on short bills in anticipation of revenues included in the
budget.
(0)

Sueplementary estimates for expenditures which result in

exceeding the estimated budget collections to be provided out of short
borrowings and adjustee in the next year's budget and estimates.
(fi Provision to be made for the creation of a staff of well

paid, pereanent under-secretaries in the various departments.
The question at once arises, how may these changes be accomplished?

The chief difficulty, and a very serious ane, will be in dealing with the
worst feature of our present system, and that is unrestricted appropriations by Congress. My suggestion would be to deal with the matter just as
the House of Commoas has in england. Ask Congress (and I realize this would

involve a bit of a fight) to agree that all appropriation bills shall originate in the initiative of a body comeosed eartIy of the Chairmen of various

conmittees of the House(legislative) and partly of the officers of the administration (executives). Legislation to that end would indeed be an act

of self-denial by the House of Representatives, but I have no doubt it is
within their constitutional powers and I believe experience would demonstrate
Its wisdom.

ealy by some such act of abnegation will the finances of our

gOvernment over be relieved of their present scandalous extravagance and lack



To - Hon. W. G. McAdoo.

February 19, 1917.

of regulation and control.
As to the budget itself, ance the administration can oxercise some
control over the spending of money, the preparation of a budget covering

the income will be greatly simplified, and if this work were done under the
direction of nermanent ender-secretaries, men of experience and ability,

who were trained in the work and satisfied to continue in the service, it
would doubtless be better done than is possible by the present system.
This plan would not be feasible unless coupled with it members of

the Cabinet were given the right to appear in the house and possibly the

3enate as well, in order to explain and defend the proposals of both
the budget and the estimates and no doubt this privilege Should be accorded to the permanent under-secretaries as well.
Under some plan such as the above a considerable part of the annual
expenditures could be made continuous and put upon a thorounhly scientific

Aasis and at the same time the adjustment of the revenues could be effected

by annual changes to the extent necessary only in certain of the larger
items of revenue of a non-political character.
One of the curses of our financial system has been the influence of

politioal considerations in establidhing rates of duties on imports. -201itioal
and private considerations, commonly paraded under the title or "protection",
have no regard for revenues whatever and a therouet going reform or our

finances would necessarili involve taking the tariff out of politics and
investin, the Tariff Board with fairly broad discretionary powers, certainly
with considerable authority for guiding Congress in fixing the scale of
those duties which would be classed as 'nermanent."




Certain items Which

9.
To - Hon. L G. McAdoo.

February 19, 1917.

.niaht produce large revenues could be left in the "fluctuatine class,

as in the case of the nnglish tea duties; - such for instance as a duty an
rubber and on coffee, neither of Which is produced in this country, and

consoquantly not subject to political influences, as in the ease of sugar.
Probably the largest item for annual readjustment to bring the
budget into balance with the estimates should be the income Tax.

The task of bringing about improvement in our financial affairs is

no greater than that which lir. Gladstone faced, and it will certainly take

a tremendous struggle to brinn it about; but the results will njustify the

effort.
1 realize that in this time of great pressure upon the officers of
the government it is difficult for them to give attention to a new and
complicated problem such as this one, but that should net be the excuse for

laying the subject aside. This is one of those aatters to be dealt with by

nrivate and unofficial investigntion and inquiry, or, at any rate, by some
committee or body not compoeed of members of Congress. -4ur government is

now embarking upon a program of expenditure far beyond anything heretofore

undertaken and under conditions where extravagance end waste are most likely
to develop. Is it net, therefore, proper that adequate measures to regulate
and control the government's revenues and expenses should be undertaken without delay?

Resnectfully yours,
Han. N. G. 7. '

Treasury ,epartment,
Washington, r.C.




THE GEOUN'S INI

TIVL.

"It Is for the House of Commons alone to grant money and to limit

the uses of its grant; it is for the House of Lords to assent to the grant,
with the limited power of criticism left to it by the Parliament Act.

The

whole initiative is with the Commons, but in the exercise of that right the
House of Commons has imposed upon itself a very important limitation.

By a

self-denying ordinance it has deprived the generality of it own members of
the power of initiative in imposing charges on the people, and has limited
that power to the Crown. By the Crown, since ours is a constitutional

BM

limited monarchy, we understand the Zing's executive ministers who sit in

Parliament and are responsible to it. So the limitation of initiative by the
House to the Crown is in fact a limitation to those of its own members who
are responsible for the executive government. No grant can be proposed unless a minister demands it. No proposal can be made that a tax be imposed

or increased unless a minister signifies the assent of the Oman to the proceeding, and thus certifies that the money is needed for the public service.
No member not a reeponsible minister can get up and propose the imposition

of a public charge on his own initiative. The matter is regulated by a
Standing Order of theEouse of Commons. It is Number 66 which provides that

"this House will receive no petition for any sum relating to the public
service, or proceed upon any motion for a grant or charge upon the public
revenue, whether payable out of the consolidated fund or out of money to be
erovided by Elarliament, unless recommended by the Crown."

The recommendation

of the Crown may be communicated by a message under the sign manual, or by a

formal verbal statement made in the House by a responsible minister; more
commonly the recommendation is conveyed by a minister simply leaning folenrd

in his place in the House, and touching a document with his -linger as it is
introduced.



2.

The limitation of the financial initiative is sometimes spoken
of as a prerogative of the Crown. The word is an unsuitable one. A pre-

rogative is a privilege of the Crown that exists of its own force. The
privilege or rather duty in question exists, not by its own force, not even
by force of a statute, but by force of a mere domestic resolution of the
House of Commons concerning its own procedure. A true prerogative right,

such as that to make treaties, could net be affected by a resolution of the
House of Commons.

But by rescinding the Standing Order quoted above the

House might to-morrow restore the right of initiative in taxation to the
geaerality of its members. It is in its awn wisdom that the House has es-

tablished the rule, and the wisdom is beyond dispute. Limitation of finan-

cial initiative to the ;:xecutive is one of the sheet-anchors of good eovernment. The balancing of revenue and exeenditure is a nice and delicate

operation; only the Executive can have the double knowledge needed for it,

ef what is needed on the one hand and of how much it will cost, and on the

other hand of how rowel the taxes are likely to yield. It is the Executive

which has sole reseoneibility for the national revenue and expenditure, and
it is the Executive which should have control over them. Its plans once made

must be rigidly adhered to; were the balaece of revenue and expenditure liable
to be upset by any ill-informed, sudden, and comparatively irresponsible ac-

tion on the part of a private member, the nation's finances nest soon fall
into wild disorder. It is ease to imagine the chaos which would result were
a fervent patriot able to rise in his place and move the House, impromptu, to
build ten fresh battleships "out of money to be provided." It is only too
likely that in these days of high-strung emotions Parliament might be stanmeded
at times into some measure not much leEs reckless, which would necessitate

at a moment's notice the immediate introduction of a fresh budget and the

review of the whole tneetion for the year. Against this we are protected by



the necessity for a recommendation from the Crown as a condition precedent
to any such proceeding.

