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F.D. 12A.3 5 0/2.47/ No Federal Reserve Bank $47-*A4 District No. 2 Correspondence Files Division P4PER5 SUBJECT 1.) LE-t-rEPS -77J R.e.. LEFF i/vGw4z_z_ 4)5s T. Sffer-Y. 0A - 7-ReNswee7 jEPP,VGAds- 112-6 :17 /f2.1 fvd&G.Atev s- cii. - 1,923 - ir GeRSDoRFP Mkty 27, 1918. Dear Leffingwell: am taking the liberty of enclosing to you a letter that I have prepared, addressed to Secretary McAdoo, on the question of organization because I think you had better read it over before passing it along. I am most .anxious to get this under way as the de- cision materially affects our work during the entire summer. As you know, I want to be away as much as possible. Very truly yours, Governor. Honorable R. C. Loftin ell, Assistant 'Secretary of the Treasury, iUshington, D. C. BS/M3B axe. 22, 1918. Dear Leffingwell: You may got a note from Dean West of Princeton as-4ing something about my work for the Goverument.-for use in the con- ferring of a degree. Don't give ran too bad a character. taithfully yours, Honorable R. j. ;414/4T4,924, saistant-Tedretary oi the Treasury, aShington, D. 0. /MSB June 15, 1918. PnVATR AHD CnNTIDMMTIAL: Dear Leffingwall: I have given more thought to the French situation since talking with you than anything else and have reached a aonclusion which you may regard al quixotic, but which I still believe is a sise thing to do. NS munt not lose the war for lack ef financial curse. This is the time when they must throw their military reserves into the struggle and I believe that a great morel s6vartnge will be given at this critical time by throwing our financinl reserves into the struggle. If it will stiffen the resietance to let the Bank of France one or two hundred million dollars of gold, I would let them have it- have The onettion is will it *stiffen the resistancei It is most difficult to get a correct appraisal of public sentiment, and Particularly of the apirit of n nation which is suffering the depression sf reverses. We have been through an experience with Russia that discloses the peril of a misunderstanding of that vita fnctor of Wcr. If it sera left Solely to me, I think I would get the very best potraible exnresuion of view es to the morale of the French people from Pershing, Sharpe, the Red Cross people, the Y. U. C. A. people and our Own Government representatives in the war councils in France and if these views encourage us to believe that it will have commensurate results, I wouldn't wait for demands to be pressed but would come forward at once with en offer to build up the recerves of the bank of Trance, nor would I wait d do this by the gradual process in connection srith our purchases iir Honorable R. C. Leffingwell 6.15.1E 2 of war materials, but I would do it in a large way, courageously, just as the aresident directed our troops in the brigading arrangement. Take this for rhat it is worth. It is my best judgment of what ought to be done. Very truly your Governor. Honorable A. C. Leffingwell, Assistant Secretary of the Treasury, 'ashington, D. C. - 5S .MSS October 17, 1918. My dear Leffingwell: One must, at all hazards, preserve a sense of humor these days, and I hope you have not entirely lost yours. An amusing incident occurred in the bank a few days ago that shows the mental attitude of the organization. We sent around some instructions about keeping windows open and doing other things to avoid the influenza. direction to Among other recommendations was a useDobell's solution as a gargle. The instructions read, "it may be obtained at any drug store without a subscription." Cordially, Honorable R. O. Leffingwell, Assistant Secretary of the Treasury, Washington, D. C. B3/MSB October 24, 1918. 'ear Sirs: Among the names of candidates for admission to membership in the entury AssoaiationI find that of Mr. Russell C. Leffingwell, at present Asuistant ieoretarroV the Treasury. I have known Mr. 1,effinguell for many years, while he was Henderson, and, during practicing law as a member of the firm of Cravath he past year and ono-half, since ho has been ehgaged in work for the Covernmaat, I have had an intimate association with hir4 and, possibly, a better opportunity to judge of his qualifications for membership in the club,.and of his great public service to the country, than any other memHe ia a man of the highest character and ability and ber of the club. On the eve of enlisting in the army, he has a most agreeable personality. was persuaded to andertae some cpecial work in the Treasury Department, Daring this which has resulted in his occupying his present tesition. period a very large share of the responsibilities of the financial di- He has vision of the Treasury Department have fallen upon his shoulders. discharged them in a manner waiot ha a aroused the admiration and gained for him the respect of the financial community of this city. Hembership in the Century Association has always been regarded as a recognition of some form of service, and I know of few men who have done more for their country during the past eighteen months than has Mr. Leffingwell, and he has done it with a modesty and ability that, in my opinion, commends him ,!!ithout reservation for memberShip in the club. hope that the membership committee of the Century Association will feel as I tion of the personal sacrifices made by such men as he. It has involved do, ttat there is little indeed that can be done in recognihis laying aside a lucrative practice, reducing himself to a scale of living involving the most rigid economy, the abandonment of associations of a life time, and this he has done, as have many others, without expectation of I Can not commend him too highly for membership in the club. any rellard. Very truly yours, Committee on Admissions, The Century Association, 7 West 43rd Street, New York. BS MSB Deoember 10, 1918. CONFIDENTIAL: Dear Leffingwell: EnOlosied is allother memorandum relating to a sug- gestion or a man in your department that may be worth investigating. Very truly yours, Bonorahle n. o. Leffinevell, ..esistant SeOretary of the Treasury, Lake George, N. Y., February 6, 1219. Deer Leffingwell: ..... This letter is the result of much cogitetion about the next bond issue; its terms; and the policy of the Department in financing from now on. If you obeerve some slight change of attitude on my part, it is brought about as the result of opportunity to do some reeding snd thinking on these matters imbieh 1 was unable to do Shen at the office. Men we became involved in the war, it developed very promptly that as prices had alreLdy been tremendously advanced U6 6 result of geld imports and of the competitive buying of the Allies in this market, our on war costs and Government borrowings vould bo correspondingly large. I felt then, sod 'till feel, that the only ways by Which the required credits could be produced for the Govern- ment's needs would be either ea the result of: (s) lconomy or, roiling Chet, of (b) Inflation (to the extent that economy was not practiced voluntarily or involuntarily) The methods evailable to the Treasury for raising the money wore limited to: (0) Competitive rate bidding, or (d) rstriotic Anneal. all knov Met Individual economy yes not practiced to such extent as to enable the Covernment to raise the entire sir fund without recourse in part to inflation, end the reserve banks furniehod it. The controversy in the Treasury Building during this entire period was betvoon one school believin4 that economy could and Should be nforcod and inflation avoidd through establishing higher U. Leffingwell 2.6.19. rats levels; the other school, Which included the writer, believed that economy must be enforced through some system of rationing, or by consumption taxes, or by other methods more rcientific, direct end equitable than high interest rates. During all of this period, as frequently. expresed to you, I have, personale ly, felt that the problem of inflation should be dealt with through enforced economy but that, nevertheless', the interest rates established for the Liberty Loane eere someWhat loeer than was vise, and that slightly higher rates end more attractive terms would have produced better results. Possibly in that view I was wrong. While higher rates of interest might have restrained some expansion, the amount saved might not have been verth while, nor do we know how much the edvanced price level is due to in- flation. On the other hand, accepting the Secretary's decision in these matters in- volved the adoption of a corresponding rate policy by the reserve bank, vhich vas e/ always done without hesitation. My only comment upon the past is that both the Treasury Denartment and the reserve banks were the victims of the failure of our Govern- ment to get a bettor control of expenditures by the neopl generally. Some part of the inflation might have been avoided by paying higher rates on the Liberty Loans, but how much is anybody's guess. Te ere all familiar with the results of the policy of the Department. The money has been successfully raised, and, an nesrly as I can estimate, it a cost of possibly Six billions of bank inflation, not all of it, however, directly attributable to Government borrowing//Before expressing 00110 vises about the program from now on, I must refer to the report of the Committee on War Finance of the Mariam Tconomic Aeseciation and Pak you to read it, if you possibly can find time to do so. kt any rate you should read articles four and five, starting at page seventy-five. They sill bore you some, make you mad some, but, also, they will help you some. Professor Revert (Iv) annoys ma, as he will you, and I am proposing to write Kemmerer a blast about the report. Their trouble is the usual end ancient one, of aperotelve Lug the problem on the theoretical basis of 130% perfection, but leaving out of WI.. count entirely the humeri rector, i.e., what ic possible to do, rather than What ought Mr. Leffingvell to be done. They are expressing in these two articles ?.6.19. at they think ihould be dene irrespective of the average of the viers of ell, and it is to that average view which a program must conform if it is to succeed. A college professor finds it impossible to construct his views along these lines. liut Kemmerer may be, and likely is, correct about the price level, although again he loaves out of his argument the most imeortant factors of all, Which ere "reletive inflation," and bearing on that "relative price level," and again bearing on that *the relative bulk Of gold reserves' as between the various nations of the world. /7- You and Secretary writer of this letter, will ceeteo, and now ascretery Giese, and possibly the humble find in future years that the Treasury and the Reserve System must stand up and justify the policy of the two war year, Which involved rather complacent acceptance of some inflation es a necessary evil aepert of the price paid by the Government for being, in fast, successful vat finence. If the Government, in consequence, paid too high prises for its su plies, I think the Treasury Dopertment could maintain that it was not as a result of wilful inflation, but was caused by the failure of the Government to take control of expenditures by the People of the country, thereby making inflation inevitable or loan failures probable. we have paid the high prices, we hove had some billions of inflation, but from now en the Treasury is charged with an even greater responsibility than heretofore because thn day of deflation aperoiches. The process of deflation is a painful one, ine waving loss, unemployment, bankruptcy and soil and political disorders, Whereas the process of inflaiion brings in its train prosperity, employment, rising prices, a haeny abeenco of bankruptcies and general stet* of contentment, all of 'Mich leads me to the noint of this letter, namely, that mistakes by the present Treueury Adminintration from now on rill bring retribution of e very certain and definite character which was not likely during the days of war excitement and expansion, but which is now beginning to loom up most definitely during the disteeteful days of paying the damages. The object of this letter is to emphasize a few points about tho future Which none of us can afford to overlook. r. Leffingwell 4 "'RICA IZITAL: The level of prices of both wages and commodities in this country has alwaye boon much above that of any country in Aaron°. is that the readjustment of prices throughout the world has not generally Uy belief eliminated the differential egainst us, and that with certain special exceptions it will still be found that the level of rage and cemmodity prices in inglend se veil vs on the continent of urope is much lover than ours. as greet sr formerly. prices out of line The relative difference may not be Our danger is not simply that re have continued a level of with those of Aurope, but rather that to have eetablished a higher level of prices than formerly under conditions of such artificial prosperity that merchants and menufraturers the have permitted their inventories to oile up on them at these oricer must no struggle through s costly period of liquidation, end, in coneequence, are bound to austain heavy losses on large stocks of unsalable goods. Abroad, Where stocks of goods have been greetly reduced, the proem, of reeecing the price level rill likely not involve such serious levees as with us. ven up in this distrietT meet men Who are already encountering difficulties with stocks purcheted censiderebly above present prices. A friend of mine 7110 bee just been visiting me, rho is in the cotton textile business, their inventories is already tremendous. industry. along tb:1 says that the shrinkage in You know that is taking place in the 'eel The same thing is heopening in loather, steel line. and iron, in fact all The objent of referring to this point is to cell attention to the fact that if inflation is arrested at its present level the reedjustment of prices, and loss resulting rill be no greater than, that now fixed by the existing level. price If inflation continuer, money grows cheap, - the liquidation will be arrested and our later troubles be the greeter. WA MST DEFLATA: T'!otwithetanding the hardships and lessee result- ing, I believe you rill agree that it is inevitably neceesery that our banking position must be gradually deflated. If this is not done, to may face the necessity of either continuing the gold expert embargo, to the detriment ef the rest of the world's financial oosition, or else lore a large amount of gold at a time 'than it woula be 2.6.19. Ur. Leffingeall 5 inconvenient for us to do so, and noceseerily force n more radical readjustment in intorest levels then ee have yet found necescary to employ. Lithe moment my thought is that the processes of deflation vill follow naturally enough, and gradually, if the Treasury is able to adopt such a policy er will simply prevent further inflation, vhiah vill be referred to later. BUSINTS5 CONDITION As briefly mentioned above, I em receiving reports that are disturbing about businece conditions; contracts are being cancelled, and sometimes rather ruthlessly. I heard the other day, for instance, of some big contracts made by American mills for South Amerioan buyers, the goods being of special cenetruction, and just es soon as prices fell off cables came up here, not only canceling the contracts, but canceling the bankers credits under vh uh the con- treats hed been issued. These sere special lines of goods rhich could not be sold in this country and involved pure sea of rote material at high prices. i know from experience that thip sloe thing will take place in the iron foundries. Uenufacturers of pig iron, 1 have no doubt, viii suffer cancellations of contracts right and left. such trades as mono' ihirte indicate the trend of the deportment store buyer. A ecleneen from a Wirt rectory in this district the other day mede the rounds with practically no cuccess evoeot in selling cheap imitation silk shirts, for vhich there still seems to be some deend from laboring men eh° are getting unusual wages. The wool auctions in Boston are en indication of the haaitation now develop- These various aims ef-butiness recession indicate that the readjuetment it now under ye), and that es may be aenronching a period *hen active criticiam eill ing. develop. There i a change of wind e indicctinE a dhsnee in reether. *snRao, AND BUT4t One ground of criticism of our policy in the peat has been the *Borrow and Buy" slogan. I believe it ves necersary in order to insure euccessful financing. I believe it involved the least vicious form of inflation, but I believe that for future loans it should be abandoned end discountenanced by the Treteury, even though it means a more moderate success in financing. BANKS MUST NOT Pe: LOADED: You may suggest, as e conclusion of No.4, that the on/y roceurne of the Treeoury, failing to niece bonds with investors, will 6 mr. Leffingvell be to sell them to the banks of the country. ' That I doubt very much. If anything is to be sold to the beaks, it should be short certificates until the time eases *en bonds can be sold or vhen the Treasury is willing to pay the rate to sell them. 6. TAT xmar or DIA= BORRITING rRIN Vann RZSZRYt AANKS: To ii----"-- lustrste exactly the relative inflation involved by various methods of borrowing would be almost impossible except in theory because the fplow of bank loans and de- posits throuehout the country is so active hs to obscure What really takes place. Theoretically, however, the fancying is true: When e member bank either lenus to e subscriber or itself buys some Government bonds, it causes inflation only in case and to the extent that it borrows from the reserve bank, and creates no inflation unless it does borrow from the reeerve bunk. For every dollar borrowed from the reserve bank a nossibility of inflation arises in the ratio of the average of bank denosits te reserve deposits so crested by borrowings. If all the banks of the country make loans of this character to or for the Government to the extent of, say, e billion dollars (and theoretically the average reserves of all national and state banks is 10%) the borrovings from the reserve benke will be only $100,000,000 to Thie can be demonstrated by figeres ehich I supnert the billion of inflation. will not eletorste. The process of expension *AO takes niece as a result of such borrowings frem commercial banks is loss dangerous than the process of infla- tion which would result from direct borrowings from the reverve banks. In the first instance the inflation it limited to the initial Amount of bank loans, the reserve bunko contributing only the amount of reserve required thraugh their die counte. Rut, if the Government, needing * billion dollars, should borrow that sum directly from the revel-Ye bunks, it voule be throwing a billioy dollars of reserve money into the hands of member banks, end, theoretically, thie reserve money would supeort a bank expansion of ton billions, if the retie is one to ten es assumed. WO hove, therefore, three possible choices: (s) (b) A sale to investors vho do not borrow, A sale to investors who do borrow, or to the commeroiel banks, Which would result in an inflation to be supported 7 mr. Leffingwell 2.6.19. by loans at the reeerve bank, equal only to the reserve percenteee of the inflation crested, and (C) riorrowings directly from reserve banks, ehich would croft* new reserves to the extent of that b)rroeing and munnort inflation to many time* that amount. I believe every possible effort should be made to confine the next loan to the 7. INTERSST RATES: ea) re have *Iraq* considered thet too sharp an ad- varce in the rates on Liberty Bonds would cause e corresponding decline in security valuer and consequent embarresemont for-savings banks, life insurance companies und No matter at ether security holders. 1 doubt if thet hoe been a sound argument. Whet rate the Government issues its securities, the in-vestment level 'ill shortly be esteblished by Inanely end demand in the market se that the cempetitive rate between the Government's loans and other securities will adjust eutemetioelly. 'Peon if the Government sold a lom, rate bond it would shortly sell at such a discount as to bring it into direct competition with other forms of investments. On that point I believe we have been misleading ourselves a bit in the nest. Hereafter, hoeever, * new fectoe will enter into our celculations of the utmosrimportance. Our markets muct greduelly be opened to foreign loans, both government and private. Foreign govern- ments, and borrowers eenerally, are willing end will bo forced to borrow in this market almost at any rates Whieh will produce the credit - Their refundinge and urchpess in our markets will sake it necessary. It is a competition Which our Aseesury must met unlnes our Government is ri/ling to exclude foreign borrowings from this merket, with coneenuent serious &owe to our cemmerce and finance. It -ekes little difference oleo at what rotas these foreigners borrow because the same interest comreadjustment of market values will take place to bring about this s petition. In feat, as the doors are now being opened graduelly to h normal interchange or goods und of credits, and, ultimately, to shipmente of gold, a. world reavoid adjustment of the interest level ir bound to tyke oleos. '0 can not ignore or Mr. 44;finosil a8 1.6.19. nd our Oovernmeat must prepare itself to enter into the competition and ad- vance its rates, or have its loans fail, unless it is still willing hereafter to pursue 6 orogram of inflation rhich might be disastrous. \Ne___. One of the ablest bankers in France, for rhos* opinion I have the highest elgerd, told we two years ago that he expected after the war was over to see the very hest private credits ix Turopo paying 10% interest for fixed capital as dietinauiehed frem benk loans, eveni solvent governments end municioalities doing so. SALT lr MONDS Tn INVgSTORS: For the next loan I believe the Treaeury phould *dart the policy of offering a rats of interest on a taxable bond running not more than five years, redeemable, say, after two years, which will be so attractive in terms that it will induce investors of all classes to buy them with s minimum of bank borrowing in order to carry them. If this is done, I believe, the action of the Treesury rill earn and receive the commendation of all thoughtful, intelligent men end that the armor of politiciene can be ignored. Also if this is done, it will reeuire SOMO readjustment of rates by the reserve banks. TRt BANK RATS: For reason* ehich need no repetition, our bank rate has been regulerly and promptly adjusted to the Treesury's program. Should the Treasury nor piece a high rate loan, I iheuld euepose that the reserve banks would be reouired to adept the relieving rates: (s) A special rate to enable banks to rediscount existing loans made to original subscribers to the Fourth Loan, probably 4i7: for ell maturities. (b) A special rate for nee. loans to enable banks to carry eubecriberr to the Fifth Lean, et lent flout' to the rate borne by the new bonds, but probably not any lower. ) A special rote for bills arising out of the importation and exportation of goods. Admittedly, this last rate, if fixed at aroun-.1 present levels, with other rotes advanced, rould drive a lar7s volume of foreign bills into the reserve banks. On the other hand, it might create such a premium or special dmeand for bill*, that banks rould be found more enxiaus than heretofore to hold a portfolio. 1 would Mr. Leffingeell '.6.19. advocate this peeled rote for internationel reasons, it for no other, es suggested at our conference in reehington. Upanoion to the extent resulting from that *alley, based upon the development of a special market for international bills, vould be the least harmful of any in vhich ve could indulge, and vault: be a later protection - to our internationel exchanges. it). TtX bond would be a mistake. TION: I have come to believe thet a by rate tax exempt The difficulties resulting are illuetreeted by the nosition in vhich any member bank would fird itself under the new tax bill. The average gross return on invested money and lonn fund* under present conditions sill run between 54 in the large cities end 0. or over in the country, If a 4;i: tax ex.- *apt bond is issued, thourh running but for five yeart, and redeemable after two, it veuld tay a return to RA member hank, by reason of the tex exemption, that would be equivalent to something like 18A or 'OA on other forms of losne table of calcul tione here and speak roughly from memory, I haven't the it rould be the greatest portable inducement for banks to buy these short bonds and turn right around and borrow from the reserve bank o to scalp the difference between our rats end the rate of net return en this- trx exempt investment. it would forde the reserve banks into the position of discriminating in loans made for that purpose and loans 'nude for more lagitimete purposes. This it an almost imponseble thing to do, beceeee a bank can buy the bonds and secure the funds to do so by diecounting its eligible paper. I believe I toll yeu that Alexander etoted to me that if the Bank of Commerce ranted to take $100,e10,000 of notes of that character they (meld realize t good many million dollen' e year profit by borroeing the *hole amount from the reserve bank in one form or another. To impooe the obligation upon the reterve bunks of safe- guarding againet this form of inflation strike*: me as an unjust and unseund thing to do. In feet, an obliration vhich they could hardly expect to suceescfully perform. 11. INTMATIONAL RCLATIINS: No policy by our Treasury from now on can ignore the international rspeet of our finencial poeition. I am very clear, after reading venous British reports, that the London Tartlet will in the not distant 10 jeerfingwell 2.6.19. future experience an edvence in the levol of hank rates generally beyond anything heretofore oxperionced in the London market eeceot in 'sr or other crises. It would not surprise me to see bilis selling at between 5% and 6% in London, and a good part of thst bueineso gradually transferred to thie country. Lord Cunliffe smite& me privately: *I am indeed nervous MB to the outcome all this enormous credit inflation and huge floating debt." Cokeyne, governor of the Bonk of Tnglend writes: "I em sorry to say that the currency inflation is proceeding apece bare *ad I fear it will continue during demobilization vhet a comfort it rill be 'her the Governeent borrowing can cease: Until that ard the artificial money rates COM3 to an end, ws shell not be able to tell how we really stend." You he doubtless; reed the report of the eunliff committee. Mose nil point to the adoption of planr in London st some time for squeezing )ut inflatioe, doinr every with artificial conditions, and, of course, accepting tha coneequences of higher interact rates. 1/. IN UOVCIAreleeli: The greet tmentetionof the secretarioe of the Treas- ury in time of wsr is to borrow cheap money. It it axiomatic that in such emergency the Treasury attempts, and usually eucceede, in obtaining control of the benk of issue and that the bank of iseuo become, the instrument for furniehing the 3overnmeent with Cheep loans or irrednemO:le retie at the expenre of sound monetary conditions and of the ,rice level. That 'le eezotly 'het }weaned in 4iglene during the Nenoloonic rare, end it has heron'ned in rrence (with the possible exception of the reenco--ruseian 'far) since the dye of Nenoleon. The sank of prance to-day shore the effect of such 6 policy as strikingly se any institution in Airepe with Whose figure* re ere authoritatively eogusinted. The ;lei& Benk and the linear/al Bank of Russia both succumbod to this irfluence, sad, in the latter case with a complete collapse of credit. Our policy in this country has no far been the soundest of any, vs have avoided a debeeement of our circulating media, have taxed liberally, end have hed but moderate inflation, and 1 believe that fro-' n,w or o couregeeae 11 Leffingeoll %05.19. policy by the Treasury for one more lean will do mere to establish the country's finance, end generally to ertablieh its business upon a sound footing than eny other eingie rector. Secretary Glass in one or two public tete-temente bee expressed the view that the Treasury can still rely upon patriotic impulse for finenciel nupport. That Is undoubtedly true to some extent, but if patriotic imoulse ie med the means of placing unettrective bonds Which must be forced upon reluctant investers who are induced by artificial rates to borrow money in order to buy them and then shortly turn shout end well them to avoid Orinkege, es experience ell of the evils of ine fiction, the disentert of losses by patriotic investors, an unnaturti end severe doe cline in the Government's bonds end credit, end en investment interest rate ultimately eehieh as would have boon estetlithed in tho first piece bed the Government borrowed et an attractive rate to the investor. If this letter seems to involve some Chimes of front on my nart, (which it rosily does net, fundamentally) pleere bear in mind *hat n change has taken piece in conditiona. In the fece of my persistent, continued recemeendetion to our friends in vsehington thet eteps be taken to coneerve goods fele services, I found myself edvocating inflation es a Moms of meking up the deficiencies of oome feilure to sdeountely control expenditures und to promote economies. Nor that tn, eer is over, even uoh meene as were adoefed to control private expenditure have been abendoned end there seems to be just one recourse left, which is to interpoos obetsclos in the wee of borroeing, end to do it by a slightly higher rate level. In other words, While the eer was en, the proposition stated or poee one of this letter resulted in edooting policy (d). Now that the ear is over end no control it being exercised, Ire are forced to the edootion of policy (c). That's the ehole story in a nut shell. This rather rambling letter contains something of vhat I would soy bed ve onportunity for e meeting. I eish very much you could melte the opportunity by coming It is eimrly an exnression of my personal views eithout conrerence with up here. it, Lrffinlvoli ly keeeoiatas. vith beet regarde. Unceroly yours, Monorehle T1. C. Leffintee11, AgeiFtemt Seeretery of the Treceory, ruAington, D. C. BZ.VF,P Lake George, N. Y., 7, 1919. F:LINFebruary C DOM MAI ri 1 1 1 1 Dear Leffin g-7-1"r14-13ERAL RESERVE BANK I received the first telephone bill to-day, -!'hich seems to cover service from the latter part of December to the firet of this month. Won't you let me know if you have received any telephone or other bills Which I should have paid, and the amounts, so that I can send you a check! Faithfully yours, 19grafal...9 Leffiurelll 1126 - 16th Street, - Tashington, D. C. V5R -------- Lake George, N. Y., February 11, 1919. ri 'V-) M,StIVS1311iit Dear Leffingre '**44,',:4pEBAL, I am continually end continueuely feeling regret that you can not There are so many things that I would like to talk gat up to Lake George. over eith you. I have had the pleeture of meeting Mrs. Heritt, and last night ead dinner at her house When you were the eubject of much discussion and everyone expressed the hope that you could run LID hare with Mrs. Leffingrell for a tine. Maybe I can still persuede you to come. There is one detail of the situation with Which you may or may not be familiar, but it seems to be developing rather rapidly. a direct drive in the last registered bonds. loan campaign to have subscribers elect to take I hear a greet many people say that they have not yet re made, as you know, rho have ordered registered bonds received them, even of the third loan, and that eben bonds are sent for transfer they literally disappear and that a good many of them come beck eith names spelled rrongly, etc., etc. Of course I knor that re always hear correct and Prompt of the mistakes, and never of the deliveries, end I know as well as anyone can how terribly overe werked Broughton is, and with *het tremendlaue difficulties he has to struggle. In fact I don't blame him, nor anyone else, if delays have occurred, but, upon making inquiry unon the situation, I was told confidentially a few days ago that there rere twelve hundred bags of unopened Treesury Department mail in the Division of Loons and Currency, which repreeented an accumulation of some months, where the contents of the begs WAS not even knorn, and that the accumulation is incretsing. 'r. Leffingrell 2 2.11.19. This is not a letter of complaint, because that--s the last thing of Which I would be guilty, but I as writing to ask Whether it is not possible for the Bank, or all the reserve banks, in some ray to help out in this difficult matter. It would be e misfortune to start the fifth campaign without having e clean-up in deliveries for the fourth. As I now recall, we have one or two men in the buelding helping. It might be possible, and if you say so I will make inquiry end see if we can't organize a staff of really expert clerks, now working in our Bond Issue Division (where it is camper ively slack until the next loan) and send them over in a body to tackle this job. I have not broached it at the office, but will do so if you ask me to, and see /that can be done about it. Ineidently, I feel very sorry for Broughton and feel that if you don't look out you are going to lose a very good man. He is terribly over-worked and those who assume their responeibilities with the conscientiousness that he does are more liable to break down under the mental strain than the less conseientious onee. And while on this subject, I feel strongly the need for legislation vile& will authorize the reserve banks to do the work of registration. The mechanical difficulties could be overcome, and our boys would infinitely prefer to do the work than to encounter the difficulties Which arise by the present methods. How do you feel about all this Beet regards. Sincerely yours, Honorable R. C. Leffingwell, Assistant Secretary of the Treasury, 7ashington, D. C. PSe7SB 14,7', Pernonal: 5 191) Lake George, N. Y., February 28, 1919. FEDERAL RESERVE BANK 111 Dear Leffingwell: y I have not really replied to a recent letter/you sent me about Clark's salary. course, give his work Clark I submit to your authority in the matter but will, of a handsome present When I leave to compensate him and attention to the for visitors. At present I am planning to attend the nveting in 7eihington on the twentieth, going over a day or two in advance, particularly for a conI have, at times, felt that I ference with you and Secretary Glass. was so much out of sympathy with the position of some of the membere of the Federal Reserve Board, that I was, in a sense, a conspirator to defeat their purposes. That's the last thing that I want them to feel, and going to washington in advance of the meeting would be somewhat with the object of endeavoring to agree in advance among ourselves upon a policy. It would be foolish for me to close my eyes to the fact that the governors of the other reserve banks will-be very much influenced by my own attitude in the next discount nolicy, and I would feel much happier if that attitude were the result of a preliminary understanding with you and Secretary Glass, and with the Federal Reserve Board. Don't think that this is inspired by egotism at all. I have enjoyed very much the hospitality and many courtesies that have been ehown me by Mrs. Hewitt, which I am very confident have been inspired by some private communication from you or Mro. Leffingwell Ur. Leffingvell all of vhich I greatly appreciate. Beet regards. Faithfully yours, Honorable R. C. Lefingwell, Aseistant Secretary ef the Treasury, Washington D 2.23.19. Personala Lake Georgemrp. Y. February 197, 1919. Dear Leffingvell: I have not rerlly replied to a recent letter you sent me about Clerk's I submit to your sulery. authority in the matter but ceurse, give Clark a handsome nresent when rill, I lenve to compensate him of for his rork and attention to the visitors. At present I am planning to attend the m:sting in tshington on the tvyntieth, going over e day or two in advance, particularly for u conference with you and Secretary Glass. 1 it I have, at times, felt that I was so much out of sympathy with the position of some of the members of the Federnl Reserve Board, that I vas, in a senre, a conspirator to defeat their purposes. That's the last thing that I rant them to feel, and going to Thehington in advance of the meeting would be someThat with the object of endeuvering to agree in advance meeng ourselves upon a policy. foolish for me to close my other eyes to the fact that the governors of the reserve banks will be very much influenced by my own attitude in the next discount Policy, and I would feel much happier =or were the result Glass, and with of it would be a preliminary understanding with if that attitude you and Secretary ft. the Federal Reserve Board. inspired by egotism at allAI I have enjoyed very much the hospitality and many courtesies thrt have been eleven me by been insnired by some Private Hewitt, rhich I em very confident have communication from you or Vra. Leffingaell mr. Leffingwell all of vhich I greutly apnreciete. Beet regards. Faithfully yours, Monoroble R. C. Leffinvell, Assistant Secretory of the Tretsury, rashington, 0. C. BS.MSB b' e , :ZY A '72 . 7 1319 Oti7;. ,t FEDERAL RESERVE BANK API? :1 1919' Ifuehington, March 28 ,1919. DeiA. Mr. Ieffirvell: The enclosed statements which have just b en received from the Bank (which, however, are not exactly in the form that I suggested) throw sme light on the financial results to the Federal Reserve Bank of fiscal agendy operations. Very truly yours, Hon. R.C.Leffirgwt, .-Trerasury Department. - , ' BANK rnia,-;AL R',E,RNIE A. Washington, March 29,1919. P. I Dear Mr. Leffingwell: am returning the correspondence with Mr. Oscar Wells and have written Mr. Treuan asking him to ta-e this matter up with Bond and Goodwin, which I am sure he will do with succe:is. Tours very truly, Mr. R.C.Leffingwell, March 31, 1919. 'ANTIUM PQR MR. L/PrINGWFIL: T an urged by the Liberty LCan OrganizAtion to 7et word to New York today in regard to Secretary Glass attending the proposed mooting wl'ich we wuuld hope to fix, If poositle, for next Monday, but Which, I believe, can be deferred until later to rneet hit convenience. once for the printI or also urged to obtain authority that they my to distributed in ing of subscription blanks, so Ovince. Thin involves, of co urse, a determination at to Whether sUbscriptions shall be for one or two forms of security. T am also urged to secure from Secret!Ary Glass, if poggile, a Irry definite and posItive st:'.t&ment as to where sUbecribers should file their subscriptions, in other words, ,*ere their 1-nk lalances ,?.re maintained, this br-ing the only protection that we can get, with our large quota, against the diversion of many sUbscriptions frog New York. Honortble R. efingwell J,, 10%3V1L9 taIttratily. and ,ah4e b CONFIO FICTIAL: re ia AA JO" ecurvi pemanimt1y6 far yr.t la caf.e irRnklid aid luare. 1 ha4 ,Altk st May 24.0419. .rL04 derYlce in some oopiK4itv In ta._ 4aleSstad, but a .ftry good oelonlvvr, and It a esdani'. i:ear Hussell: Ihis letter ia not intended to be answered while you George, but I am using that address so that it may be kept files in Wadhington and torn up after reading, if are at Lake out of your office that is the proper disposition to make of it. Mere is no doubt that the conclusion of the 2ifth Loan is accompanied by the complete dieintelgration of the Liberty Loan Organization in this dis- trict. The only way in which that organization has been possible of creation charge of the various and operation is by having man of the highest order in of responsibility could div5aions, to whom a great deal be delegated. Those men have finished their work and will return to their respective offices, practically all of them having Considering the been volunteers. program of the future in the I have it strongly in mind teat what we need right man to take charge of' return to the fact, anything else is more than the business from now on as a considering who the man should be. would not light of this the paid employe, and I am I was told a while ago that Lewis Franklin Guaranty Trust -Gompany, and up his office in the '.a-easury pretty soon. that he might it contenTlated winding not be possible for him to transfer to this bank, in some responsible position, in charge of this whole operation. That is one suggestion another relates to ir. hornor of I have had in mind in regard WM. A. head & Oompany, who had charge of our :etropolitan Canvass Organization in the Fifth to the future - Loan. he impressed me most 0°L° ck oN i.o.a;r2 I Ma y 2. AL: 09Y9: Dear Hussell: This letter ia not intended to be answered while George, but I you are at Lake am using that address so that it may be kept out of your office files in Nadhington and torn up after reading, if that is the proper disposition to make of it. Moro is no doubt that the conclusion of the 2ifth Loan is accompanied by the complete disintaxgration of the liberty Loan Organization in this dis- trict. The only way in which that organization has been possible of creation and operation is by having men of the highest order in charge of the various divsions, to whom a great deal of responsibility could be delegated. Those men have finished their work and will return to their respective offices, practically all of them having been volunteers. considering the program of the future in the light of this fact, I have it strongly in mind that what we need more than anything else is the right man to take charge of the business from now on considering who the man should be. as a paid employe, and I am I was told a while ago that Lewis 2ranklin would not return to the Guaranty Trust Gompany, and that he contemplated winding up his office in the Treasury pretty soon. Might it not be possible for him to transfer to this bank, in some responsible position, in charge of this whole operation. That is one suggestion I have had in mind in regard to the future another relates to Mr. Horner of m. .. Read & Company, who had charge of our Metropolitan Canvass Organization in the fifth Loan. He impressed me most Honorable R. J. Leffingwell 2 b/26/19. favorably, and while he could not be secured permanently, he might be a very valuable man for you in case iran.klin did leave. I had it in mind to suggest for him a limited period service in some capacity in the Treasury. He is essentially a bond salesman, but a very good organizer, and is a partner in the firm mentioned. *:ion't you turn these things over in your mind and let me know the are result of your cogitations? of z eaithfully yours, off: roper diaper i6 aooOmpar this ells- Honorable "Oluneden", G...144.L4weee014., Lake George, E. Y. LV Of oreatiOrt t o vh'Ic finished th, 1 L un4 B3/Mali 411 ei thaq: ing s feat. c=o1:elderin4- have It stron.ly In :8Xt. A4L te tau aLlog. meiring wiz.o the skin W. vald not return to the 31 h14 offiee in the Treasdr- to transfer to thie Wank. in ei.ise is the E :thew; from no,. on 41, AJ. dove. and I am 1 Vas told a 'hilts ago that kowi3 Praairlia .ast;ocl.,any4 and thwt he sontqmplated winding etty elan. Might it not be p4.ssib3e for him =r1b position, in Ofaferio Of this whole atioa. 