There is another great mischief against which the limitation protects
both the House of Commons and the taxpayer, one that was rife in the past

before the limitation became so absolute as it is now. It protects them
against the improper appropriation of public funds by members for the benefit

of their constituencies. Formerly it was podsible and common for the member
for Lootam, it might be, to move and carry the expenditure of 100,000 pounds

an a new harbour for his constituents. The present rule makes that impossible.

All that a private member can do of his own initiative is to move a theoretical
resolution that money might profitably be spent on such an object, which Commits the House to nothing."




Denver, Colorado,
February 19, 1917.

Dear Mr. Secretary:

In elaboration of my letter of
suggesting in detail

the matters

December 11

relating to our

last, I am below
rrency to Which my

letter had reference and which I believe Should b

he subject of further

legislation by Congress at an early da
on the subject of a "Budget", as su

g you separately
ad by your let

have already been

Some of the various points ment

Reserve Board,

of correspondence with mambo

t received.

the subject

and are

covered by bills now before Cong
experience with the Federal

After more than

it ha

Reserve BPrik8 in

on is needed.

that the following

tates notes (greenbacks) should

The entir

1.

be retirz.

once, th4t.:

7erve Banks assuming their redemption,

gradually substitute in

so as

Fedora Reserve bank not
obligat

the present

been thoroughly demonstrated

they Should
.004

circulation

Federal

Reserve notes (not

In consideration of their assuming this

:ceive

from the government the entire amount of

(say 453 )00,000) of old and in addition govern-

ment bonds for 4493,000,000, bearing a rate of interest Which would enable
the Reserve Banks to

gradually sell them,

banks, the government to receive a tax
the government to say 1-1/27..

but so long as held by Reserve

Which would reduce the net cost

to

These bonds only to be used as security for

Federal Reserve Notes.




2. The Reserve banks should

be authorized to issue Federal Reserve

2.

February 19, 1917.

To - Hon. W. G. McAdoo,
notes directly and freely against gold
count as an asset

and the gold so obtained should

and the notes issued as liabilities of the Reserve

This subject has been thoroughly threshed out by the Reserve

Banks.

Board, but for soe reason Congress

fails

to appreciate, not only the

wisdom but the absolute necessity for

hange

e law.

Congress should provide for

3.

ace value and
e redemption a
coin now in

the recoinage at the expense of the
circulation which is abraded below_the limit of toler
ented wi

any gold coin which is not

force its immediate redem
cies for receiving this
issues of Federal

on.

els,
e n

If the Re

they

a pi_ ::

and demonetize

ibed period, so as to

Banks were made the agen-

could pa for at

s and corr

e

least a part of it by

ondingly increase their gold

,holdings.

The present p

4.

Office of receiving

and

ng at

and all

once 99'

ositors

office ret

the New York Sub-Treasury and Assay
onsiblo depositors for assay and coinage
ssumed value thereof should be discontinued

of gold should be forced

to await at least the assay

ly the Mint return, before receiving payment.

Coincident wi

this change of policy, the Reserve Bank should offer to

purchase all

d under an arrangement substantially similar to that now

conducted by t e Sub Treasury and Assay Office at Now York, under which
they pay

of the assumed value at once.

This would put the Federal

Reserve Banks in the same relation to the American gold market as that now
occupied by the Bank of England in the English gold market.

It would make

dealings in gold for cash purely banking transactions and leave the Mint,

as it should be, a government institution for the conversion of gold bullion



3.

February 19, 1917.

To - Hon. W. G. McAdoo.

into gold coin for any depositor who preferred to deposit his gold
and await its actual minting.
5.

6old certificates

The law prescribing the denominations

should be modified at least to the extent that t

determination of
reasury, or jointly

denominations Shall rest with the Secretary of th

erve Board.

with the Secretary of the Treasury and

of say less than

denominations

old certificate

would enable the gradual retirement o

4400, until sue

th the Reserve Banks
gold stock, but

National Banks had largely in

e power

prive the Secretary of the Treasu

to

resume

and

the

would not do-

the issue of

h extent as became

small denomination gold

This

necessary in

of gold circulation, Which I

order that the count

denu

.regard as a desirab

ment in the hand to hand

circulation

of the country.

ly in $

tion silver certificates, particular-

sue of

6.

0

42.00 and $5.00 denominations,

as thesi denominations 0
been the po

that it

the constan

should

be increased as rapidly

e absorbed in general circulation.

y of the Treasury

Department

I am aware

to endeavor to meet

ng demand for small bills, and that an order has

lately been made providing for the issue of small

denomination United

States

notes; - but, as 1 believe that all the United States notes should be retired, the demand for small bills must

in

that event necessarily be fur-

nished entirely in the form of silver certificates.
7.

Provision should be made for a more rapid retirement of

National Bank notes, with considerable discretion resting in the Federal




4.
To - Hon.

G. McAdoo.

February 19, 1917.

Reserve Board as to the nrogress of the retirement.

My theory is that

the demand for currency at the present time is so groat by reason of unusual business activity, that efforts should now be directed principally
to impounding imported gold, which counts as

reserve, rather than

in contracting other existing currency

does no

but that the moans should be at hand f

the later reti

';nt of Nationel

th the inevita

subsidence of

in

bank notes

large volume, coincident

business and a resulting redunda

unt as reserve;

S legislLtion

should be undertaken now,

era

not commenced until

business slackens.
The operations o

e Banks will require them to

accumulate a consid

vision should

ates standard gold bars.

be made by

er for waiving remelting charges in

favor of Federal Reserv

h enter into necessary undertakings :ith

the government to pro

This mKter is fully c
Harding,

Pro-

lent against an:: lose in that respect.

a letter which I recently wrote to Governor

of Which is enclosed herewith.
Whi

no

°E

ig directly on the currency, I think the provi-

sions of the C

ton Act should be modified so as to eliminate the present

absolute prohib

ion in regard to private bankers serving as hall: directors.