2r.at iz oao 41094tioa I'have 4ad in-ziad in ?cgs:TO to the future reIatos to AA-, horUer of 1M. A.. Amid * .Ds4,a47. who tad ohulte of our t4141 AVAIDS Organizatium in the. k1tt4 Loss. he impro*sAd mmt l'aost Honorable R. U. Leffingwell 5/26/19. favorably, and while he could not be secured permanently, he might be a very valuable man for you in case iranklin did leave. for him a limited period service in some I had it in mind to suggest capacity in the Treasury. He is essentially a bond salesman, but a very good organizer, and is a partner in the firm mentioned. Won't you turn these things over in your mind and let me know the result of your cogitations? 2aithfully yours, Honorable R. 0....1441g4W1,1944, "Zuneden", Lake George, N. Y. B4MSB 0"/Z-N° ,Nt4 June 40, 1° Mvs BIO My dear Russell: I noticed in yesterday's papers a your having received a degree from Yale. way of contrast. It interested me by Possibly you do not realize it but there is no honor that governments or universities can confer upon you which is equal in value to the esteem are held little account of and affection in which you by the many people with whom you have been associated in Government work during the last two years. That is certainly one of the greatest, if not the greatest reward for all the sacrifices which it involved. There are very few people, if any, mho realize quite so well as I do what a wonderful job you did for Uncle 3am, and it will be a satisfaction to you all your life to have dune it even though it cost a lot in personal deprivations and hard work. sincerely yours, Honorable R. O. Leffingwell, Assistant jecretary of the Treasury, Washington, D. C. B8/14a3. LI I3RARN JU N 24 191-9 Julie 439 1919. EDERA L, RESERVE BANK )fil) Dear Leffingwell: Thank you for your note of the twenty-first, enclos- ing photostat analysis of the public debt, which is exctly what I wanted. Of course It will not be made public, but I needed it somewhat for mu own information at the moment, and it is just what 1 aesired. Ma,y thanks. 2aithfully yours, z Honorable R. C. Leffin,gwell sistant Secretary of the ireasI,rj, J. /9 p) July 2,, 109 Dear Leffingwell: Enceosed is confirmation of a cable which I sent you through Ambassador Davis, in the Embassy code, and which may astonish you a bit; so I um writing you an explanation. After talking with the officers of the Bank of Englund and with a very able, intelligent and thoroughly reliable newsaaper man named Kiddey whom Norman invited to his house for dinner for the purpose, and after talking yesterday with the Chancellor, I am convinced that the immediate task now ahead of us which will help conditions over here more than anything else is to get some sort of a definition of United States, and parthe terms ticularly of the British debt. I shall not attem%t to reoeat converoatione in detail, but there is undoubtedly in existence here a. latent underlying feeling that the Allies have made the great and most vital sacrifices In the war, both of men and finance and in material damae suffered: that our sacrifices have been slight and our nrofita imaense, and that the existence of this great debt due on demand is a sword of Damocles hanging overtheir lads. of the debt of the Allies to the The oremium on dollars, now increasing so rapidly, gives them a feeling of great concern as to how they are to meet the interest payments, oarticularly this fall when they feel matters will more or less reach a crisis, without paying so heavy penalties as to be embarrassing and huminiating, and to contemplate going into the market to raise SI'-o-,7"^- in exchange, at present rates and under present conditions, is reaAy a cause of great anxiety. I saw the Chancellor yesterday under the following circumstances: Tuesday night Governor Cokayne had a meeting with him and told him I was here, and he sent ward to e through Governor Cokayne that he ho:ed I would be sure and see him before leaving for 'Paris end finally made le had an a oointlent for 4 o'clock yesterday (Thuraday, the 24th). chat of about an hour and a quarter, much of thetime ret y discussing matters of mutual interest such as our drogram and theirs, taxes, reconstruction, etc., etc. I have made no suggestions nor have I in any 1,f.ty disclosed our views or feelings exce_t to state that Englund and the United States must in some way preserve good relations and work together; that themeans must be found to overcome the difficulties in the way of getting investment money from America to help proper reconstruction work, and that now that the treaty with Germany is formulated it might be well for these discussions to take place WashI inzton with thoroughly resoonsible people there for the puroose. did point out how important it was that Great Britain should be well rep- at R.O.L. - 2. sented at the Embassy in Tashibeton when Reading's lace is filled, and how imeortant it was that we should both be well re,resented on the ReAs to the lutter, he assured me that if the man arations,Commisaion. to whomthe eosition had been offered would acce t it we wound be thoroughly satisfied. He made no reforece to u definition of the terms of their debt to us until about as I was leaving it cane up in response ti my inquiry as to ehether there were any ,ending tangles between the finenuinl dceurtnents of the two governments that wore unadjusted nnd causing difficulty. This led hia to remark that as to the debt he thought it would be improeer for the debtor to a eroach the creditor with proposals. You mi4 be sure of my discretion In discuesing these mutters with him, OT with anyone else, but T onn see the need of prompt treatment of this matter. Possibly you will consider that I heve changed my views because I recall stating to you that I did not think it was our duty to approach the debtor. In that I believe I WAS wrong. I gather by implication that there is a feeA.ng here that we should try and have some cancelation of debt nil around. It was too indefinite for me to suegest any particulars, and it is hard to wr how such n °elation could tane place without an actual reduction in indebtedness due us, which is not to be contenplated, in my opinion. I am sending this letter in the Embassy pouch. It is quite informal and confidential, but I thought you would like to have a line on how things arc going. On arriving found that the Bank of England expected me to make my office eith then whine in London, and my old friend Norman took me right to his house where I have been staying since arrival. They have ende no feel most at home and there Isethekeenest possible desire that in every way relations between America and England should be strengthened. In a sense it is pathetic. Englishmen have betrayed so little of that sort of thing in the past and it emphasizes their neud at the moment. The whole German gold mutter is held up until I see Hoover in Paris, and there Is nothing to reivrt on that. The coal strike at York, of which you noubtless see much in the newspapers, has some quite serious aspects. The difference is over adjustment of piece work, in which the Government Beene to have played A rather stupid part, but the youneer mine workers have broken away from their older leaders and are ranking rather unreasonable demands. One serious development is the use of the strike for political purposes, the so-called "Triple Alliance' of leber unions at a meeting nowbeing held proposing frankly that the etrike be used to force the discontinuance of conscription and the withdrawal of troops from Russia. I The picture of the situation here, aS I gather it from only a few daye vieit, is really distressing alongside of our situation at Home, and naturally one's sympathies are aroused. I cannot believe, and so far have received no evidence to Notify the belief, that any such condition exists .Lc3 Vanderlip pictured on his return. There is not time now to write you as fUllyan account of some of these matters as I would like to but when I reach Paris there will be and I will write you through the Embassy at length. With warmeet regards to all in the Treasury, and particularly your good self, Faithfully yours, Hon. R. C. Leffingwvii, Treasury Derartment, 7ashinston, D. C. BS/V (ileksitkiVsse Afek- 1-iss Hotel Woke s j'ireeleeeseet.._ eoese lats. Paris, July Ols 1919. Dear Leffineeells Had I a small regiment of stenographers with me and an ample &welly of time I could write you volumes of interest about things over here and many amusing stories and I had al ready priseered an unsatisfactory cable which I am not sending, partly because I have reason to beAeve that even cables in code are scrutinized and partly because no cable could be much better than misleading. at This will be 4 :soot disjointed statement .Jf my impressions the moment, with a distinct earnine that they are liable to change as I travel about and oick up information and gather new impressions here and there. I did cable you through the Embassy at London about the debt, because I found such e very strong feeling of uneasiness, and with same justification, that I felt you should know my impressions. The Engsish bunkers and business men went to know where they stand financially with America and whether they will be exoected to add to their present difficulties in exchange by being obliged to take out large Amounts of dollar credits for interest in addition to taking cure of meturities of loans other than governeental, and, over it ull, with no certainty but what we might impose severe terms of payment of the principal which would imeeril their position. Most of the really levelheaded Jae man that I met, like Cokeyne and Noreen in the Bank of Englund, Sir Charles Addis and the Chancelor, Mr. Austin Chamberlain, do not exeect forgiveness of the debt. eindersley, who'is a director of the Balk, Is the only men who positively stated that America would vastly gela in prestige by forgiving the debt of the kites, and he admitted that the sentiment serang from his heart and that while it would be sentimentally e good thing for America and suld to our erestige, it would be a bud thing for Essgsend and the Continent. Noreen frankly said, 'Pay no attention to Kindersley; his heart rules his heed". The Chancelor, with whom I seent an hour and a hell' at his invitation, never mentioned the subject until I was about to leave and then confined himself to the statement that he thought that suggestions on the subject of the debt should originate with the creditor. In general it is fair to say that Englisheen whom you and I would likely meet in our daily take feel that England, both rich and eoor, should work, economize and :my their debts, but English business men say that the government is making it hard for them by clumsy treatment of the labor situation and perticular..y by unemployment wages, which promote idleness. Almost without exception they say out of her dif iculties if they esceee seriousthat England will stagger labor troubles, and the Chuncelor frankly said that he thought the time was shortly coming when they would have to have a real test of strength with strikers who were R.C.L.- 2 striking for unreasonable deeends. He referred, I believe, to the effort being mede by the "Triple Alliance" of labor unions to employ strikes to force the government to withdraw conscription troops from the army and discontinue conscription service, :Is well as to force the withdrawal of all British troops from Russia, in other eords, to use the strike weapon for political objects. Englishmen are all concerned About American competition end the air is filled with rumors of American bunkers opening credits and American manufacturers making contracts abroad in merkete which England considers her own. There is much discussion as to whether England should incur further foreign debt in order to extend credit in turn to purchasers of Eegland's manufactured products in foreign coun- tries. There is also among business man a thorough distrust of the government in its proposed war policies, which they sey are extravagant and visionary and largely subservient to theleborine classes. Nat- urally a letter like this centeins reports of disagreeable things. My own impression from it all is that England, while having considerable labor troubles ahead and a tremendous curtailment at the moment of her export trade, will nevertheless in the long run make the best Showing of any of these Euroeeun countries, possibly berring Belgium. I do not believe they will need much in the way of credit from us, with the possible exception of some mis.' treeteent of cotton and a fairly generous treatment of their debt to us. They have immense troubles ahead of them, the housing problem alone being most perplexing as they claim to have had a shortage of adequate workmen's dwellings of at least 300,o4)0 before the war started, which has been increased to 525,°"0 in the last five years, but on the whole I do not worry about Englend. The Continent, however, is a different story and it is quite impossible to begin to give you even such impressions as I have formed in the four or five der, I have been in Paris, talking principally with our own people but to some extent with Englishmen and 4 few Frenchmen. Undoubtedly the latent impression in England, which Is only expressed by one's closest frends, is here very strong although people voice it rather gracefully: that the United States made vast fortunes out of the war and very email sacrifices of men or treasure compered to Europe, and that now in Europe's hour of real need the United States gives evidence of an intention to abandon Europe to its fete. This feeling is so strong that even the general exodus from the here when the President returned created a very bad impression. With our great wealth of resources still hardly touched, they look et us with envy and I think that many Frenchmen, es doubtless do others on the Continent, believe that we should forgive their debts. special organization T heve some ideas in my mind of a way to deal with this situation, but um not yet ready to express them, certainly not in writing, which always has a look of finality of opinion. . We have discussed the European situation geographically so fre- quently that I think I shall follow the course of our former discussions. The reel key to the political situation, I am sure is just what we Agreed, (V-/ namely, the new countries created between the Baltic and the R.C.L.- 3 I gather in talking with Eneliahmen, with Mr. Hoover, Mr. Stettinius and, in fact, e good :Deny capable people, that the difficulties there are much more Aore largely political, governmental and specie' rather than economic. Mr. Balfour suid at the luncheon yestereey that he wee not sure whether there were 12 or 23 wars in progress in that part of the country and the situation is so omplicuted with racial entegoniems and ambitions and with the intereley of ale aorta uf oolitical considerations that 1 shell not attempt to describe it in detail. 'The main underlying fact is that probably by next ye,a, and to some extent this yeer, e large section of that country will have e surplus of food Black Sea. products for export which could be delivered in exchenee for needed manufectures were it not that rate antagonisms, local fighting, interrupted transportation, ceeeletely disorganized currency and benking and a discredited credit position have to a greet extent reduced trader I can illustrete this by some stories that Mx. Hoover told to barter. me of his trades. In one case he sent e cargo of miscellaneous goods -ploughs, stoves, cooking utensils, cloth, thread and needles which coet him 3,c,On0 And which he iurchased princidlly from the army, to the Bi4e,_ See ports and actually sent it inland with his on people and worth of wheat wiiieh he sold in western Europe. traded two hell' brokendown locomotives for got in exchange $3,1itilehh0 In another instance he still another instance he arranged a trade between the German-Austrians and the Serbs, the latter furniehing 5-,--4r" tons of groin in exchange for e steel bridge and 80,0e,C,NOC kronen of ;leper money which was seecielly printed for the purpose and was probe abLy of littLe value, but which immediately it wee chipped into Serbia Those are just samples was promptly stewed and put into circulation. Ur. Hoover admitted of what is going on in that part of the country. to ma last night, in response to a series of questions, that if they could once eet political stebility and stop fighting and nettle down to ratting their houses in order their surplus roductiou of foodetuffe, end, in the case of Roumania, of oil, would give them 4 good opeorThey do, however, need some eeJ- salty to develop buying ?ewer ;Abroad. I gather in general eitial things promptly and would need lone credit. that Mr. Hoover has A very poor idea of the governuents of most of those 2,0,-e- eggs, and in countries exceet Finland which he :ewe is strong and developing very well. '''' Pursuing our old line of discussion, my general impression about the Russian situation is that everyone, in a politIcel eeftee, would like to wish it on someone else and that there is no mealy constructive definite policy about the Russians over here that would justify believing that Russian trade or Russian needs in the way of foodstuffs, etc., or menu- factured goods ceued be considered at this time. 7i'hen the bolsheviste get through with Russia both inside and out there may be nothing left of her to do some business with, but just now it l a pretty bed picture and will need political and other kinds of disinfection. One curious thing about the currencies here sees to be that there was 4 good deal of Imitation stuff put in circulation all the way around, but thet is a lone and complicated story. Next as to Germeny: I f nd 4 good many people expressing the opinion that Germany is getting alone pretty well in holding the population together and under control, keeeing their civil eervioe eoing and =eking plane for a reconstruction of industry, etc. They have an appalling debt and neutral creditors for about two and 4 h-lf billion ',lark:: who are moot anxious lest the reearation clauses of the Treaty will render their debt uncollectible. There is no dissent in any quarter to the effect that tile Gartner: is in dire need of fat t one. ne eeee- R.C.L. - 4 I hear statelents hade that the morale and energy of the people in vastly impaired. Thellereans themoelveo admit that it has affected their nervous systeme and their ability to work, both physically and mentally. Some very ridiculous stories are about as to the effect of semieterveeion, but I UM inclined to the opinion that a few months of good feeding is about all they need, but that it 'rill take e very large emount to meet up the deficiency. The German herde of cattle have not been as much reduced as one would imegiae, according to their last census, but they have not enough fodder for their cattle and the production of milk and butter fats has been tremendJusly reduced. Both some of our people and the ikeghish as well have etuted to eel that the Germans will start trading to the cent and that the exchange of commodities and German manu- factured goods for foodetuffs will doubtlees help to stabilize eatters along Germuny's eastern frontier, but Germany has had an imeenee reduction in her ceel areas end in her actual coal production at home which effects her manufuctureu output and, besidee that, eLe is pretty well denudee of rue' meteriels. I should aey that as Germany will be in the hands of the League of Nations and the Reparations Gommiseion, if those bodies come into existence in the near future, she dill be speciuely dealt with in the matter of erovidine food and other necessary things and it will be most difficult to arrange credits with her on e business basis; but help has got to be exteuded and should be very seen for eoliticei, if no other, reaeons. Ab to France, I must Bey the crops look eretty well in the country that we pessed through on the way to Peril; and I can tell better still after reaching Belgium next Monday, as I expect to re the tri , by auto. In Paris one suffers.no leek of things to eat, but the prices are tree: mendous, and I should say that in places of corresponding character New York a dinner ould cost not mutqatore than one-helf as much as here. France needs food, but even more them the neer future coal, and even more than that government economy and la sound tax system. I think most Frenchmen hope that we will, and believe that WO should, forgive the debt and loan them vast sums in addition, but in general the attitude of our peop,.e here wou_d seen to be of (41 character to disabuse their minds of that ex,ectation. A good many people toll me that ,eople hero are not working, but T see no such air of indifference here in Purls aff one encounters in Eagland, edthoueh I had little enenee to look about In F2ngien4 outside of the business section in Imam. That is, however, the general feeling here in Peris where you have rightfully said so often that discussions of political policies, territorial ceeims, bounderies, etc., etc., have ebsorbed public utter/Um' to the exclusion of the really more haportent question of getting people to work. I chould say that, considering the government's week financial policy, lack of coal, the enormous destruction in the north, loss of credit, high prices and probably some idleneel3 or lassitude cambine in presenting a very gloomy ture, I do not feel nearly as pessimistic 42 this bete recleaning of pictroubles dould seam to Justify. Mew people say, and probebly correctly, that there is u great untouched weaAh in Prance, pert of which ehould be taken by taxation and part employed to relieve the government's emberresseents and reduce the inflated condition of the currency and a pert promptly directed to industrial develoement. The burden of the the government will, I feel, give them a serious ties, but there debt of are all sorts of scheess being considered over here for dealing with it, and preeume that after one or two finance ministers have mede attempts, failed and resigned, ublic opinion will probably ereeare for a severe treatment R.C.L. - 5 of the matter and some strong man will sae it through. At any rate that veu:d sena to be the most liesly political deveneeemat in thet connection. In the cese of France our help is undoubtedly needed and deaerved end must be given freely to avert a period of greet deereoeion and poverty *anon& the poorer people. I refer to that particularly because of the absence of a oound system of direct taxation, the indirect taxation of course being of little relief to the poor. I cannot say maoh about Italy and shall not eo there. They all tell me it is A very gloomy picture. The general impression seems to be that the pece'le are aroused on the subject of the terrntorial expenelm on the Adriatic to such an extent that economic quo tions are overOne encouraging feature of the Italien situetian is that Chedowed. the people are reeorted to be going beck to work better than in other parts of Europe. They see that they immediately graseed the problem of recenetruction in the devastated regions with considerable success and are far ahead of France in that respect. Those with whom I have talked seem to feel that the Italian situation is probably the most critical of any in lestera Europe. Estimates ate being prepared of what Euro e needs. I saw same immediate need of ftguree the Aber dey indicating that Italy figures an This was to e considerable exteet for coal, where about 4455n,--n,",eo. the situation in Italy is undoubtedly most critical; even their public service corporationerunning from hundto mouth with but a few dep.* re- serves, and this of course Is made worse by the English coel strike and practically no exports for the moment from Englund. The French estimate varies greatly, but Is eemethine ere? 17r-nn,hCennhe, and same figures are a billion dollars. These I believe are both from official sources and think can be completely disregarded. Mr. Hoover says that $3One,erT,000 WIS cure of the European situation and I think his figure can be disregarded. The fact in that no one cen eossibly state 4 figure, in the cese of food forinetence, can be altered by probably hundreds of millions according to the extent to ehioh political unrest and incapacity to trade develops between eestern and western Europe and the extent to which the neutral countries like Holland will open credits for the sale of toad preducts, etc. 'I have rather come to the concLueion that the imeediate pressing neoessities ofEurope, somewhat in the order reamed, coneist of fats, that is paceeeehouse roducts, grains, cotton, copper, megar and coal. The lust named everyone seems to agree cannot be furnished from America without the withdrawal of shipping to such an extant as to menace the transport of necessary food supplies, and further that we haven't the loedins facilities dt our ports to ship coal in anything like the quanThere is, however, no doubt that es to the first five tity rewired. named, some steps should be tenon very promptly to get things moving and open credits that are long enough to avoid subsequent eabarrassments when eay day arrives. T am not yet Tenured to say that I have any ?articular program in mind, although I am beginning to get eene Ideas that I will either bring hone with me, or, if I ma de eyed, will eand tentatively and with the sual reeervation of the right to change my o-inion, but there is no doubt whatever that irnediate aid is needed, that the credits must be fairly 'ong and that the amount required is very large. If political conditions in eastern Eureee quiet down, the ....Jaunt will be reduced; if they de not, they will be much larger, but these flve articles should be on R.C.L. - 6 their way over here before very long. T cannot help feeling that a part or the problem can be dealt with on a business basis and a part of it must be dealt with on an eleemoeynary basis. T am also convinced that we will do better in the long run by settling all disputed questions and all open accounts between Great Britain and ourselves and then tackle the job in partnership. The reueone for this 1 will explain when I return. Just es an indication of what is going through my mind I mead like to ask yau to consider a few points: let, will the United States government adoet an affirmative constructive policy toward the restoration of Europe and its productive caeacity and will its policy justify our aesuming some political responsibilities as to the new countries in eastern Europe ee well as economic responsibilities for the whole of Europe, or only the latter; 2d, will our government give any direct aid out of its own treasury or will it give only affirmative support to efforts made by our citizens to restore trade with Europe and extend credits, or will it not even do the latter (if our government does neither I fear some parts of Europe will starve as has been prophesied); ,d, will our government euthorize a generous adjustmerit of our present loans so that immediate peyeents are not required for interest and a very light burden of amortization edoeted; 4th, will our government consent to a readjustment of debt so that we may accept in payment of at least same part of the debt of England and France some of the debt which the other Allies now owe to them; 5th, will the United States consent to have the finance ministers or at leest equally responsible representatives of the four principal nations come to Washington and negotiate the adjustment of the existing debt and arrange a policy for the future, or at any rate give it a clear picture on the ground of their needs; 6th, would our government join hands with the British in e reconstruction policy? That I am driving at in asking you to consider these points is to im- press upon you what has became quite clear to me, and that is, that our government must take an affirmative or a negative position on some of these questions very shortly. Without any desire whatever to embarrass, I want to illustrate my doubts about our own government's attitude in some of these matters. I Was toed by e responsible men in our alley here thee., subject to ratification by the French Chamber, I believe, they had concluded a trade for the 'sale of all the army pleat In France to the French government for about 140,0,Mo,om. The terms of the trede. so fax as I heard thsm, impressed me as admirable, a-though I have no knowledge of what the property cost or is worth. It adds 14e0,0'e,CM, however, to what France owes us, and I presume they will give a fairly longtime obligation 4f the transaction is concluded. Now I learn (this is most confidential) that Kr. Hare has come to like two end e half billion doodlers of material owned by the Deeartment which has never been sent to France. Soee of this stuff is probably food and maybe other things which are urgently needed, but if any such sale were made over here just now I should think it would be little short of a calemity. These people cannot afford to buy more than their here necessities for the present-until they develop production. 'nth this 1 em enclosing a memorandum on that subject which Mr. Hoover handed me which has had some vogue in private circulation among government officers, and which, frankly, impressed me most favorably. This 'seeds to a little discussion of Mr. Hoover, whom I have seen 'Lice for quite long discussions. Last night Europe representing the War Deeertment, with a commission to sell something /7 , I waa at his house at dinner when we had nice quiet talk. I hoe I He he undoubtedly done A magnificent piece of work over here and I know of no one who could have accomplished what ha has. His reilef organization cempriees about eee eeoele scattered all over Euroeeand he hae plunged at the job eith on energy that is megnificent. On the other hand I e%11 see for myself, and he frankly admits to Me, that he has taken some very long chances if one considers *tali not do hi, an injuetice. the money involved, but I believe it in literally a fact that he more than anyone else eaved this part of the world from u breakdown immediately after the ermietioo. Now the trouble eith Mr. Hoover is that he develoeo 4 3t4t0 of nind, particularly under reaistance, vhich mieht be dangerous to the develoement of sound plans. His head is filled with a,moes of figure and statistics, the reliability of which I am inclined to doubt. He eereenolly etatee, and I have no doubt thoroughly beliveu wean letting off steam se to speak, that unless the United States &tees in with seeo neenificent echene of immediate aid, political and social disaster will break out all over Europe, bolshevism will Berea, and that a complete maw.** of credit, banking machinery and transportation, with consequent curtailment of production will *none. He else seems to think that if we do not market our on warelue preduction in Europe to meet thio eltuation promptly, wo will have 4 breakdown in ericen at heme that will be equally disastrous to us. On thoother hand, when I came to question him in detail ae I aid loot night, I do not think he was able to substantiate his beliefe. I could dive you d list of statements which he nude which were meet encearaeing aS to vdrioue parts of Europe. Furthermore, in five minutes he took out his eencil and &lowed els that the total required of the five urticles I have named amounted to f3,3,0,000,t00, and that I p0Sitively cannot believe and do not think it can be subetwatiated by our own ceeerlence of his eetimates and of what Germany needed in the way of foods:tuffs. One Gannet help but wheire his energy end courage and his ability to get things done under nreesure. It has been simply amazing ovcfr hors and he to entitled to a vet Amount of credit, but when it cones to coidbleoded deAVerate Ndement of what urope needs, I think lie ex- precsee in over etrone terms an trereesion ehich he eathere from 4 great Mass or mieleoding statistical eaterial gathered from %tutees, 4l1ch in many cooec are enite unreliable. And yet with it all he is themun that has dome the trick and I have a much greater respect for his ability than I had before learning of what he had done -ad before :ueetias him intimately. In cenclusion let no slay that aside from any material or other advane tag* that we may gain free. step 1i in or getting out of thio situation, I think we at home euet recognize that IT we withdraw politically dud take no risk* fin,Azielzaly in conneetion with the restoration or Euroee, we are going to be thoroughly despised abroad end will do oerselves nesdIees harm. cy bo:t it that eome method muy be found by which those things which wt can de will Le done at once and the things which might be most dift floult to do under our preeent politieel condition e will at least be attotted in ;art and peneibly accompliehed in eurt. I only wioh you were hero yeureelf. R.C.L.- 8. Hotel Ritz, Paris, Auaust 17, 1919. Since the first part of this letter was written we have traveled over the devastated regions of France, visited Brussels and Amsterdam and returned to Iaria, a trip of absorbing interest and developing a farther knowledge of this situation that cannot be obtained in any other way. First, let me say as to Mr. Hare's work that Mr. :Vent has written you tally, and I believe cabled you as well, and I sincerely trust that it will be arranged that these sales of army material will be confined to those things which are essential and adequate time be given for payment, and that es much as possible a market be found where payment is easier than it is at present in either France or Belgium. I want to give you a brief further review of the situation as Mae Kent and I see it, ehLah may in sone respects modify what I have already written. The crops throughout all of France (except the immediate aevastated region), Belgium and Holland are magnificent. The wheat, and to some extent, the oats, are an course of harvesting, but a very large anion :t of this week is being done by the women, both in France and Belgium. You would be im- pressed as I was at seeing the women working in the fields as long as day- light lasted, up to 9 o'clock at night. Certainly the women of France deserve every praise that can be given thee for their magnificent response to the need of this terrible situation. Mr. Hoover was under the impression that Holland had a large surplus supply of cattle. This I find is not the case. In the early part of the war they did, but cattle are e part of the cromotation in Holland. Then the war broke out they much increased their heap and introduced a good many Later imported fodder could not be obtained, the herds had to be hogs. reduced and the hogs practically all slaughtered, so that Holland is practically without hogs now and the herds only slightly above normal. During a part of the war fodder was so deficient that animals were producing only 25 per cent. of the normal sepply of milk. They have now been restored to condition and the herds look in magnificent shape, but they will still need to import fodder and they 'vete not a large amount of cattle for export and practically no bogs. Belgium in normal times has only produced about one-third of the food reoulrements of the nation, France slightly more than that proportion, and nutside of Holland the food production has been Holland somewhat more. impaired by the war and all three countries will need to import foodstuffs: France and Belgium fats, Holland grain and fodder. The amount of grain required for France and Belgium cannot possibly be determined now with any accuracy, but in general a largo amouet will be needed. me depressing sight in all three countries is the large number of men still in uniform. The French are discharging their men as are the Belgians, as rapidly they claim an possible, but I doubt if they are doing it anywhere rapidly enough. Every teen ee visited in the devasteted area was filled R.C.L. - 9. with soldiers, some of them working on reparation, and in one city I noticed French soldiers, German prisoners, African troops, Chinese, Japanese and British. In general, it is my impression that there are altogether too many men in uniform at the present time, and that while Ln uniform they are not inclined to hard work as they would be if restored to civilian duty. My picture of the situation, which can only be briefly summed up here, is about as follows: Drew a ;.,elt through the war area eide enough to cover the whole ficad occupied by the Germans throughout the war. Through the center of this belt draw a line representing actual battle areas, includine each places as Verdue, Chateau Thierry, et. Mihiel, Rheims, the whole ter- ritory of the Somme, the Chemin des Dames district, and so on north through Lens and into Flanders. Where resistence was strong and battles were fought the devastation is complete. As one leaves this center line he finds the cultivation encroaching in some cases right into the ground which has been torn apart by shells and tmgches but already restored. The evidence of restoration of the soil isirOst encouraging thing I saw, but there are never- theless vast belts where the groual is so torn up thet it will take another year or two to get it back in cultivation and the effort to work over such land filled with shell craters six and eight feet deep is too greet for the peasant owner and meet be undertaken by organised labor and engineering.; but the most depressine spectacle in this area of destruction Le the condition of cities, towns and industries. Most of the small towns are flat and the large cities destroyed or so damaged as to be useless for a long time as centers of population. I think we must have driven by automobile through 511 miles or the ground over which fighting. occurred, and in northern France I saw smoke coming out of only two chimneys and two other plants in operation. They were two cement plants and two brickyards. Everything else was dead in France, so far as we could see. A few plants were being repaired, but many of them are utterly beyond repair. We saw etidence in many places where there had been no fighting,of a destructive character but where. nevertheless, plants Were completely destroyed by bombs or fire or the contents had been removed.. Sugar mills., foundries, etc., were euite Useless. In Lens, the center of a valuable coal area, I believe not one pound of coal is being prodeced. 1.1any of these cities and town e of from a few thousand to 118010 inhabitants in the case ofTJleines have a small scattered population of harky natives who have returned to repair their homes--in the case of Rheims about 8,100the balance being the soldiers clearing up the rubbish. So you may consider that throughout this area of France the losses The agricultural recovery will be fairly prompt, but the Industrial recovery and the recovery of civil losses very slow indeed. In Belgium the period of occupation permitted a great deal of repair work to be done, and I was delighted to see what had been accomplished. The Belgians we saw assured us thet the industrial recovery was now making good progress. I should say the agricultural recovery is well nigh complete. To complete the picture I should say that while the industrial and civil losses in the devastated area are Shocking and almost irrecoverable, outside or thet in both France and. Belgium there is great evidence of prosperity. The farmers have made a great deal Of money; many war profits have been realized, and the real problem is the actual area of have been tremendous. devastation and the restoration of their industries. That Europe needs is production of goods of all kinds and as much as possible for export. To bring this about credits must in some way be arranged to feed the people for this winter, to give them raw materials E.C.L.