Some modification of this Act is necessary before it is possible to induce
many of the larger Trust Companies to become members of the Federal Reserve
System, and I think it can be shown that the objects sought by the Clayton
Act have already bee l fully accomplished end could not now be defeated by

some modification in this respect.




5.

February 19, 1917.

- Hon. W. G. McAdoo.

The suggestions made above are only those of considerable im-

portance and I

appreciate the

difficulties which

mast be encountered

in securing the adoption of a program as extensive as the one suggested.
Nevertheless, all

of these I regard as important

financial preparedness of this country a

in fact of sufficient importance to ju
attention of Congress

by the

Presideht

measures, looking to the

st any

ify their beingught to the
o the extent

is required.

I beg to remain,
yours,

,Han. W.

G..ailacto

Treasury Department,
Washington, D. C.




ble emergency;

th4

legislation

Denver, Colorado,
February 19, 1917.

Dear Mr. Secretary:
Your letter of February 13th is just recei

much to learn that you have been laid up, parti
pressure Which you must be feeling

andresp

and I regret very
ly as I realize the

ilities that you

are carrying just now.

I am answering your letter
cold a few days ago returning
The two letters enclosed

yself as I ea

but expect to get up today.

ry rough outline the particular
December.

matters I had in mind in

a little

A number of the

are partly or entirely

points referred to b
,covered by amendmen

serve Act now before Congress

upon recommendation

rve Board.

I wil

if you

e these matters with an argument

4-very

dk there is any use

erely hoping t

covered

t an early

date

hat can be made of it.

you will be around and completely rend with kindest regards, I am,
Very truly yours,

Han. W. G. McA
Treasury De artment>
.Ashington, D. C.

BS/CO

Enes.




2arch

e, 1917.

Dear Mr. Secretary:
Governor leardine advises me that he has referred to you the

sUgeestions I made a fortnight ago loncerning certain changes in relations between the Asnay Oft Ice and this bank which would eive us ereater

fanility in dealing in gold, es

tally in regard to the international

areects of the situation, and has asked mo to write you direct and at
length on the matter, which I now take pleasure in doing.

Three chenges are suggested, having for their object To emelt) us to act with greater facility and
without loss in earmarking gold for, andshipping eon to our foreign agents, and
To enable us to purchase whatever foreign gold
coin or fine gold bars are offered to the
essay Office in round amounts of over
e1,000,000.
7;ith respect to (1), under the terms of the agreements nee In
process of nogotiation,with the dank of ,;.ngland and the Bank of Franco,

we agree to eeemark gold 'either in coin or in United States mint glad

bars, for our oorrespondent at their bullion value.

we are obliged to charge
bare of 50 cents

per

cCrrespondent we are

In the case of bars

our correspondent the Assay Office charge for

01,000., and if such bars are later credited to our
obliged to charge it the Assay Office charge for re-

melting of el.;e0 per 1,000 ounces.

The essence of each of the agreements

above referred to is that each ban shall undertake for the other to perform simIlar services on exactly similar bases.

than the Bank of ieesland

or the Bank of France earmarks gold bars for this bank there is no deduce



Eonorable Wo U. Meath)°,

0/17.

tion for ohargen as would be the ease in Uew York, nor, when such bars

wore returned to our credit at the 'Nina of England or the Bank of Orono°
would there be any oharge to our acoounl similar to the re-melt oharoe
here.

'de shall probably usuollo want to earmark oold bars rather than
gold coin owing to the unoertainty as to whether the coin we get from the
Cubtroasury in exohanoo for cortificatoo will be new coin of full voluo

or coin slightly abraded.
Frankly, we have felt a little embarrassed at having to subject

the Bono of :and and the Bank of France to these chargos in handling
gold for their account since they have no similar oharges to sobject us
to waon we ask them to perfonm similar sorvicos for us.

In our proposed relotions with these institutions, and the same
would be true of others with which we might mato similar orrano;,oments,

tho transactions oontomplated are of such avestriotod nature that in settling balanceo we would not, like the ordinary comoercial bank, be able
either to remit in exohange or to ship gold, whichever might be the more

profitable after taaing into consideration abrasion, assay Office chargos,
etc. The proposed aoroment obligates the debsor institution at the re-

quest of the creditor institution aotually to ship the gold whioh haz been
earmarkod, and in order to fulfil this obligation we should be put in a
poeition to secure the gold and ship it on as favorable a basis as the Bank
of Ongland or the Ban: of France could rerform a liko sox-vice for us, and
without the considerablo loos whioh WQ would incur if we ourselves had to

stond the cost of securing United Otato mint bars.
It !A:mMS to us that there would be a compensating advantage to

the govornmont in having it male as easy as oracticablo for us to earmark

gold bars inatead of United States toold coin for our foreign correspondents




ee

L;. McAdoo,

3/ 3/ 17

since the exportile 0: suoh corn would require, potentially at least, the
minting of additional ;old coin end would entail experwe upon the government.

In this connection tie .e it also be oonsidered the exkense which

the Federal Reserve. .,istem is saving the government by issuing its notes

in eubstitetion for gold certificates, not for its own profit but solely
This saving will boxreatly increased when the
in the public interests
has been amend& so as to facilitate the ',recess.
Mrs 'Bovee superintendent of the essay Office has recently asked
tv, whether re could help him for a few months by storing ue to perhaps
4300,000,000. to 4410,000,100. of gold burs in our vault and we have told.

him that while it would not be possible for us to r;tore any such amount en

he indicates aar attitude would he to cooperate with end essiot him as far

as may be precticable without interfering eith our on JAcilities and those
of our member banks.

We are now studying what now vault compartments we

are likely to need during the next year or two, and have told ler. Boyce
that when this survey is finished we would reply to him definitely.

wo

-7e stated to him, however, that if the remission of the 50 cents per
,000. charge could be, made we should be inclined to acquire romptly end

eerry on hand e subetantidl amount of gold bars in anticipation of their
being needed under our foreign agreements, which would give him eerie mere

of relief even should we not be able to store bars for his account.

It Is our desire, threfore, in view o.

effect which

we teel the agreements now under negotiation with the Bank of :ngland and

the Bank of France will have in steadying credit conditions in the United

States with conscluent advantae to our commercial, industrial and agricul-

tural inteeests, end in order that we may be able to operate pith the greatest freedom -ender these agreements, if concluded,



Ponorable

G. Woodoo

TOat we should be able, without -plying the ohare of
51 cents 'per o1,000., to orocure from the Alaraa7
Offies from time to tine such reasonable amount of
United Otaten mint oold bars as we nay desire normally to keep on hand and Sal we may need for transactions with our foreign oorrespondento. Of
0ourse, oc ohould not expect to make a oractice of
re-selling such bare to our member banks unless and
until our relation to the Treasury Oeoartmont and
the ssay Of. ice required or oonoitted os to do so.

Tht on any United States mint ;old bars Which we nay
have procured from the osoao Ofilce und later with
to return for cormersion into gold certificates,
the Asay °Moo should waive the oharoe for remelting of 41.00 per 1,100 canoes upon our written
guarantee that the ixars reVarned were the identical
ones received from it and had not boon out of our
vaults. OS understand that this hao already beela
done in some cases for individuals or lostitutiona,
and the precedent therefore seems established for
the extontion of the privilege, under appropriate
safeouarda, to this bank.

With resoect to (2), alr000y referred to briegly in my letter to
aovornor Rarding, I will ask the orivileoe of deferring oriting you at length
until some time next vet* 4s or study of the details is not ouite completed,

but I am writing you to-day about the other ohanoes desired as Mr. Bowe tells
us he expects to be inWashiro;ton early next week and you might with to dielass them with him.

We trust that the waivino of these two charges in our case, to the
extent tool under the conditions above deooribed, may receive your favorable

consideration, and it would be a great satisfaction if they ould be adjusted
soon os we Should like very much to be able to eliminote mention of them from

our or000 al to tha Bunk of rance whioh should oo forward some tint next
week.

Respectfally youru,

Honorable W.

ReAdoo

Secretary Of the Treasury,
lOashinston, D. C.


http://fraser.stlouisfed.org/
.49J/ BAIT
Federal Reserve Bank of St. Louis

Uhairnan.

March 14, 1917.

Dear Mr. secretary:

have delayed writing you further in continuance of y letter

of larch Zrd until after the meetine of our board of directors to-day4
in order that I ml. ;ht have wathority to convoy to you certain assurances
as sageested by Governor Hardiege
Vie are no authorized by our board of directors to assure you

that if you will reestablish the old rule under which the essay Office
advanced only. 90% of the estimated value of eold deposited

eith It, this

hate will offer to advance to resionsible earties under apertpriate guarantees and for lots of e1,100,100. and over, 98% of the estimated value
of gold bars de,osited and 99% of the estimated value of foreign gold coin

deposited subject to determination of the actual values at the asay Office.
Our offer would be subject to discontinuance upon reasonable notice, but
least
it would be our intention to continue it in foroo/during the present ex-irt

traordinary movement of ;old towards this country reuniting from condi-

tione arising out of the earopean war.
Governor Harding suggested also that we should write you what
advantages would accrue to the Federal reserve baqic from such reestablish-

merit of the old rule.
Generally seedking, it would enable this bank to have gold com-

ing Into the country pass

meelethz1 it instead of ease Ix it. How muoh of

the :;old It could retain would depend upon varying conditions.

Specifically, the reestablishment of the rule would enable the
bank ti )



to 14y out it clearing house settlements any silver certificates

\

42

Honorable W. G. McAdoo,

3/14/17.

and legal tender notes it might hold, and thereby to maintain all its re-

ere in :old; and (2) at times, to issue Federal reserve notes against gold
for the raluirements of member banes.

Of course, the possibility of is-

suing notes against each gold would be very much increased if the reserve
amendment now under consideration by Congroes were enacted.

The reestablishment of the rule would put this 'oank in the

same

relation with regard to the essay OfAce in which the eenk of inland finds

itself with regard to the British mint.

The seility of the Bank of Lneland

through this relation to divert through its machinery all gold imported into
England is considered a most important element of strength, and we have no

doubt that a similar relation to the 4say Office taken in conjunction with
a revision of certain Assay Office charges to us, referred to in my letter
of Larch 3rd, could be developed in time into an equally important clement

of strength for the Federal Reserve System.
Respectfully yours,

Chairman.

Honorable W. G. leadoo,

Secretary of the Treasury,

Washineten, D. O.
,17 BAH




Denver, Colorado,
Mprch 27, 1917.

PalS.iNAL.

Dear Mr. Secretary:

This is the most tryins absenco from my work that I have over
suffered. but I am looking forward to returning by the first of June,

barring unforseen developments and, in fact, could return sooner than
that if mg presence was needed.

This letter is to urge that you do not hesitate to call

on me

for any work here, i New York or abroadin Which I can be of any service
to the Government.

I am led to write you just now because of suGgestims, Which seem

to have the apl)earance of authority, that you aro contemplating financial
arrangements abroed ii connection with war developments.

it relations in

London and l'aris with the bankers are, as you know, of long standing and

I hasten to assure you of my desiro to utilize them in any may Which would
be of service to you.
With kindest regards, I am,
Very truly yours,
Hon. W.

G.,...1..1464400,

Treasury Department,

,ashington, L. C.

BS/CO







Form 1217

ESTE47,11vM UNION
AM
TEL

OF SERVICE DESIRED
dst Day Message

iy Letter

WESTERN UNION

Night Message
. ight Letter
Patrons should mark an X opposite the class of service desired;
OTHERWISE THE TELEGRAM
WILL BE TRANSMITTED AS A
FAST DAY MESSAGE.

Receiver's No.

Check

am

Time Filed

NEWCOMB CARLTON, PRESIDENT

Send the folloWing telegram, subject to the terms
on back hereof, which are hereby agreed to

Denver, Colorado,

Anril 3, 1917,
Han.

UcAdoo,

Treasury 1o7artmont,

biu3ton, D. C.

1 ennvot enlist but am relyint; unon you to advise mo if there
anythine ciao that I can do and assure you that my health w111 juntify
mg raturnin6 now at almost any time.
Benjamin 3tron6.

Chg. Benj. Stron6,

4100 :dontvlow Blvd.,




ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERMS:
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for comparison. For
one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND PAID FOR AS Prin consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond the amount
received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the sum received
for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in cipher or obscure
telegrams.