- 10 for their plants, and to get their plants in operation again. nue the greatest difficulties thet has been reported to us many times is the exchange. At present rates it is possible for the French and Belgians to bey machinery and other requirements in Germany very much cheaper than in America, end they are most insistent that the provision limiting the application of the proceeds of loans to purchases in America is most burdensome and impossible to comply with. Belgian Simply to illustrate this, the/Prime thinister, Vonsieur Delacrobt, told me thet of the '!...50000,007 credit arranged for Belgium fq4,001,000 only had been drawn and I think only three or Dour million actually used, that the credit is a great expense to them and without benefit because it is not long enough and cannot be expended outside of America. They want a loan of ,110,0n1,000 at once, and they have handed me the enclosed memorandum of that they would like. They say their reeuirements are covered into september but thereafter the government alone must buy ,.. .5,100,10h a month in the United atates and they should be in position to buy foodstuffs in Argentine and rachinery be Germany and England. I spoke above of the possibility of suggesting some program. should think that this must be very sketchy and a policy rather than a program, but my present thought is something like this: eapitelize the interest on loans made by our government to the Allies for a period of three to five years, preferably five. Graduate. the amortization so thet the earlier amortization payments arc small and increase with the later payments. 7ork out some plan to furnish England with cotton on long credits, say three yearn, and certainly two. I believe no other credit will be needed there. zsure that Belrium gets a credit right away of $111,011,000, with the provision that some part of it may be spent outside of the United States. necuire the French le state their minieum requirements. 'They are all figuring now on maximum requirements. At first, it seems to me, somewhere from !r!250,10n 0e0 to f. 511,111,110 applied carefully to things absolutely required would give an assurance Viet would make subseeuent busieess much easier. Arrange some cooperation with Holland, I should say preferably between their bankers and ours, for credits for fodder and for some credits to buy grain either in the Melted States or in the ergentine. These need not be very long credits, as Holland's colonial exports should enable her to pay promptly. 'V I can say nothine of Italy, not having visited there. 8. With some reluctance and only because I know it is in your mind I suggest still another important matter. I think we should arrange with England and France to accept in settlement of some part of their debt the I know the difficulty of working out any such plan, but it will go a very long way toward restoring peace of mind, confidence in the future and the willingness to get back to work. It will indicate a sympathetic attitude by our oountry which will be of inestimable value, as just now the thing we are dealing with is only in part material. es we have frequently said, the Whole situation here is neurasthenic; they are warn out with anxiety and work; they are worried about labor; the production of coal is so short as to be a menace, and in a word a large part of Europe ueede more than anything obligations now owing to them by other governments. else to he sent to a hospital for a rest cure. 9. One most important item of the :?roam is to ensure that such credits as are extended shall not be wasted on luxuries. That matter we cannot control by restricting our exports, and it should be insisted that these governments effect the control by an embargo on imports. I say this with great emphasis, because I know that kn both Prance and Belgium there is extravagance beyond anything heretofLre known,by those classes which have profited by the war. La two garages in Brussels the man who drove us was told that they could buy at once 45 new tedillac cars, for which they had customers. One of them had just purchased a secondhand Cadillac worth a3,000 francs. In other 'words, this is another ease where the rich have grove richer out of the war, and that very fact, including their extravagances, results La the poor being poor- er, and the poor to whom I refer are the industrial classes rather than the agricultural. Those are the people to look after and to look out for. If, directly or indirectly,, those who /v.ve made fortunes out of the war are permitted to buy at will, those 140 have lost money in the war cannot get back to work. '10. In connection with this whole program I think our government must assure a definite and constructive attitude in regard to the situation in the new countries of central eastern auxope. / Eet having been there I can- not speak except by hearsay, principally of people in London end earis, but I am sure conditions will not be restored for a, long time unless some sort of fraternal intervention is effected rather promptly, and it is undoubtedly a fact that they are wiiiing end ready to trust us snd probably no one else. 11. How, as a practical means of dealing with these matters, I have already suggested in a previous letter a conference of finance ministers at eashington to restore the center of financeal gravity where it belongs, and where a program can be developed to cover the whcae situation and not a piecemeal treatment of it. If Davison makes progress with his plan I hope It will be in general in conformity with the Above suggestions. 1 m satisfied that the amount of money which can be saent promptly Ls limited, as we have frequently discussed, but 1 am equally satisfied taat the amount to be furnished for foodstuffs must be furnished elouptly this fall. A larther practical suggestion that I have had much in mind and disceseed with Dr. Vissering is to have a meeting of the heads of the state hanks very erivately, unofficially end informelly. Cokayee, of the bank of eng1snde and Vissering, of the Nederlandsche Bank, are both men of great ebLlity, and an exchanee of views at such a meeting without any expectation of making a pro- R.C.L.- 12. gram would be of great value. Possibly I can arrange it before returning. In concluding this part of my letter let me repeat that no one can understand the situation without coming over here. It is not as desperate as has been represented, but it is serious and prompt action, particularly in the matter of food, is now needed--partieularly eromptness--end Per that result I believe oar government mast take a pretty affirmative position. Ince the wheels are started I am sure recovery will be more prompt then anybody has been willing to forecast. Another consideration with me is the general attitude over here toyards America. We are not popular and unless we do something nowee are eoine to be regarded as selfish, even inhuman, in abandoning Europe to her LIte after the war is won. Now, as to my trip to the aet. People here have urged ne very stronely to go with General Harbord to uonstantinople and Tiflis and possibly a little further. The men in the State Department can tell yOu all about the objects of the trip. I have been led to do it, first to meet their emergency, which was very urgent for they needed a practical banker with them, and, second, to give me aone opportunity to complete the picture of the situetion, This Commission will have an ueexampled Oppor- tunity to get inforretion, rald I believe it means that to miss the chance an important benefit from my visit. ee will learn a good deal there :.bout central eastern Europe. It will detain re until along toward the first of Ictober, or, if a cable from the Bank makes it seem possible, I shal/ stay a. little longer. You must not feel concerned woild be to throw away ebout my leaving. I am proposing to write you again from the steamer, sup- it over plementing this letter and filling in the gaps after I have read and studied it. For your information please ask Governor bardine to let you see a copy of my letter to rr. Tremen about the handling of the gold matter, which I believe is in very good shape. I cabled about the possibility of a renewal of the September maturity. Daigle Fare might be able, within the period of another renewal, to make some sales in Spain which would oirviate the necessity of buying pesetas, which just now seems unfortunate. Foping that this letter will be helpful t...nd that I mr4, be able to give you still further help on riiy return, with best regards, Sincerely yours, Pen, Fussell Leffingeell, Assistant secretary of the Treasury, eerie/to:ton, -. C. BS/7 441. yer werUa rpm Stem imgell T at Aienst 19 Replying VW sable Islam peseta psemost Bank a Prunes states I. They hare speed with ?torah Treasury to :Oda up to len million dollars in napoleons but are only willing to Alai* foram!' seente in bars A. There will likely be sem Olell 41041111 less unless SIMesed in Sottiflg dl VW :Untied coin ). They will fusel& figures for Items ene two mma three tociorres 4. They uu$t allow ton days for arrivaa of geld in Nadrid after shipmest Is ordered but will taNe entire *barge of shtseert stop !ill sable flare! OW% Om London as epos ua recsivet4 stop Assuming it would require it least equal time for Shipping from ltrusela t Paris Iendeavor/al to penned* Aglaia to tesporarilI nermyt gold earmarked is Bruesels ioho is most rslostant to do tomAuss involvbk; shoving fatintilible geld bead ahrt4.4 in 404e.relsbessot step H4VO &IAA* asked Ameriemn Exyrosz i7om:.41, to furnish figures for items one tors arid three ins1udin6 inouransoltoccsi:amloation slow to Brussel a ,ami 'rd d oaanst upset re1217 for few 4101 10V,P It Okipmest to arTamood hose by azi-41 Oftany insuranee oust to plowed *OW sota.,istiee pies610 in starlips and I dotibt passibility of sbtainina insuranee rayablo in pesstws atop It should be understood that seek tiNs Is ro,Ared to twerliie peek sea arrange far lotsguarding OMOk ohipmegto und I regard it 4.0 oases to *oust von soneluding transaction In t4nes for Auvet wad September maturities unielle Sank S2atm would aocont geld s4rnArkod in AusferOus trussele or poovibiy London stop gave 4rr4spod to ass 001l1or at TrosanrY tomorrow Tokkeeday afternoon to sso it he on etpedite 'matter 3TROSI ?pt* CABLEGRAM For Leffingwell from Strong Teseven August 20th Bank of France advises following They are unable to obtain accurately present railroad rates in Holland Belgium and Spain but cost of transportation is smallest part of expense Insurance is largest cost and rates are so variable it is impossible to etate accurately in advance of actual shipment Based upon experience of previous anipmente to Spain very roughly estimate expense of shipping ten million dollars would not exceed following araounts From Brussels to Paris fifty thousand francs From Amsterdam to Paris seventy thousand francs From Paris to Madrid parenthesis which does not include transportation in Spain to be arranged by Bank of Spain parenthesis one hundred and twenty five thousand francs .4. They will take entire charge of shipment when order is received from Ministry of Finance but must allow about ten days to arrive at Madrid stop figures yet from American Express Company stop Belgium if in case of need they can take entire Am inquiring National Bank of charge of shipping amount German marks required to Bank of ,France and probable time required and cost involved 5. stsbp It is ee,important that I should know promptly whether insurance is to be secured here and payable in what currencies in case of loss and whether shipments are made at risk of Federal Reserve Bank and if Bank agreee or at risk of Treasury No SSTRONG BANK RK 11111 Sent by (SEND TO FILES) COPY OF TELEGRAM 1919v . I:Tea:surd Delartmont, '41201 ngton y thanks ior ;lour tbou4htfu1 messaea r,.velveu juat anZ am lqpItiod Unable tQ writs btalprelate the Aooa winhns tone ti%a 3.erw. Benj. trotg Hotel Ritz, Paris, August 21, 1919. PERSONAL My deer Russell! I wieh it were poseitae for me to write you fully, but I hevebeen driven to death with letters, cables, calls and trying to arrange this gold mutter, cm that pert of the time I have been obliged to work late evenings. I really need an office force here. My last lone letter wan 4 wry Sketchy affair containing inpresalons, and I an constantly gaining new ones, involving no eheuee in 414 eeeerel viewe but some change in detail. Fur one thing, notwithstanding the aduireble aepeerance of the crops in northern France, I understand the wheat condition to not up to previous years, at any rate in some parte of the country, because of early drought and later rain, and that they do not ox eat a fuel crop by any means. In other words they must import wheat as well as meets. Tn feet, the ;resent need for thle winter really seems to be food supineauding sugar, and, with that eatiefied, if it cen be, teem iz tneloebteeay a very great need in France for asoistance in restoring industries which have been so terribly destroyed by the Germans. Mr. Oellier told me today that they did not leave one whole :tugs: plant in the country. T Owe emitted to refer-in my former letter to another matter which is We have never reeaid Preece the emount of money which she loaned ue when we eainee our indeeendencee and I wonder whether this much in ny mend. is not the time to recognize or, at any rate, credit France with a sort of I do not know anything of the history of that debt; what it amounts to; how it was dealt with by treaty, or whet that amount of money would value at today, etc., etc., but at any rate it would make an exeuce for a gift of some sort in the case of France, which would not ply to ()there, and the sentimental effect I believe would be trenendous. No one hes ever mentioned this to me nor have I ever mentioned it to moral debt that we owe her. anyone until this letter, I prebably gave you e Shock by my cable announcing ey trip to ConstanThe arreneement for moving the gold from Belgium and Holland to London is ell complete .n(i Mr. Kent :vas to close up the details reearding insurance in London, and there seemed no reason why I should not go, prolonging my trip possibly two or thr e weeks on that account, when your cable came about the *seta payment which led me to abandon the idea and cable you at once. Kent now advises that the Bunk of England representativeshave gone tinople. R.C.L.- 2. to both Brussels and Amsterdam to start the gold Shipments on Wednesday. I have informed him fully about the peseta situation and between us we will do the best we can to handle matters, even if I m obliged to bulldoze Pelican into eccepting gold in Bruesels temporarily in place of gold he must ship, but they do not like it because it Shows more gold held abroad and the Bank of France statement just now is scratinized very critically. This water will have gone over the darn by cable before 14 letter reaches you, ao I shall not go into deteil except to enclose confirmations of my cables elreedy sent. The rupee mutter I m eatiefied cannot be argued out either by cable or letter, but the picture precented to me is quite different from what T gather you and ritrausa see as indicated in your cables. Ever sinee the Pitmen Act was passed the Indiun government has been selling repeee in our market, as 1 understand, considerably abeve exact geld parity, and naturally as the price of silver advances the price of rupees edvences r41,1 the value of gold in relation to the price of rupees is reduced. Therefore our gold shipmente buy fewer r::.2o(r!p, T f:ee hoe that eituation can be changed unless the Indian government is willing to cell rupees to our importers at e rate below the cot of m::Zeing rulees auying silver. In other words, so long as we continue to buy goods in India those goods become correspondingly more ex2ensiove to us, and f.11:d.f., too ee- pensive Ladle's export trade to the United states would decrease. Naturally WAX market is protected against shipments of gold by English importers of jute desiring to buy rupees in our merket, leceeune of the premiue on dollars at present rates for sterling. If the Indian government, on the other hand, marks dorm the price which they are willing to pay for gold in India to a point w ich we would regard 413 unreaseenuble, then the arrangenent concerning which I cabled should be discontinued. I distinguish between the situation in India and the situation in Spain by the fact that in India the depreciation on gold and the premium on rupees is brought about by therdeme in silver, whereas the situation in 3,Atin is a purely arbitrary one, the :!,,anieh government or the Bank of Spain simply reducing the price at which they will buy gold, for the sake of profit or pos- sibly to curtail their exports. I would regret very much if I eMburres?ed your dincuscione with Blackett in the slightest degree, but I do think thutNome of these matters we must recognise the tremendous difficulties and Tessure which now rent on the British government and do our best to otrengthen them by every reasonable means in our power. The situation over here is a most difficult one, end possibly I am influenced by the exceedingly generous response which is made to every request which I have made for aid in handling our business. Now, regarding my cable about discussions with the British and French governments on the eubject of their debt, we at home, busy as we have been, nevertheless do not understand the tremendous preoccupation of all the R.C.L.- 0. Rnglish government people with doaestic affairs, and I do not know that free from criticism ourselves in the matter of representation abroad, whk today we are without a minister in either Holland or Belgium, most of the cipal parties have left the Mission orgenization in Paris, and Hoover's rei organization which has done the lion's share of the work in saving a collaps throughout Euroee is now pulling out. Just between ourselves I never felt so sorry for anyone in my life as did for Frenk Polk yesterday when I took e abort automobile ride with him and found him quite worn out and realized, although he wo.s not complaining, that he is overburdened, largely because he is uaerorganized. After I had written and cabled you Stettinius returned to Paris from Lon- don and I asked him whom he /lad seen over there and whet he had leerned. He told me he had leaked with the Chancellor, ameng others, and that notnnly the Chancellor but bankers with whom he talked, all of thee referred to the menace of the American debt. They feel, as I wrote you, thet it is a sort of sword of Damocles hanging over their heeds, and you have mede e very wise and conctrective move in taking steps which will at any rate put us ntraight in that matter. One thing that has Impressed me here very much, 4s well as in England, but not so much in Belgium, in that they have no plea, no definite centralized leadership for deolingeWith economic matters. If I were the boss of the whole job--end thenk :leaven I em net--T would devote my energy toward persuading the Allied governments to declare a moratorium on all political, boundary, territorial and military dizeuseioae and require the whole orgenization to get busy at once an economic and financial problems. They are all engaged in needless and most difficult discueeions of these boundary matters, trying to keep these jealous, bellicose people in Eastern Europe quiet, when the government organizations should he devoting every energy towerd the restoration of production, transportation and finance. T cannot believe that it is our fault, but they nevertheless all look upon us as the rich partner end seem to expect us to take e hand in ell of their difficulties and do the major part of the financing as well. The contrary view of the boundary question is of course that in the aboence of a League of Nations organization which is really functioning, if the Peaee Mission organization does not deal with matters, each nation whose interests are involved will end eeet of nezeesity look after its own inter- eats solely. A great deal of emphesis has been laid upon the necessity for free oredAmerica, eheaI havehee diecussiona with various people, and I suppose it would be wise to grant a certain amount of free credits, provided the amount is reasonably limited so as to protect us irota an undue drainkne of our gold to the smaller neutral countries where facilities for getting credit bevel upon additional gold reserves do not exist, like the South American countries, Scandinavia, etc., etc. its in At present rates of exchan e our markets are more exoensive to buy in than other markets, and of ceuree you realize, as I do, thet this is really a re- versal of the arbitrage position which gave us so much concern during the war. But in general a reasonable amount of free credit would be most helpful and would enable setae of these countrieo to buy in Geraany, which they badly A.6.L.