In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether
caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless a greater value is stated in
writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based on such value equal to one-tenth of
one per cent. thereof.
The Company is hereby made the at,:: t of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to reach its
destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities or
towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at Ids expense, endeavor to
contract for him for such delivery at a reasonable price.
No responsibility attaches to this Compa:ly concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such office
by one of the Company's messengers, he acts for that purpose as the agent of the sender.
0. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is
filed with the Company for transmission.
7. Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition to all
the foregoing terms.
S. No employee of the Company is authorized to vary the foregoing.

THE WESTERN UN ION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON. PRESIDENT

CLASSES OF SERVICE
FAST DAY MESSAGES
A full-rate expedited service.
NIGHT MESSAGES
Accepted up to 2.00 A.m. at reduced rates to be sent during the night
and delivered not earlier than the morning of the ensuing business day.
DAY LETTERS

A deferred day service at rates lower than the standard day message rates as follows: One and one-half times the standard Night
Letter rate for the transmission of 50 words or less and one-fifth of
the initial rate for each additional 10 words or less.

SPECIAL TERMS APPLYING TO DAY LETTERS:

In further consideration of the reduced rate for this special "Day
Letter" service, the following special terms in addition to those enu-

Letter shall be delivered on the day of its date absolutely and at all
events; but that the Company's obligation n. this. respect is subject
to the condition that there-S. 11 reain sufficic,t time for the transm
mission and delivery of such , sr Letter on the da: of its date during

?,

regular office hours, subject t -the priority of the tr.-71sinission of regular telegrams under the conditions named above.
No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2.00 A.M. for delivery on the morning of tiic ensuing
business day, at rates still lower than standard night message.v ates, as
follows: The standard day rate for 10 words shall be charged for th ,t ransmission of 50 words or less, and one-fifth of such sta,ndard day rat1
words, shall he charged for each additional 10 words or less.

fore

merated above are hereby agreed to:

Day Letters may be forwarded by the Telegraph Company as a
deferred service and the transmission and delivery of such Day Letters
is, in all respects, subordinate to the priority of transmission and
delivery of regular telegrams.
Day Letters shall be written in plain English. Code language
is not permissible.
c. This Day Letter may be delivered by the Telegraph Company

by telephoning the same to the addressee, and such delivery shall be a

complete discharge of the obligation of the Telegraph Company to
deliver.

This Day Letter is received subject to the express understanding and agreement that the Company does not undertake that a Day
D.

1

SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rate for this special "Night
Letter" service, the following special terms in addition o ',Lose
enumerated above are hereby agreed to:

Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect

to delivery by mailing such Night Letters at destination, postage
prepaid.

Night Letters shall be written in plain English. Code language
is not permissible
No employee of the Company is authorized to vary the foregoing.

April 9, 1917.

7y dear 77r. Secretary:

Concerning the proposed Goverment bond issue, which was discussed
by the governors of the Federal reserve banks with you last week, we have

taken occasion at this

bank to confer with a few of the leading bankers in

this city, including sons
Pa

officers.

private bankers, national bankers and trust con-

For purpones of

discussion we

took as a text the

nenorandun

on bond 'ssues which the governors of the reserve banks prepared and of
which I think 7r. Aiken has sent you a copy.

In case, however, you have

not received it for any reason, I an enclosing a copy herewith for ready

reference.
The consensus of opinion on the points suggested in the memorandum
was as follows:
1,

As to amount:

It was unanimously agreed that an issue of

five billion dollars could not be placed at one time at any reasonable rate
of interest.

The ma,iority-of those

conferred with

felt

issue could not be placed at Ilay rate of ipterest at all.

that such a

large

They wereall of

opinion that it would be wise, if the Government decided that four or five

billion dollars should be raised by bond issues during the first year, that
an announcement to that effect night

be made but

that the

first offering

for

public subscription should be for one billion dollars or, at the outside,
two billions.

They also were unanimously in accordance with the governors, memo-

randum to



the effect that the issue should be free from all taxes and should

2.

Honorable 74 G. reAdoo.

most certainly carry the privilege of

carrying a higher interest rate

OM*

conversion into any subsequent issues

that might be brought out during the period

of the war.
2.

As to rate:

They were all of opinion that an issue of as much

as a billion dollars could not be placed at
issue could be placed at 3

be placed at ea
be

placed

at 3

31.

They thought that such an

l/e, and that an issue of
consulted

A few of those

l/21 if there was a very able

two billion dollars could

thought that two billions might
publicity campaign conducted.

They were all strongly of opinion that the price

As to price:

should be par and interest and that an issue of the size contemplated ought
not to be offered to the public for tenders but

scription at

should be

offered for sub-

the flat rate.

They were substantially in accordance with the

As to terns:

views of the governors to the

effect that the bonds should be redeemable af-

ter a certain number of years from the date of issue,

with an annual

retire-

ment thereafter of a certain pereentage of the total amount in order to
the

whole at a given tine;

or in

the alternative that sufficient sinking fund

provisions should be provided for.
that

retire

However, most of those p

an annual retirement wasapreferable to a sinking fund.
As to

nations should be as lo' a

bonds were

The opinion was unanimous that the denomi-

denomination:

as 50. and possibly as low as C, 20,

but that if f:20.

to be issued, there should not be any ?;.50. ones.

As to

subscriptions:

that the placing of the bonds and

They agreed with the governors' memorandum

obtaining subscriptions should he handled

through the Federal reserve banks as fiscal agents of the Government and that
subscriptions should be received by all national banks, state banks, trust
companies, savings banks, private bankers and postoffices.
that it would be unfortunate to designate



certain private

They all agreed
bankers (to

the ex-

3.

Honorable

W. G. McAdoo.

4/9/17.

official receivers of

elusion of others) who would be included as
as this would tend to create hard feeling.

subscriptions,

They suggested that instead, any

private banker should be authorized to receive subscriptions for the reserve
banks.

They also felt strongly that a first-class reblicity committee should
be organized as promptly as possible to take

charge of the advertising and

that this committee should be formed of advertising, publicity men and bond
distributors, most of whom should have larger experience than the publicity
men of the bond houses and banks themselves.

7.

77ethod of receiving subscription

payments:

The general opinion

the subscriptione should all be payable at once and not by in-

prevailed that

stalments, especially if the initial

offering was

any event, subscriptions in amounts of

for a billion dollars.

In

41'1,000. or less should be cleaned up

in one payment, even if the larger ones night be paid by instalments.

Deposit of

S.

proceeds:

The feeling was

unanimous that the bulk

of the proceeds should not be transferred to the Treasury or the Federal reserve banks.

Upon the question of leaving subscriptions with state banks and

trust companies (not members of the Fedora/

Reserve

System) there was not a

general expression of opinion, but it was clearly brought out that if it was

decided

that the proceeds should not

tions, this

be deposited with the nonmember institu-

intention on the part of the Government should be made clear suf-

ficiently in advance for

such institutions

to prepare for the shifting of

their deposits.

The general feeling was that the Institutions with whom the deposits
were left or made should not be required to pay interest on then, as this would,
as a practical natter, compel them to make use of the funds in order to earn
their interest charges, which would have n detrimental effect on the general
situation;

and furthermore, that if no interest were charged on

efforts of

 the


the balances,

the institutions to obtain subscriptions night be increased.

4.

Honorable

0/17.

. G. McAdoo.

There was some criticism of the governors' suggestion to the effect that do-

posits in the other institutions be made by the Federal reserve banks, the
general opinion being that such a provision would cause an unnecessary complication and that the deposits might

be made with the institutions or left with

them direct by the Government, instead of having

it made by the reserve banks.

The feeling was very strongly expressed that it would be far better

to have a comparatively small initial

issue at an attractive rate, so that the

bonds would be quickly taken by the ultimate investors and go to a slight premium, which would have a very stimulating effect upon

further issues.

It

was also suggested that the initial issue might be accompanied by an official
statement to the effect that further iseues would be forthcoming as the Government requirements might dictate.

One advantage which this method would bring

about was stated to be that a good deal

of hesitation would be felt by many

investors in committing themselves to large subscrintions of Government bonds
before they knew what the taxation prograrele of the Government was to be, as

the matter

of taxation would have a very direct bearing upon the disposition

of many investors with respect

to making large commitments.

tion it was pointed oat that the

prevalent rumors concerning

In this connec-

the possibility

of general very heavy increases in many forms of taxation had begun to have

an effect upon both investors and bnsiness men, who were in a state of uncer-

tainty as to how seriously their

holdings and incomes might be

affected.

With respect to the size of the issue, I think there was a general
sentiment that an initial offering of more than two billion dollars would
necessitate a violent readjustment

in the values of existing securities and

would thus add another obstacle in the way of nlacing the loan.
One more reason advanced against such a large initial offering was
the fact that there was no existing admosphere which had

aroused the country,

such as great loss of life among our fighting force or Zeppelin or other attacks



5.

Hon.

u.V9/17.

on United States soil, so that the people had not been worked up to carry a
large floatation along on a wave of enthusiam.
I hope that

these suggestions may

As this conference was

prove of some assistance to you.

arranged wholely on the initiative of Mr.

Jay and myself, we took great pains to indicate to those with whom we talked
that we were acting on our own initiative

and not at all at the request or

suwestion of yourself or anyone else in the Government.

and that we desired

their euggestions and advice for our own guidance in making
as to how any bond issue night best be handled, and
treated in an

recommendations

naturally

extremely confidential manner.

Very truly

yours,

Secretary.

-Inorable T. G. !ToAdoo,

Jcretary of the Treasury,
ahington, P. C.




the

matter was




Denver, Colorado,
April 11, 1917.
PERSONAL.

Dear Mr.

Secretary:

Our association and friendship of the last two and a half years
is excuse for this letter.

For some months past letters have been coming to me from our
mutual friends, almost all of them referring to the great pressure under
which you are working and the severe hours of work that have been imposed upon you.

Nay I offer myself as an example of the consequences of

trying to do too much one's self.

I am writing this because you have just

lost two valuable assistants in Mr. Malburn and Mr. Peters,

and

I hope

that in this crises in our affairs where your labors mean so much to the

nation, that you will take the wise course of selecting a staff of competent assistant/se to relieve you of the burden of detail and give you op-

portunity for some fresh air and recreation.

I have been hoping to read

in the newspapers-that you have appointed a special staff of assistants
to deal with the particular problems aribing out of war and shall be
grievously disappointed if you are not milling or do not find it possible
to adopt that policy.

May I also venture one or two suggestions in

regard

to the

financial program?
Under Chancellor lacKenna's budget, Great Britain in the fiscal

year ending March 31st collected over $2,800,000,000
sufficient to discharge the

present

from taxes, a sum

funded debt of the United States




2.

April 11, 1917.

To - Hon. W. G. McAdoo.

Government and of every state, count2 and municipality.

This country

has more than twice the wealth of Great Britain PTA it should certainly
be possible, by an equitable distribution of taxes, to pay a largo proportion of our share of war expense by that means, rather than by permaEngland's financial

nent borrowings.

history during the

demonstrated

the Crimean war and the Boer war

Napoleonic war,

that a program of war

finance

must be based upon tax revenues sufficient to meet the normal

expenses

of the Government, interest, sinking fund and a large margin

excess of that for

security. I

ernment will not hesitate

to

sincerely hope, therefore,

meet

the present situation by

that

in

the Gov-

an extensive

program of taxation, equitably distributed among all classes.
We are about to ask the people of the country to

very

large loan, but

subscribe

to a

must recognize that if the war continues it will be

only the first of a number of such loans.

I hope that the experience of

the belligerent nations will govern our policy in arranging the terms of
the pending loan.

It is absolutely necessary that the loan should be

over subscribed and sell

instantly at a premium.

That might appear to be

an immediate loss to the Government in the rate of interest fixed in order
that the loan Shall bring a oremium at once, will ultimately be a source
of economy

in

the ease with which subsequent loans are placed and the

certainty, if handled in that way, that subsequent loans may be placed on
better terms than the original

loan, Which is the

great desideratum.

There-

fore, I hope that Congress will vest in you all discretion necessary for
determining the terms of the loans and that you will decide to make an
issue at par, fixing the rate of interest and terms so that there will be
no question as to

the premium Which

it will command.




3.

To - Hon. W. G. McAdoo.

Aoril 11, 1917.

These are just a few of the things that I would have had opportunity, no doubt,

to express had 1 been able to attend the last conference

of Governors.

Again assuring you of my hope and desire to be of some service
to the Government and to you personally in connection with these matters,
I beg to remain,
Sincerely yours,

Hon. W. G. McAdoo,
Treasury Depiirtnent,
Washington, D. C.

C




Copy for Governor Strong.

April 209 1917.

Dear Mr. Secretary:
We received at noon to-day Governor Harding's

telegram stating that the rate on the certificates bad been
Changed from 2 Ap% to 3%, and promptly oommanieated with
the variaab institutions In this city whiall yesterday had

given us subseriptions aggregating over 4009000,000.