- 4. need to Jo, and of course that would help the Germen recovery by so mut. We must not also overlook the feet that we really have not establish free gold market unless we are willing tee we.1 to have a free credit merke wes told the other day the terns of the Paine, Weber n Co. loan in Be. glum, which did not materialize. It struck me as being extortionate. wrote Governor Herding a letter about the Belgian currency situation which I hope you will read, but notwithstanding that curionsly stupid blunder of which the Belgians were guilty, I cunnot help but feel that Belgium it well ahead of France in getting on her feet again, and in saae respects is oopoiderably better off than England. In fact, my personal belief i* that a Belgian loan is probably good, barring of couree the complete breeneiown ne Europe which some people still prophesy. Let me say in general that conditions hare are really improving slightly and slowly according to my best judgment, but the danger is that this iawy be temporary and cannot be maintained after this crop and Hoover's meat supplies are exhausted and after the winter conditions of life, perticelue14 being without co el for heeting, become annoying and possibly dietreesing. my most important recommendation to you is to GOM4 over here. I would give anything if you were here now. In fact, when Frank Polk and I wore discussing matters yesterdey ee eeid he htal been on the u number of times of cabling you urging you to come, and I was obliged to confess to him that I had had a onbio in my mind of that bort for cane time. &low,* for now. If T ever get oleaned up with mail end telegrams I will drite you a carefully prepared review and something more definite in the way of suggeetion than was done in ay feet letter. Rath best regards to all in the building, Sincerely yours, Hon. B. C. Leffingwell, Assistant Socretery of the Tre-eury, Washington, D. 0. ee/V I 4 et eewover, le that is 013141AaNis. tiptoe. Ritz, Perio, Aeeust la ceeolueion, lee 'hat in no re,elet is tlee ae "" 4 moderatieee e' al pain. eq bereeer aeepueeible peep. Tly dear Russell: l Woe letter° in the neture of runUp to now I heteve, ,. adr, View° boon eereful to warn you suing conmente and impree (MST the time he° come when rehould were not in any wiAy oonolusienik send you aeletIline more La the ne 'ef a definite opinion. Thic cennot be done setisfectoriTy in the limited teee I have end without core essietanee, but I heve dictated the encloeed nemorandum eiv, let what I believe epitomizes the more importent features of the eituation. el this memoramdun I have not emphasized whet is possibly the eost importet of all considerations.- The prestige end influence of the United States eoverament end of our people in Euroee todey is le great thet it muy be enjoyed in bringing about steble politicel conditions and economic re°every reasonably promptly, provided" we are eilliee to aeeuee the leederShip and-give erompt help. In my opinion treetien would be eiened promptly, disputes .end disoords aould either dieeepeur or be subjected to control end the orgunizationa to deal with finenciel and busineso rehabi/itetion would :eomptly be created und begin to function Irf the United Statee would take the leederShip und furnish needed essistence. Every re:ort Teething UA here indicates that the attitude of the Sanete end poesibly grourinz peblio opinion at home leene toward withdrewine from the European situution end allowing EUreee to flounder. I on only believe that we do not realize our power, end am unwillieg to beMove thet once we reelized it we would be unwilline to exerciee it. -50 cannot wait to have finence miaistero, ambassedora end others came to Weehington begging for help. We must take en affirmetive and coe- structive attitude and invite them to eome, end we meet likewise, where influence an be exerted, diroat it towerd furaidhiee help. This afternoon I read the cenorendum to Mr. Polk. His principel comment was felet I had not sufficiently maphesized the poesibilities of roetoretion in Europe through the exercise of our influence beaked by financial and material uid. Objection end discord in formulating plans will diseppaer in the few of this ettitude by us. At his suggestion I am sending you e cable perephreeiee the memorendum and he is proposing to send cable to MIK Leasleg urging that it be conadered by the Preeident. Hotel Ritz, parte, Aegust 5 109. Tly dear Russell: Up to now I have bean seadina you same lettere in the nature of runnieg comments and isapreecions, ehioh I have boon onreful to warn you were not in any way oanclusions, but the time has come when I* Should send you something more in the nature of 4 definite opinion. This cannot be done satisfnctorily in the limited t.rae I have aud without more assistance, but I have dictated the enclosed nemorandum giving what I believe epitomizes the more important features of the situation. In this memorandun I have not emphasized *hat is possibly the Lost import,44 of all considerations.The prestige and influence of the United States government and of our people in Europe today Is to great that it may be erOoyed in brining about stable political conditions and economic recovery reasonably promptly, provided vieare willing to aosume the leaderShip and -give prompt help. In my opinion treatiee would be signed promptly, disputes and discords ould either disappear or be subjected to control and the orgonizations to opal with financial and busineso rehabilitation would ,romptly be created und begin to function *f the United States would take the leaderShip and furnish needed assistance. Every re-ort resehing um hero indicates that the attitude of the Senate and possibly a growing public opinion at home leana toward withdruwLeg from the Europenn situation and allowing Euro.e to floander. I on only believe that we do not renlize our power, and um unwilling to beblew that once we realized it we would be unwillin, to exercise it. 710 cannot it to have finance ministero, ambassadora and others =IMO to Waehington begging for help. We muet take an affirmative and constructive attitude and invite them to come, and we must likewise, where influence can be exerted, diroct it toward furninhieg help. This afternoon I read the mmornndum to Mr. Polk. His principal comW48 that I had not sufficiently emphasized the possibilities of reeltoration in Europe through the exercise of our influence backed by financial nnd materinl aid. Objection and discord in formulating plans will disnppenr in the face of thio attitude by us. ment At his suggestion I am sending you a cable 2araphrasing the memorandum and he is proposing to oend a cable to MrC, Laneing urging that it be coneidered by the President. Of course I realize the many difficulties Which exist at home. I am not willing now to soy as Vi'. Vunderlip did that if we do not give aid Europe is going to oollopso, nor huvo I modified greutly my belide frequently oxpressed to you, that there is such exaggerution in the state- ment of figures of Teeropeon requirements. What has not been exeggeroted, however; is the need for prompt help, oven though it be bat a fraction of whet is estimated .by sone recent visitors to Europe. In conclusion, let ue say that you moy rely with complete assurance that in no resoeot is the memorandum enclosed an exeggerutian, but it is rather amoderotion of all points and reoreeontatione which have been made to me by many responsible people. In u recent letter from Jay, referring to money leaving the United States in the hands of aeigronts, he mekes the following stotevent! "In it conversation Which we had with mr. Mort arouse this week he indicated that a. coneideroble :.virt of our exports oere being financed in effect in this,pauter. He stated thot absence of actual requests from foreign governmente for credit on this side woe quite romarkoble in view of the fact that the Treasury Department had =eh a large eum avoilable and that the War Finance Corporation woe oble to be of assistance." This indicates a eomewhat passive attitude on our part, and I believe a much more effirmotivo and eggressivo attitude is justified. I hope this memorendum nay be of some ossistance to you. Sincerely yours, Hon. Russell C. Leffingvell, Assistant Secretary of the Treasury; Washington, T). C. BS/11 GREEN 4 -EJF 3963 August 31, 1919 Secstate, Washington. 3963, August 31st 1:00 a.m. For Leffingwell from Strong. T 9 August 30. After careful consideration and submitting to Polk "am sending following paraphrase of memorandum mailed / you today. In general both political and economic situation is so vast and complicated that one comprehensive plan of restoration is impossible for an undertaking requiring years of hard work production and economy. Political. There is lack of leadership and plan as people in authority are exhausted and relaxed. apprehensive With the termination of hostilities and common danger cooperation and leadership are superseded by individual and conflicting interests greatly delaying the completion and enforcement of treaties. During the President's presence a certain control was .exercised through our influence which is gradually disappearing now that the German treaty is formulated. order in Silesia,Rumania,Hungary and elsewhere whtch One result i -2- 4-EJF To Secstate Washington 3963 discredit the principles of the treaty. Delay by our Senate in ratification will surely retard return of quiet and result in either a barren league or one incapable of harmonious action with out stabilizing in-. fluence absent. This also delays the formation of the committees and commissions which must be promptly organized to deal with both political and economic problems and in the absence of properly ftnctioning organizations the new nations of Eastern Europe are struggling in doubt disorder and anxiety and appealing to us for help. The gradual withdrawal of our mission and relief -organizations will remove a needed stabilizing influence both for political progress and in organizing food distribution and improving transport and communication. 3. Labor and,Social Conditions. War strain and relaxation combined with Underfeeding have left the people neurotic and sensitive. There is danger of too much paternalistic government control of all activities reducing initiative inclination to work. and delaying recovery with reduced The Hopeful exception is the agri- cultural class which has returned to hard work and pro- 4-EJF -.3- To: Secstate Washington 3963 duction tbroughout Europe hut the extravagance of those enriched by the war combined with unwise government finance currency expansion and like evils has seriously increased the living cost for wage earners and those of fixed income who must be ensured tolerable living con- ditions this winter. 41 Financial and Monetary Conditions. Excessive short borrov.ing government loans from central banks and currency issues and with the exception of England insufficient taxes have Caused such currency depteciation and exchange disoratlr partiaUlatiy in eastern Europe that trade is difficult and frequently impossible but no wholesale measures for immediate currency deflation would be safe because of enormous readjustments entailed unless general throughout-Continent. Some scheme of gradual treatment af this matter must be devised to avoid even greater trade difficulties, Recovery is continued and satisfactory and another year will see probably all but the most seriously destroyed areas of France restored to cultvation. Western Europe this year will not produce 5. Agriculture. 4-EJF To Seestate Washington. 3963 more than seventy five per cent of pre-war crop and needs fertilizers. 6. Industry Varying greatly in the different coun- tries the immediate necessities are labor tranquility, greatly increased production of coal, restoration of industrial plants in Fr:_.no e , Belgium and. southeastern Europe and large supplies of raw material. These supplies can be distributed over period of time and immediate shipments I belie are munh less than some reports. indicate. There is ample railroad equipment in western Europe but ro aibeds badly need imProvement. Canal transportation in northern France slowly improving but not yet restored. Wagon roads generally in good shape. Telephone and telegraph lines and mail service, slow, inefficient and bad. A large port of eastern Europe ''requires equipment and motive power and '7. Transportatibn and Communication. renewal of river transportation now interrupted by political conditions. 8. Food. This is the serious- aro.d pressing problem which 1 -RFA SIXTH SHEET OF #3963 TO SECSTATE credit control to bare necessities. Political tranquility restored in eastern producing sections to ensure exports of surplus grain. America must allow reasonable freedom for use of our credits in buying in cheaper markets than ours. Restrictions upon trade with Germany imposed by treaty must be partly modified or suspended during period of recovery. B. Inland transportation in eastern and central Europe must be improved. F. Plans should be made now for gradually progress- ive reduction of inflated currencies. Foreign Exchange. The recent Sharp decline in exchange has had a depressing effect upon people and government credit but is developing a realization of necessity to work and produce. As United States is now dearest buying market the importance of long credits together with relief from immediate payments of existing debts and restrictions upon unnecessary imports is greater than ever. Debt to America. My previous recommendations on this l-RFA FIFTH SET OF #3963 TO SECSTATE which can only be solved, by credits in the United States. Holland needs fodder for cattle and six to eight months supplies of foodstuffs for which se should have no difficulty in arranging payment. Estimates f or Italy vary from three hundred and fifty to six hundred million dollars. For other countries figures vary so greatly as to preclude attempting detailed estimates. Based upon a combination of opinions partly official partly from Hoover's orgazation I should estimate that the United. States should furnish from one billion to a billion and a half in fats and neat grain sugar and fodder to do no more than alleviate intense strain this winter. The German official statement of requirements indicates a great deficiency in fats but I believe their food. figures are exaggerated. 9. Foreign Trade. I cannot see any prospect of early resumption' of large exports from Europe and believe following measures are essential to ensure avoiding too great impairment of European buying power. A. Imports must be restricted by direct embargo or credit 1-RFA SEVENTH SHEET OF #3965 TO SECSTATE on this subject are renewed. The moral effect o early announcement 0f: arrangements for deferring interest payments would be most helpful. Reparation by Germany. The theory of the treaty iX ruthlessly applied will so retard German recovery as to hamper rOctoVery throughout Europe. It is essential that the Reparations Commission should be promptly appointed develop its organization and formulate the reparation procedure along some line which will ensure prompt restoration of destroyed industries and defer unnecessary exactions during the early period of restoration. Neutrals. The uneasiness of neutral countries concerning Germany's debts which are now subordinated to reparation requirements of the treaty could be rmoved by an understanding with neutrals which would encourage them to throw their economic weight into the work of restoration and furnishing food. Favorabl-e Factors. During the summer improved food conditions have brought considerable improvement in the general situation principally the following: A. Restoration of agricuT_tural activity and the stabilitv 1-RFA EIGHTH SHEET OF #3963 TO SECSTATE stability of the agricultural population who will present .a strong resistance to the spread of Bolshevism and who have the advantage of adjustment of price of their production to advanced cost of living. There are numerous evidences of waning of the Bolshevist movement . It is increasingly obvious that the efforts of labor do not ultimately result in organized violence. There is growing appreciation of the necessity for financial and monetary reform. There is growing conviction that recovery depends upon increased production and thrift. Unemployment and unemployment wages are gradually decreasing having been reduced :rle half in Belgium and being further reduced in France this month. 15. I believe our potion is now as follows: Once we were forced into the war we brought it to a conclusion upon the basis that governments would be established upon principles of self determination along natural and historic lines as formulated by our President. In consequence new nations have been created and new governments formed for old. NINTH SHEET OF #3963 TO SECSTATE old nations based upon these principles by our invitation and insistence the danger political and economic to Europe and morally to the United States is that we shall desert On Europe and leave these new governments to their fate. entering the war we assumed not only military but financial poli,Acal and moral obligations to Europe which cannot be terminated by the conclusion of peace under present conditions without prolonging disorder and suffering. It would be an act of cowardice for which we would be despised. The whole situation may be summarized by stating that our ratification of the Treaty is essential to prompt political and economic recovery to be followed at once by the creation of the League of Nations and other organizations required to direct this process. While food raw materials machinery and reconstruction work must be furnished speedily there is ample time to prepare for the winter's strain if we recognize our responsibilities at home. All of EUrope is now waiting upon the United States obligations. and our attitude toward recognition of our Our influence and prestige promptly applied supported l-RFA 1717TE F:7711-.T.07.1 1?.:4965 TO STST,217 supported by material 613,i0ence of our attitude: such. ,7S - a generous treatment of debt.and eaily extension of needed credit will have an immediate quieting effect and vastly aid recovery. It would be hazardous to predict developments next winter if food is not suz3plies0 The margin of safety between -oresent comditions and reVolt and disorder is narrow enough and will be further reduced with cold weather. While my present opinion is t1).6:.t there will not be the complete collapse and disorder which is predicted for this winter Euro7De nevertheless faces period of intense suffering the hardships and duration of which depend upon the degree to which the United .States extends or refuses aid. 16 If feasible the following -Trograan would probably meet the situation. Limit the use of any available government credit for necessary fobd su7Dlies to centers of population of middle Europe if required by emergency or by failure of other 'plans. Enlarge powers of Grain Corporation to sell on reasonably long credit and if possible include other food products ETEVENTH SEEET OF #3963 TO SECSTATE products ;particularly meat and fats. War Finance Corporation principally to furnish credit for raw material needed for essential industries. Banking and investment credits directed partic- ularly to furnishing industrial capital. If through these sources one and a half to two billion dollars could be furnished in the next six or eight months it would give us all needed influence to insist upon settlement of many pending disputes and I believe the peril of the winter situation would_ be largely removed. 7_7. Would greatly appreciate cable to London giving as fall information as possible regarding situation at home. Strong. 3963. POLK ANIMISSION 711, October 1, 1919. My dear Leffingwells I am enclosing herewith check to your order for $10.,4, to cover my share of the room and railroad transportation to Washington. Sincerely yours, Hon. Russell C. Leqinet11, Assistant Secretary of the Treasury, Washington, D. C. October 8, 19_9. 