They

all expressed great satisfeetion at the change in rate and
were especially pleased to

learn that

both you and the Fed-

eral Reserve Board had appreciated their response to the

issue on the original basis.
Please accept our warmest appreolation of your de-

cision. It has completely changed the public attitude towards the now certificates, will greatly increase the number
of buyers, and, will oreate a broad market for them which

will make them

Dul

st desirable and liquid bank investments.
Respectfully yours,

Chairman.

Honorable W. G. LcAdoo,
Secretary of the Treasury,
Washington, D. C.




May 7, 1917.

Honorable Wm. G. McAdoo,

Secretary of the Treasury,
1),ehington.

My dear Ir. Secretary:
I was very much touched and pleased by the
kind things you said about my return 15hen we had the
pleasure of entertaining you at luncheon in New York
last Friday. I take this means of expressing my
deep appreciation, which T will do in person at the

first opportunity.
hear from New York that your remarks were

received with the greatest enthusiasm, and have gone
a long way tCward giving this immense loan transaction

just the kind of a start that is needed to make it
a success.
Yours. very truly,




August 22 1 7.

Dear Mr. Clagett:

I thank you for your letter of August 21st
advising me that Secretar McAdoo will see me on Monday,

August 27th at noon.

I expect to be in Washington at that time to
keep my appointment with the Secretary.

Very truly yours,

Governor.

M. B. Clagett, Esq.,
Private Secretary,
to Honorable W. G. McAdoo,
Washington, D. C.

May 10, 1918.

Dear Mr. Secretary:

I am concerned and grieved to learn of your illness
hope it isneither serious nor painful.

and

You will also always have

in mind the importance to the country of your health and ability to
carry on the great work you are

doing.

This is just a line before leaving for a week's rest to
congratulate you upon
Loan.

the magnificent success

of the Third Liberty

It surely was an achievement of the first order and one of

which you will certainly be proud for the rest of your life.
After a short rest I am hoping to run over

to

Washington

and have a little of your valuable time to discuss plans for the
next loan.

Mr. Jay has already handed you a memorandum covering

much of the ground that

we have discussed

here.

I am convinced

that we must develop permanent organizations and make the work continuous the year round if we are to continue to realize the success
of the last three loans.

With warmest regards and hoping that you will soon be on
your feet

again, I am,
Very sincerely yours,

Honorable2E,_1,_NeA404),---.
Secretary of the Treasury,
Washington, D. C.

BS,/H1G



May 31, 1918.

Dear Secretary McAdoo:
I was very much pleased indeed to have your letter of the twenty.ainth
this morning, but feel guilty in having added anything to your work when you are
The fact is, I have been a good deal worried
so hard pressed and not well.
Constant inquiries come to me
about you, and am not the only one by any means.
every day about your real condition and who ter you are seriously ill or simply
I have reassured your many friends by telling them that after talking
wora out.
your voice out of action you developed laryngitis and finally had been persuaded
to get rid of it by resting.

It

was not only the
The Third Liberty Loaa was a magnificent success.
amount raised, but the widespread enthusiasm and interest displayed by all classes
The organization in New York gave the radical socialists on the Last
of people.
side a terrible jolt and much wonder is being expressed here as to the change of
heart among that class of our people who had failed to respond in former loans.
Your letter gives MB an opportunity to write a few words about the proI am uelighted that you had dourage to insist upon tax legisgram of taxation.
lation at this session and you will be pleased to know that almost without excepsitars is a strong, insistent demand
is the feeling here in Lew York.
among business men here to see taxes increased scientifically so that the corporations and individuals that are benefitted in business profits by the war shall pay
They feel that a very large
over in taxes a large portion of these war profits.
revenue can be collected for the Government without hardship on anyone by the
Nor are they going to object
imposition of scientific taxes of that character.
to higher income taxes, particularly on unearned incomes as distinguished from

tion that

working incomes.

No one knows better than I do how earnestly you desire these very things
and if, in any way, I can be of assistance you will, I am sure, command me without
hesitation.
I return to you, reinforced, the
Please take care of yourself.
sentiments expressed in the last paragraph of your letter.
With warmest regards, believe me,
Sincerely yours,

Honorable Wt. G. MeAdoo,

White Sulphur aprings,
Virginia.

BS/M88




Try+^,

June 15, 1918.
l'OnN
;?:

AitY \

Dear Sir:

in the absence of Mr. Strong from the city, I am sending
you herewith copy of a telegram received this morning from Mr. J. F.
Welborn, Denver, Colorado, which explains itself.
Mr. Strong will no doubt get in touch with you on Monday,

on his return to the office.
Very truly yours,

Secretary to Mr. Strong.
Honorable William G. McAdoo,

White Sulphur Springs,

west Virginia.

GB

Encl.




2'
June 15, 1918.
ICI\b

/ (Pr

Dear Secretary McAdoo:

iq

I hove taken the liberty, without your knowledge, of telegraphing my friend J. F. Welborn, President of the Colorado Fuel and Iron Company,
73enver, ineuiring for imformation such as you will need in connection with
your trip. The substance of his reply eae telegraphed to you this morning.
Lot me say that Welborn is a splendid fellow, a very warm friend,
and he and his friend W. V. Hodgee, another fine fellow, are exceedingly
anxious to do everything in their power to give you just the kind of trip
that you need. If you would feel willing to put yourself in their hands,
you can surely rely upon their carrying out any wish that you express which
would serve to protect you against entertainment or any other interference
to your complete roast.
I know Colorado pretty well. While the altitude is stimulating,
the weather is gorgeous at thie seeten and you would be, in a few weeke, so
thoroughly rested and restored that I feel our:. the balance of this year
would present no terrors ahen yeu came back refreshed and invigorated.

I would be tempted to invite myself to be yaur guide and companion
were it not my knowledge that neither you nor I could keep away from con-

tent discussion of all of our problems and perplexities, end that is just what

you are going away to avoid.

I will keep you posted as I hear from Welborn and possibly between

us ne can put the Secrotary of the Treasury heck on hie felt again.
With wermeet regerde,

Sincerely,

Honorable Wm. G. McAdoo,

White §ulphur 8 pringe,

Virginia.

138.M81

Enos.




October 19, 1918.

REGISTERED ;JAIL:

Dear Secretary Mc.i,doo:

It came to my knowledge that the President expected to be at
the New Amsterdam Theatre Friday night of last week, and a number of the

members of the Liberty Loan Organization went there in order to help
along the ollebration occasioned by his presence.