0 My,de r Russell: Our discussions in regard to expaneion, ric, interect etc., did not, eild Lrobably oe id not, result in anythin6 in the inAure of a oonclueion, and the Litution hue so mny complexities that i doubt if anyone is ju tified in aseuMin6 to huve a settled conictioh at all. On the other huhd, I cannot escaie a feeling that there is a tremendous rEcponsibility in this.matter now restint; u,en EGMe one; whether it tA. the !L_ecre- .tary of the Tre ry, or you, or the Fedor-el Recerve L'oard, or tole te.nk rein to Le :en. Thie is one of those c sez where the adort.-cn of no ioiley uty heve just importauL and far re en effir-Live decieion my two oint I um afri., we re not in areemeet:- CIOne. is'as to ti s function of the Federfti Reserve .4 Lem. tht Lee Federi.1 Reserve Sy,tem vi Your ViC.3 seem de_ljled for the -ur,o,e of providin the means by which credit and currency would expand as trede demands increaEt and that when tr,de dem_nds diminish the vciume of credit :11.: currency would contract, without employin,z rate chanises to inf,uence ei6ner move.. believe, is contrary to accepted Gootriae in Thic, to credit currency and price; tmry to the exrience of th3 world in central Lnk .rot. ; I weuld be reretfel to feet that Ke differed auteriuliy* on such h0 The second point re - t than of theory. i- ret_iar Lee direct_y to the first And is mor You believe, _ -_ter of I uhderet,nd it, the't an iecre e .tieh of good:,.:),;11,..4,coincidnt wite _ reductien 1: Lour export tr-de, ee relied upui to hr down rice nd tri,t thi will Lrin nn CIL, volume of ro- October 8, My,dear Russell: Our discussloo in regard to expanoion, .ric000 intoroA rates, etc., did not, and ,robably coold not, result in ,inythin,l, io the oturo of a coociL000, and the sltuotion hao so many comolexitieo that I doubt if anyone is juotifiod in aosumino to have a settled cooictiocoat au. On the other hond, I osnnot escope a feolio6 thot there is a tremendous responsibility in thio'ootter now restin; u;:on. come one; hother it be the oecre. tory of the Treoury, or you, or the Federol Reserve bord, or toio bonk romoin.2 to to soen. Th io one of thoo c0000 where tlio adopio.on of no oolicy may have just as important and for reochioo cooceueocoo a:, an offlro-Give decision moy Oo two iointL I am afroid We :,re not in ag.eemeutt- [One is 'ao to tOo function of the Foderal Resorve 2y tem. Your vies .eem . to bo tht the lOdori Eosorve Fy.tom wo, Oo_ined for the ;,.uloo,o of ,rovidinL, means by which credit -nd cu'rreoty would ex000d Aho tr.:4o domalloo increaL, aad that when trade demoos. oiminioh the volume of credit no currency oould outomv:..toc,oloy antroct, -i.ta-out omvloyine 1.-ite clinere, to illfluence either illovta6t. To. , I believo, lo cootrory to accepted doctrine in re6ard to crodit, corrency ond pricao; contrary to the experiance of the worlO. in control t oO .loctoco; 'and I wouio be moot reorctfol to fee. toat KO differed motorioli.y'oL :oich fund oontal matter tO:io. The second point relto,.. diroctoy to too firEA ,od is more a matter of jo,co,00lt than of theory. You believe, as I understand it, that an ircre duction of goodo, pcooiLly coincidont with a reduction in our export trodo, coo be rolled doon to bro,_ down ,rOcoo ond oft thi. will trio down' Olio volume of ro- 10.8.19 Mr. Leffingwell 2 That I do not believe will .prove credit without any etimulation ty rats oh,nge. to .be the ce..e, et any rte permeneetly. :7 I am not going to write s ion E; letter with argueent on these ,Loints, but I a oin to take the liberty of sending you a personal word or two which I know you will understand: Don't take all, or too much of, the resi)oe-sibelity tion your own shoulders in deteriiiiflL is to be in the matter of rtse, nor, if you the policy of te Treury De,ertment ernit eeureelf 1,0 relieve iO the Feder- 1 -Reeerve Board ane the Federal ReserNe Eeek of th.eir necessery eflare in this reRceribility! I am wrItin4; this vetil two objects in view: -- ,tne first to suf;gect, if it cen be arranged without inconvenience, that we have a little discussion of this matter, if i:OE, ibie with Secretary Glaes and Governor Hardin, erior to the confereace of governors to be held on November 12th; , second, thet yeu -iere this responsibility with others ju,t ee fully as possible by makine it a prt of the program for discueeion 00 November 12th, in which you will yourself particiate. I cen marshal many ,erguments in ort of these recommendation:, whieh, el probably, are not necessary, but which are naturally inspired by my person desire thet of us to eu long as you are in the Treeeury no stone be ,11,,,,Ke left unturned by either the record al,erfect one. Eincerely yours, Honorable R. C. Leffingwell, -Assistant Secretary of the Treesury, Waehington, D. C. 135.1111SB 4e Mr. Leffineil 2 Tht I do not believe -will trove crAit without any ,timulation ty rate ch-nge. to.b, the cc, t :j.ny r.,te permanently. not goinL. to write .bu 8 10.8.19 :7 letter with erbur,nt;: on these ,:ointc, ion, I am ,oint; to take the liberty of sanding you a personal word or to which I know you will understand: - or too liuch of, the responsib_lity Don't t.,ice '11011 your own shouiaers in deterinin va,J, the policy of tne Treasury Department is to be in the matter of rtes, nor, if you , a 80, ,:ermit your3elf W relieve the Federd-R.esrze Board ane.the Federal Reserve Bank; of thir ileCeSET7 share In this responsibility I am writing this with two objects in view: -- the first to suggeot, if it on be arranged without inconvenience, that we have a little discussion of this matter, if pos ibie with Secretary Glass and Governor Hardin, priur to the conference of governors to be held on November 12th.; second, th.,.,A you thre this with others su t %E,5 fully as i:ossible by makin, it a prt of Che responEitillty \ , i:rogram for discusion au Novembur 12th, in which you will yourself 1 can marshal many tii ort of these recommendtion, which, _ - probably, .1-guments in -_re not necessary, but which are naturally inspired by ray i_erson l desire tht EU long as you are in the Treasury no stone be left of uo to maKe Lie record a.,erfect one. incerely your:- Honomtle R. C. Leffingwell, -Assistant Secretary of the Tre&sury, Washington, D. C. rtici.;.ate. unturned by either FILING DEPT. NOV 6 - iS19 October lei, "..; your note o'' try FA.nd trint, I thirteenth. sugostioh of BOLA, sort to Washin6ton in the neer future rid would like to alscu&s fiurewith you speoifiodlly aric,se our view, togsth,n-, whiOn I hetha,r toi) t. I ai. most to di). yourf,, g2:8R. C. teffin,ckell, :,,,cirrtY7Truty!!!"!?""aVlisry , , D. C, OctJber 15, 1919. Dear Russell: Thank you for yours of the thirteunth. I wculd like lo he atle to 1.repare the article which Professor Huetner asked you to prepare for him, but it really is out of the uetio jut now, o I Alai! try and wish it on to someone else, subject, of coure, to approvtd the .cademy. Ho' would you like to have Nr. jay take a try at it? Faithfully yours, Honortle R. C. Leffingwell, Assistunt cret ry of the Tresury, Whi.hin6ton, D. C. . dear Ru. sell: In order tht you y be somewhat informed of develoiL, I am re receivin nuroL in,uirie, from 1,wk ich should L. reed fer the reneetal of lo,im uon the bond- of the-Fourth Liberty Loan nd ueon Victory Note, mr. tellia, m. V120 yeAl Liv,t we that he 1111, reoeivd probably fiftean inuiriet, of that onuroter in the le-Et y . two Lion it; th t rated viii be advanced to 4-/4 rhr, nu, in some oasee, 5%. r,roeivicj at the frit-: ii , n- god Jimmy in uiriel from igoinL to Liu:, ,teiy cul.tive fevor that weel, to i.e 4re dit-4: over_ to when the F dc,r.1 ,oxie check to t E3in untry, not otly a to the tee& oxda, but re_ w.t,Lo, etc. gy ftesocl_te in tho tsimk Lei! meL.t.- t there is. drowia6 lte tion.1. celrelojni;. I . re e LA-.) permit my ,elf to Le ihf,ucuced by re- of tn-,i; oL,,r.ctsr, I thif:- thp ir.dic_tleL are Cii r- in ge:r *1.); ct omethin;.; will be io.., the line Ion, a.nd, furthermore, I think mo t of done.' (fur inve:Aed fLnd Lody Leli 4.,.3 re chcd nd I exect will b,a rutrin_ Aofe a billion of runnin over te V-hinten next Tued y night, e ini y u feel the irne iJctoter 16, 1919. Dear Russell: tun most gratAfut to iou for the lettr of apti,reci,tion which you hs,ve written Ltut. Mr. Murray. Wohlit he 116.5 done for you ill he4 nim in this bunk, Wire 1 fee, confiO!nt th.,t his future 4, I.,JEured. 1.7ithfuL_Ly Houomlle R. C. Leffin&well, Assistant Secretry of the frea,ury, -Alic4;ton, .MSb 17,. C. October 20, 1919. Lear Russell: Th,nk you for your note of th6.righteenth. di:-icume the m%eting, with you by tele,hone day, and hill F.,dtnfully Honorable R. O. LeffIgki=,76,i, Ausistnt Secretory of the Treasury, Wa hinton, D. in the course of the .F. ccomiliodate my tri. to Washington to venience. C. I hoe to your on con- v FEDERAL RESERVE BANK OF NEW YORK C. CORRESF:DENCE Date Nov. 3, 191 . Subject. Rates of Discount From RUNG DEPT, BENJ. STROM. Nov-5- 1.19 y The attached papers relate to the discussrort precedin,6 117V (-)AKr, rates in rates of discount by the Federal Reserve Bank of New York, authorized at the directors' meeting held on Monday, November 3, 1919. They include, among other papers, the statement which was proposed to the Board and which was rejected in favor of the briefer one also attached. Mr. Leffingwell strongly favored the original statement, but 'agreed to the short one, as did the Federal Reserve Board, with a slight change of language suggested by Mr. Strauss. The history of the discussion of the rate change goes back to my first visit to Washington on returning from Surope the last of September, and really prior to that, to the date of an informal, personal letter which I wrote to mr. Leffingwell from Lake George on February 6, 1919, indicating that the time had come rr (1"/W 0 in the Reserve Bank rate policy would be absolutely necessary for when a change the business of the country. It has been the writer's theory right along that during the period of expanding Government borrowing it would be necessary for the Federal Reserve Bank to increase the available supply of credit by large accommodation to member banks, otherwise subscribers to the Government's loans would be unable to get accommodation of their own banks and, conse4uent15 unable to subscribe. This was based upon the belief, which I believe has been general among students of the subject, that the Government's re_uirements for loans were, and would continue to be during 9 large part of the war, in excess of the amount of credit created by savings, which would be available, first to pay taxes, second for Government loans, and third to finance the enlargement of our industrial and agricultural production and transportaLion. The necessary corollary of this theory was that when the Government's borrowing us reduced, or even when the time arrived when the volume of its out FEDERAL RESERVE BANK OF NEW YORK CORRESPONDENCE Date Subject: From 2 standing loans would be reduced, then a check should be imposed upon the employment of the facilities of the Reserve Banks by increases in discount rates. In June and July the Government's expenditures still exceeded its - revenues and the program of somewhat expanded borrowing was still in operation. In August, at the time of the then governors' conference and of Mr. Leffingwellts visit to meet the members of the Liberty Loan Committee in New York, it had developed that the Government's revenues would shortly overtake its expenditures and that the Department's program anticipated the possibility, or even the certainty,of reducing outstanding loans by $500,000,000 on the 15th of September. proved to be the case because on that date the gross debt was and Government bank balances increased *100,000,000. This reduced400,000,000 That was the time,(or in August), idien rates should have been advanced, but Mr. Leffingwell's program, which had many elements of strength and merit, was in general adopted and no rate change I certainly cannot assume that I would have held any made by the Reserve Banks. different opinion had I been here. Nevertheless, this was tantamount to the re- , lease of *500,000,000 of credit to the money markets, and subseuent to that date the loans of the ReEterve Banks have increased an additional $400,000,000 and we have added to our reserve about *150,000,000 of gold received from Germany. In view of these facts, Thich gradually develoed following my first visit to Washington on the 28th of September, I have been regularly urging upon the Treasury Department the necessity for increasing discount rates. This finally bore fruit in a meeting of all governors available on short call, that is to say, all but the governors of the Dallas and San Francisco banks, the latter represented, however, by Mr. Perrin; in five separate visits to Washington; and the fullest possible discussion of the matter with the Secretary of the Treasury, Mr. Leffingwell FEDERAL. RESERVE BANK OF NEW YORK ,E CORRESPONDENCE Date Subject: From 3 and the Federal Reserve Board. And, after an exchange of views with the governors of the Reserve Banks on October 28th, and after holding meetings of our directors on Wednesday, October 29th, Thursday, October 30th and Monday, November 3d , there was finally adopted at the meeting of the directors today (Monday, November 3, 1919) a schedule of rate changes, for announcement this afternoon, as shown in the att-Lched circular. The statement for the press is that authorized by the Board, after an hour's discussion. BS.MSB November 3, i(J19. Dear Russell: am returning Profebsor Huer.nr's ieLter, finding Ltrt it, will he suite imlossiLle for either Mr. Jiy or me to prec,re the article he wishes. 11(w would it do to ,,,ek Lewis Frc.nklin to write sush an art,icie? Fuithfully yours, Honorane R. C. LeffnvVll.__ Assistant FecretTP"V thrTIVINIry, Pa,LhinLton, D. C. BS.MSB Ens. November 3, 191. Dear Mr. Morris: am in receipt, :lid think you for your courtesy in forla,rdin two coiAeL, of the telegracwhich I cont out through your office On November 1st. Very tx1.0 yourE, A. r1;, Jr., Esq., .. ecretgry-tt: tr. Lefftureii, Treasury Deprtment, Wc,lhington, D. C. Deceliiher lel, C 9-,et ," Dear Russell: You iiit reA the encloLed letter, if not too much trouble, hand it to Secret ry Glas at some convenient -.44nd, oortunity,ae 1 4ould like to nve this imktter 1-)e1d in confidence until I am reAy to state definitely just what my decision will to about reoloin.. Faithfully yours, Honor,tle R. C. Leffinwell, Igth .Stroetr 1226 imshin6ton, D. C. BS.I#EB December 19, 1919. CONFIDENTIAL Dear Russell: You will gather from my letter to Secretary glass that at least for a considerable period I shall be eliminated from you counsels, and I cannot leave without a word in regard to these matters of policy, concerning which we have unfortunately differed, although I do not feel so radically during the past few months. The Federal Reserve Bank of New York now has a minimum rate of discount for every kind of borrowing by member banRs with the following exceptions: 15 day advances upon certificates of indebtedness 4-1/2% Discounts of bankers bills for perioasup to 90 days 4-1/2% Six months' agricultural paper There can 5% certainly be no objection to advancing the rate of discount for bankers bills to 4-3/4%. All of the needed stimulation to the development of that busi- ness can be given by our poliay in buying bills in the open market when that course seems desirable at rates below our discount rate for such paper. Assuming, there- fore, that we have changed our discount rate for this paper to 4-3/4%, you will observe that we have a uniform bank rate for all kinds of borrowing with the sole exception of the rate for 15-day advances upon certificates of indebtedness. At last, after nearly five years of experience and experimentation, we are upon the eve of completing the last step in making the Federal Reserve Bank a real central bank, with a real bank rate. In fact, in a period of five years, we will have arrived at a position in banking at least as good, if not better than, that which has been reached in England after 250 years or more in experience and development. 2. Mr. Leffilvwell 12/19/19. When the time comes, as I hope it will shortly, when the Treasury Department and the Reserve System as a whole can agree upon a policy which will permit of the establishment of this uniform rate of discount, I am convinced that we will have in our hands an instrument for the exercise of a reasonable control over credit expansion, and, through that, no other method. in my mind as organized. of price expansion, such as can be accomplished by This bank rate, of the character I have described, has the objective toward which we were working ever since our bank was Its success depends upon the development voluntary purchases or by in the market of an adequate paper) so that the Bank, by volume of bills (as distinguished from commercial refraining from making purchases, can exercise a primary it could control over the money market which a volume of per that may be purchased, or not not possibly exercise without such purchased, at will. the dis- During all of our discussions of rates, and, in fact, before cussions became so important as recently, I have lookedat this goal of all of our efforts. Now I want to ask you to consider position as Mr. Glass, the author of the Act becarre Secretary of the finally responsible for the Government's financial seem, the very man who produced the position quite hostile to my own views, been doing the utmost that one could do but brings to the felt system: Treasury and policy, and, strange as Federal Reserve System the what a curious situation has arisen, growing out of this perfectly natural ambition for a real success. been obliged to it may take a notwithstanding that for five years I have to make this plan of Secretary Glass's This difference of opinion is, of course, a wholly honest one, light with curious significance what has always been historically true of the relation between Government Treasuries and Central Banks in war, namely that the Treasury endeavors to assert a control time of over the policy of the central bank mpre distinctly in the interest of the Treasury than in the interest of the general business of the country. It is not an unreasonable, in fact in many instances is a necessary, development because in time of war the policy of Mr. Leffingwell 3. 12.19.19 the central bank must be considered not as an official or economic policy but a military policy and one of the agencies to win battles, rather than to develop theoretically sound banking and financial practices, such as would control in peace times. That situation was thoroughly recognized, and I may say, promoted by the New York bank during the entire period when it was necessary that the bank should have a military policy, so to speak. But now that the war is over, the time has come to abandon a policy designed for military purposes in favor of one which will better serve the interests of the country as a whole, rather than the separate interests of the Treasury alone. Unfortunately Mr. Glass has not agreed with my feelings about this and one of the results, I fear, has been to drive him to the view that there were some things which might have been done to deal with the credit situation by other methods than by rates, and that in some way I have led a revolt in the System, the object of which, while not openly expressed, was to assert the dominating position of the Reserve System in controlling the policy of the Treasury. One of the consequences of this situation has, / fear, been to very much shake Mr. Glass's confidence in my own judgment, and, possibly, in my own intentions. Now I am about to be away for possibly a year and I feel altogether unwilling to leave without an effort to discover exactly what is in his mind. It certainly would be unfortunate if the author of the Federal Reserve Act and one of thA men who did as much as anybody else to make it a success should end a year's association in complete discord and with complete lack of sympathy as to what has been done. I am to be in Washington for one or more days next week, probably right after Christmas, and am writing to ask if you will arrange .'.. if in your judgment it will be wise to do so for us to have a talk with the Secretary and see if before I leave we can- not remove misunderstandings. I don't want to feel that at least in his mind the last five years' work have been thrown away, nor, indeed, now that he is about to enter the Senate, where his influence in legislation affecting the Reserve Banks - 4 - Mr. Leffingwell 12/19/19 will be very great, that the result of this difference of views may lead to a decision by him to attempt some changes in the Federal Reserve Act based solely upon the experiences of the past year. This is a matter about which I feel very strongly indeed, because if COMA it. back to the Reserve Bank, I would like to find it there just as I left Won't you drop me a line on receipt of this, telling me frankly just the way you feel about my suggestion? Faithfully yours, Honorable R. C. Leffingwell, Assistant Secretary of the Treasury, Washington, D. C. BS/MSB F.D. 12A.3 . 