You doubtless read

that something like Z75O,00 of bonds was sold by Mr. Hazard to the audience.
Some of the members of our organization subscribed rather generously that

evening and two or three of them have asked if it would be possible to
obtain the President's autograph on a 450.00 bond, as he did sign a number
of bonds which were sold for cash in the audience.

It just hapiened, as

luck would have it, that we all seemed to arrive at the theatre strapyed
for cash in our pockets, and didn't have the money to buy the necessary

00.00 bonds.
On the chance that you will not think this an unreasonable request on my part, particularly as two of the bonds are for our chairmen,
including myself, I enclose three 450.00 bonds by registered mail, anti

if it is possible to obtain the President's autograph on them, we would
very greatly appreciate it.
Cordially,

Honorable Vim. G. McAdoo,
Secretary Of-tiftrTrtabbil,
Washington, D. 0.

BS/MSB
Enos.



Alt

1

EllAL
eiUL

011014141,

October PO

-'

14.4

22 1921

RESER

VZ

24411"0/Po-

lili

Ity dear oecretary UcAdoo:

I am most grateful to you for your courtesy in sending me those
bonds bearing the President's autograph, and particularly for the one
bearing your own, which you sent for me personally.

Of course you realize

that the Government will never be called upon to pay these bonds;

they

will be highly valued souveniers of some work which we all enjoyed, but
really of the privilege Which we particularly enjoyed in doing some work
for "Uncle Sam."

Many thanks for the good wishes and the good advice contained in

your letter. Just to show you how much I value it, I am going to take it,
as I am leaving on Wednesday for ten days' absence, and then after a short
hope
stay at the officeato go away again.

With congratulations upon this fourth successful loan, and
warmest regards, I am,.,
Very sincerely yours,

Honorable Wm.

Secretary

The Treasury,

Washin2;ton, D. O.
BS/Lia




November 25, 1918.

Dear Mr. Jeorotary:

I am writing this letter with the greatest possible reluctance
and regret, for I realize that it is quite impossible to express my dieappointnent in learning of your decision to relinquish your offiee an
Secretary of the Treasury, and the difference it will mean in my personal
relations with your department.

No one, I believe, realizes, either in the Treasury or outside
of it, what a splendid administration you have had quite so well as I do.
It is best illuatrated by a comparison of what hae boon done by the
Treasury Department in this war and what happened during our Civil ear.
Through eecretary Uhaee, as : recall, the Government, shortly after the
war broke out, paid as high as 12% for temporary loans. By the first
of January, 1862, the noveenment, and practically all of the beaks of
the country, had suspended specie payment. In the later days of the war
the Governnent sold its bonds bearing 65 interest at the equivalent oe
about 455 of par value, gold basis, and the entire cost of the mar was
Jeee than a third the cost of this ear, and much less than the total
amount of the Fourth Liberty Loan.
We abandoned sound principles of
finance in favor of fiat money and started the country on the rampage
of speculation, witnessing at one time, in consequence of our defective
police, a quotation of 280% for gold in exchange for paIer money or
bank credit.

When the history of the Treasury in this ear comes to be
written, it will be foetid that the Government never paid over 4, 1/2%
for bank loans or over 4 1/4% on its bonds; that there has not only
been no premium on gold, but, in fact, that gold payment has been continuted by every bank in the country, and by the Treasury as well;
that we have adhered to sound beeking and monetary principles; and that
during this year are one-half bank failures have probably been less in
number and amount than during any similar period for a great many years
past.
I recite this simply to give you a very slight evidence of
the extent of the loss which 1 believe the country suffers by your
retirement.
Your administration has been a notable success - a great
personal achievement for yourself - and I know that you will be rewarded by the satisfaction which it affords you to have served your
country so splendidly.

In conclusion let me say that I suffer a real and grevious
personal loss to have our association ended.



Sheet No. 2

Secretary icAdoo

11/2418.

L-hing you in your i'zture affairs success and happiness
and everything which you so justly deserve, I am,

Faithfully your friend,

Honorable 74n. G. McAdoo,

Se-aretar, of the Treasury,
washington, D. C.

133/MSB




December 12, 1916.

,3ar Secretary McAdoo:

Your letter is one of those letters which one receives
now and then that gives a real glow. I am so glad to have you say

that our association has been a pleasure to you. It has been a

great pleasure to me, Pnd an inspiration as well.
When you come to New York, whether it is to practice

law, to go into business, or whatever it may be, I hope that I
may be of some service in forwarding your plans, and, particular-

ly, be counted one of your friends.
With warmest regards, believe me,

Very sincerely yours,

Honorable WM. G. McAdoo,

Secretary of the Treasury,
Washington,

B$/LB




May

my dear

r, McAdoo:

22, 1919,

.//

I am mighty glad to learn by yours of the nSeteenth

ti,at you will be at tha dinner on the twenty-eighth, and look forward to soeiag you there.

I have refilod the caveat and just as soon as the schedule
of changes is worked out will drop in to see you about it.
frank to say, however, that the boys are very discouraging,
Cordially,

Honorable VDU G. AcadoQ,

Vre,idoo, Cann

franklia,

120 .iroadwAy, Dew York.




I am




.410 0,1kRY

22

N1 AI

1-11DER,,,I,

RESERVE

::ay 22, 1919.

My dear 'Lit. Shaffer:

L. Strong directs me to ask you to kindly
convey to flt. Eilldoo his thanks and appreciation for the
autographed photograph Which he so thoughtfully sent to him-.

As Et. Strong desires to reciprocate, I
take pleasure in forwaritng at his request an autographed
photograph of himself.

Yours very tray,

Encl.

J. M. Shaffer, Esq.,
Secretary to Et.
120 Broady-IvoN:1*C.

Secretary.

1919

BANK

My dear Mr. Licadoo:

Aany thanks for your kind note of the twelfth. This

last loan, I admit, worried me a bit, but you will be glad to
know that our subscriptions in this district will probably

be a billion and three-quarters on our quota of a billion
three hundred and fifty million.

And I am rather hopeful that

we will be a the top of the list this time

You can not

imagine what a relief it 13 to have the job behind
Many tharks to you for your fine help.

aordially,

Ronorablp Att4A,,,,,A9A499

Itca6-0, ao6ton Vranklin,
120 4roadway, iew Y0f4.




me.




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