0/g2.1/ No Federal Reserve Bank P/9/7Ek S SITRoio District No. 2 Correspondence Files Division SUBJECT .2.) TO LE FAN a 41,6-1-1... / / Ao 1ff sIssir 5 Ee-7-ct: STPO 4) a 4:7 7-He 771? eAkS . ( Ave /L. /7 /7/7 - .ree # v E / 120) ' TREASURY DEPARTMENT Washington, ASSISTANT SECRETARY January 2, 1918. 4),0' Acir <9. FED BAN.17; Dear Strang: I received your good letter of the 26th and have read and studied it a number of times. I shall try to put it to use. It is full of wisdom and I cannot write now in detail so I send you this hasty line to thank you for writing me as you did and caxry to you my best 7ishes f Faithfully Benjamin Strong, Jr., Esq., 4.liken, S. C. the New Year. 4) ASSISTANT SECRETARY OF TH E TREASURY WASHINGTON ... ..0%; reg.'1419' Janua y 9, 1916. Dear Strong: Referring to our talk of yesterday, will you ask Hardy if he will come, down! ru L-.77-771 Benjamin Strong, Jr., Esq., c/o Paul Y. Warburg, Esq., 1704 Eighteenth Street, 1471., Washington. A[..,1 FEDPR ASSISTANT SECRETARY OF THE TREASURY WASH I NGTQ1,41, JanuaTy 9, 1916. Dear Strong: 1004 Referring to our talk of yesterday, will you ask Hardy if he will come, down! Very truly! Benjamin Strong, Jr., Esq., eio Paul M. 7:arburg, Esq., 1704 Eighteenth Street, N.V., Washington. I, RPDT' BANK ASSISTANT SECRETARY OF TH E TREASURY WAS January 6, 11V. - ,71LtiNQ PLi? r Dear Strong; 11) -2ny thanks for your amusing letter. to know thatiou avi., It is perfectly bully gg-WisivAtne health and pleasure out of Cluneden.FnERPJ-IN-D" By the way, why don't you get Clark to turn r t ou some of the letter paper which I have which bears the ---newns cad of misleading your correspondents with the Nassau Street address. lars. Leffingwell has a plate at Tiffany's from which you can order some note paper if you like. Bother the rent and the wages. So lone as you pay the additional bills and expenses due to your occupation of the house you may know that I am losing nothing by having you there. Our house at Lake George has no rentable value in winter time and Clark's wages and most of the expenses run along anyway. Let us have the pleasure of feeling that we are giving pleasure with our toy-house. The new Secretary has taken hold very well. He was so reluctant to take the job and is so modest about his qualifications for it and so urgent in his appeal to me to help him out as to make it utterly impossible for me to do otherwise than to stick to it. 2urthermore, the increasing difficulties prevent the job from becoming dull. Benjamin Strong, Esq., Cluneden, Lake George, N. Y. ASS!STANT SECRETARY OF THE TREASURY WASH N GTO N opportunity of having a be very much the wiser for having February 6, 1919. pointing because I should enjoy an little play with you a chance to talk things over. and virr Fou:Nd Sincere yours, Pear Strong: -t/ 111 0 I received your letter of February very much interested to have yeurAP4Malk and Treasury policy generally. I- .9 1 be z= /tax loan I have no intention of selling Treasury ceKtgicates Benj. Strong, Jr., Esq., Lake Ceorge, New York. to the Reserve Banks, except as a temporary expediendi as hereIn that connection count it to my credit that I have tofore. retired nearly t30,000,000 (the whole issue) of one year notes which were held by the Federal Reserve Banks and were renewable for thirty years. I am very glad that you are getting such good skating and enjoying it. I hope when the skating goes it will be followed by deep snows and that you will take to skis. There Is a good book on skiing among my books:on the top shelf, I think, of a yellow the right hand book case, being a book printed with label on it. bill I did send you a telephone the other day which large for an Assistant Secretary to pay. Notwithstanding your accursed persistence, I cannot let you pay Clark's wages, which I should be paying just the same if you were not there. No doubt, however, if you were not there Clark would have less work to do and I should be glad enough to have you make him a substantial present, if that would make you feel easier in your mind. was too I do wish I could get up to see you, but it is utto be away from here. Recertly:I took a day off on each of three occasions to make speeches to the Investment Bankers in Atlantic City, the Massachusetts Bankers in Boston and to the Philadelphia bankers, at such injury to my work that I have been forced to make up my mind not to go away again for any purpose until the summer. This is very disap- terly impossible for me .2. .,144 441 rumncia1 . n 114. 4.; Ao 240 ** ' :-.C1.0;k11 efrtgollgeltd 4,12 a...:1111.4 siakiAi rev ** *ass 10,04>ilw T.K.4 94p2A.Tbf,pbeS *I 654-tois * ten.:ax it44rma3in '64k <A/5 jfeapfa I'Ves I rse A11111 :smog 1401' tfilot W$e,41sz.vt. e4 Sin Xli w)IVTAei ;Iva titt ,t...")lartisi..; * t*o7.'e Sideltiabaerl ert*Iii is-L.4 SaiLlaii , VA ttrzlbo4 444 UP.% shelL4 IC ?4,t3,.rei su -11144eJpi ..tat laix SS.J,, stivrir? 11. VIA* .44* tgt .411' b4.1 * fe:." - qv, .70 tot71 xi '.: ',Oki , , . .ts t t 4 : en a: ieroio - .rae1shert7 bN,,, vs, *I- .4 drat Ara4 trq.1 I vt .0- 1.F*1 rIPT80100 d .- 14 4L; skiz ria ditiiiP:411, )11.0 to24 tusratir.et:tra frst,r, . armor os tatto y tILia I* 'çti4aa*1 ;:z.i.le :**: e.thsol erviii I J.At ci.4 :ma $43 iladaboott*.t 14* '2"*4bit, *ter 40;:: (OOPY) 44,.. WASHINGTON ikzi, t14,1 ; 111) February 21, 1919. FEDERAL RESERVE DANK Dear Mr. Jay: 1 received your letter of February 18th about the conversion of the 47. bonds. I think that in view of the fact that temporary bonds will soon have to be exchanged for definitive bonds with all coupons attached, that would be the time to reach any negligent bond holders if Congress acts upon the Treasury's suggestion to extend the conversion period. Very truly yours, (Signed) Pierre CrbirMan, New York. 14i e:'al reserve Bank, R. C. Leffingwell. ASSISTANT SECRETARYORTHE TREASURY WASHINGTON March 11, 1919. Dear Strong: Here is inflation in Spain. Very ulr yours, Benj. Strong, Jr., Esq., Covernor, Federal Reserve Bank, New York City. Enclosure. TR EAS U RY D F_PAF-tTM E NT Washilagton, ASSISTANT SECRETARY April 22, 19lklte TAMIQUAL Dear Strong: / ,0' Someone told me today that a business coltpany he knew had been asked by a bank in New York to put in a Ohscription for its account without disclosing I( the source. I Ekol getting really worried lest the banks take the Victory Loan, or for their own Caine subject. substantial part of it, If this morning on the I had a letterlfrom you account. (P444.(41 I am even beginning to wonder whether, after all, you may not feel it necessary to consider the possibility of some modification of your action as to the concerns Victory Notes. that they could borrow fifteen day rate, so far as it If the banks should get it into their heads indefinitely at a 3/41. spread, and load up with the Notes, it would derange badly our whole financial program, which contemplates heavy borrowing on Treasury Certificates the Loan at the 4% rate. I remember you said the possibility cif forbidding or restricting after something once about renewals at the fifteen day rate on the Notes. After a good deal of pose the action which consideration, I concluded not tot, the Chicago bank wanted to take, which, as I understand it, continues the 410 rate as to Certificates, but fixes the rate on bonds and notes at 4%. Of course, you could not make any change so far as bonds are concerned. Please consider this as an informal telephone message for your personal thought only. I tried to call you up late this afternoon, but could n Very truly yours, Benj. Strong, Jr., Es., governor, Federal Reserve Bank, New York. r ach you. ,t pks V I Sept incluSive r'er e are two reasons why suoh excha At of certificates ex- or two weeks it woul. Airy certificate program x1 to the banks of the count Ate a large mount of refund1.- "reat ch must. isent 1, -der to prevent money disturbance 15 that a large amount of herT 4 should be issued and I do AWE it expeaient on account of the extremely for the Treasury to *ell such cercash or by credit. about Se Ass of se lag banking institutions this privil, take a certificate which should be te for certificates for which taere it 'et ai COMMERCE REPORTS. 1053 the use of vessels with a draft of 22 feet. The company has its own storage tanks. One of the important parts to be played by this new company will be the exporting of linseed cakes for cattle food in Europe. DIFFICULTIES OF JAPANESE COTTON-YARN EXPORTERS. [Consul 'General George H. Seldmore, Yokohama.] Between March and August, 1918, says the Japan Chronicle, there was unprecedented activity in export transactions, covering delivery up to about May, 1919, of cotton yarn and cotton cloth from Japan to India. At that time prices were also unprecedentedly high, $299 per b6..le being quoted for 40s yarn. It is estimated that these forward transactions at such high prices reached 250,000 or 260,000 bales. There has, however, been a great decline in prices, especially since the signing of the armistice, Deceniber quotations standing at $150 a bale for 20s, $199 for 32s, $217 for 40s, and $366 for 60s. These prices show a decline of from $50 to $75 per bale. Importers in India have asked Japanese exporters to make resales on their account or to cancel orders where possible. It is said that Japanese merchants have agreed to make resales in regard to forward contracts for 1919, but are executing the contracts mativing before the end of 1918, making shipments as soon as tonnage is available. There are, however, considerable shipments which have not been taken on arrival in India, and this has placed the merchants in serious difficulties. It is said that they have asked the Yokohama Specie Bank to advance money on these shipments, but the bank has to meet a great demand for funds necessary for buying raw cotton and is, consequently, unable to meet the requirements a the merchants. These conditions have affected many firms. INCREASED BANK-NOTE ISSUE IN SPAIN. [Consul -General C. B. Hurst, Barcelona, Jan. 7, laia.] The development of the banking operations of the Bank of Spain and its natural connection with the requirements of Spanili industry and commerce, both domestic and foreign, has resulted in a circu- lation of bank notes amounting to 3,316,215,325 pesetas (about $597,000,000), which is almost the limit of notes authorized by the royal decree of August 6, 1018. In order to avoid any inconvenience to the bank in its operations, an authorization to increase its issue of bank notes was necessary, pending the presentation to Cortes of a law regulating the issues of the bank. Accordingly, a royal decree, published on January 3, authorized the Bank cif Spain to increase its bank note issue by 500,000,000 pesetas (about $90,000,000), or up to 4,000,000,000 pesetas, instead of the 3,500,000,000 pesetas authorized in August. 1918', on condition that the gold reserves of the bank are in proportion to the increase and that the increase does not disturb the guaranty established by previous legislation. The Bank of Spain may not reduce the gold reserve actually held without the consent of the cabinet or acquire, through the decreed issue, gold that is not in legal circulation without the previous authorization of the Minister of the Treasury. ' 1054 COMMERCE REPORTS. EXTENSION OF ROTHERRAIVI ELECTRICAL DEPARTMENT. [Consul John M. Savage, Sheffield, England, Dec. 12, 1918.] The Borough of Rotherham, with a population of WOO, is only 6 miles distant from Sheffield, with which it is joined by street railway connections, as well as by two lines of railroads. It is largely engaged in the steel industry, and several important works are situated there. In order to meet manufacturing rquirements the first electric superpower sation has been erected by the Rotherham Corporation and will be available for distributing its output early in 1919. The war undoubtedly influenced the extensions, and the municipality in its enterprise has the support of the Government. The new works are an extension of the former electrical department inaugurated by the corporation in 1891. New Machinery Installed. The first two turbo-alternators will have a capacity of 12,500 kilowatts each, or 16,800 horsepower per set. By midsummer next a 30,000 kilowatt set, representing 40,200 horsepower, will be completed. With the existing generating machinery of the power station, the capacity wjil then be brought to 70,500 kilowatts. This figure, it is believed; constitutes a record for any municipality in this country. There are special advantages in respect of railway and water connection, and an abundance of fuel is within easy reach. The arrangements are such that it is computed that fuel can be brought frOm the pithead to the overhead bunkers in the boiler house at about 14 cents per ton. The installation includes 12 of the largest water-tube boilers, each equipped with special coal-feed arrangements, and a suction ash plant. With the class of coal now being used, it is computed that the consumption per unit delivered on consumer's premises will be less than 2 pounds per kilowatt, or to 11 pounds per horsepower. An achievement of this sort is considered remarkable. The Rotherham Electricity Department has during the past ;year greatly extended its sphere of influence by taking over the electrical arc ofthe Mexborough (6 miles) and Swinton (5 miles) Tramways Co. The necessity for the new developments was in a measure due to some 15,000 horsepower being required for a new rollinc, mill plant. At present there are applications from existing works for between 40,000 and 50,000 kilowatts. As to cost, the old and new works total approximately $5,000,000, and sanction has been obtained for the expenditure of a further $4,000,000. Cheap power for industry is the primary object and there is every probability that the enterprise of the Rotherham Corporation will be profitable. WATER POWER RESOURCES OF THE PROVINCE OF NEW BRUNSWICK. [Consul Henry S. Culver, St. John, New Brunswick, Canada.] There are wonderful possibilities ahead in the utilization of the water power of the Province of New Brunswick, not only for muni- ASSISTANT SECRETARY OF THE TREASURY WASHINGTON June 21, 1919. Dear Ben: Thanks for your good letter of the 20th. I believe I care more for your good opinion and friendship than any other personal satisfaction which has cone to me during the period of the war. You will know, therefore, What your letter means to me. Sincerely, Benjamin Strong, Jr., Esq., Governor, Federal Reserve Bank, New York. COPY Charge to Treasury Department July 9, 1919. Ammission, pan s. For Davis from Rathbone. Treasury 1136. Our 1104, subdivision!), paragraph six, and 1129, paragraph three. Nederlandsche Bank has cabled Federal Reserve Bank that govern- ment of Holland makes no objection to the exportation of the gold. Please ascertain if there is any objection on the part of the Belgian Government. Signed- Albert Rathbone, Assistant Secretary of the Treasury. 2-ABG. GREEN. 2699. Wbshington. Dated Lug. a, 1919. Rec'd 2nd, 11:50 a.m. Ammission, Paris. 2699, Lugust 2, 5 p.m. For Sqgnz_from Ieffingwell. Your T-1 received. Treasury 1170. Treasury is ready to discuss funding demand loans whenever the British Government desires to take the matter up. knows. This the British Government It has had neither Lmbassador nor High Commissioner here for months. There is nothing that the :,merican Treasury can do about the matter. If British bankers are worried why don't they request their government to act? I do not understand that British Government shares any fear that there will be difficulties on account of in, terest payments in the autumn. LANSING. GREEN 2 -CGD Brussels Undated Recta 2:00 a.m. Aug. 15. Ammissi on, Paris. 54. Received the following from Deplrtment today, Aug. 13, 9:00 p.m. Following is for Benjamin Strong from Treasury. It may be neces- sary or desirable to ship gold to Spain in connection with final settlement of peseta credits orened for the Treasury through New York banks. Treasury is making inquiry State as to litethr Bank of Spain through Department of would, if requested, be willing to accept gold earmarked in Paris, London or New York with proper allowance for shipment charge, thence to Spain. French Government has expressed willingness to furnish up to $10,000,000 in Napoleons in return for German gold delivered in Paris, accepting German on the basis of 999.4 of fineness. gold Can you ascertain and cable: Cost of shipping German gold from Belgium to Paris. Same inquiry fromAmsterdam to Paris. Cost of shipping Napoleons from Paris to drid. Cost of shipping gold from London to Madrid. Earliest date upon 'Which Napoleons shipped from Paris to Ladrid against Gel-Han gold shipped from Belgium or Amsterdam to Paris can be counted on to reach radrid." AIVOUR COPY Charge to Treasury Department July 9, 1919. Immission, paris. For Davis from Rathbone. Treasury 1136. Our 1104, subdivision I), paragraph six, and 1129, paragraph three. Nederlandsche Bailk has cabled Federal Reserve Bank that govern- ment of 7o11and makes no objection to the exportation of the gold. Please ascertain if there is any objection on the part of the Government. signed- Albert Rathbone, Assistant Secretary of the Treasury. Relgian 141118. GIERLI. Uashington, Dated August 18th, 1919. ise'd 11 a.m.. 29th. Matission, Paris. 2860. August 18th 12 noon. prom Leffingwell for strong, care "organ, rarjes and Company. Your letter July 25th received. We have indlosted to Bleotett or fhe BrItish and to Deneuflisa and Bloch for the French that le think it importnat to undertake discussion Of funding (1 ornate obligations at the earliest opportunity of their governmente. It is of course essential that in these disoussions their governrante should be authoritatively represented in Washirgton. !tusk 'bilged for your letter and the light it thrown The truth is that upon the whole al tustian. ( our whole plan for financing Europe 't; requirements\ is suld must remeln In advance vbeyrinee) Tending the ratifleation of the treaty. LIXIVG. 2-CGD GREEN 2861 Washington Dated August 18, 1919. Recid 9:30 p.m. Lug. 19. Amission, Paris. 2861, .1,1gu.st 18, 12:00 noon. For Strong care Morgan Harjes and Company from LeffiEg1.9-011. -Ippreciate currency dificulties of Indian Government; silver rupee was originally taken coin standard being gold sovereign or its equivalent, the Indian Mohur, on the basis of fifteen rupees per sovereign and .go1din Indian par money ret),:)rvo still counts on that basis which equals thirty-two Point forty-four cents Par rupee. Can understand why Indian Government, not desiring to put gold in circulation nor to buy silver at present market price and coin it into rupees for circulation at a loss, should progressively raise rate for rupee transfers thus permitting purchase and importation of silver for coinage purposes without loss. It follows nevertheless that Indian Government, sending gold into India against rupee transfers at present market prices derives therefrom a very large profit which raises question SHEET 2 2 -CGD 2861 whether 2uch profit derived from gold obtained in thirJ market ohould not accrue to United State_ Govrnment or United StateL; merchants. Thio government will not canction an arrangement which virtually mean gold taken from thin market io received in foreign market J at a diccount from otandard of Btch marketc. It i.e juElt di2tacteful to U2 in pre ent cae ar:. when Spain placed diocount i2 on Lmerican gold sent to that market. Thio a matte' between the government's and the general subject has been under discussion between Rathbono and Blackett. In view this and factAhat this situation is intimately rlated to and directly involves te-nurcz- our agreomnt with British Treasury for sale of silvr to India. Do you not think embarrassment would be avoided by your advising Reserve Bank to be guided by wishes of Lmerican Treasury? ILNSING Iitersted Copy Checked b Translation _19 TEL. D. 1 Code used '4)A414 FEDERAL RESERVE BANK OF NW YORK /Ay\ PRIVATE WIRE-INCOMING 'irk4 201) t.sj Washn DC Aug 19 1240P 00:4. Case FRB NY der Stronz cables he has abaneonee. Constantinople trip Lef finzwell TELEOl250,21 OPERA 1Y19 g. X-. 1-PBS. GRAY. 2877. Washington, Dated August 19th, 1919. Reed 4:20 p.m. 20th. Ammission, Paris. August 19th 4 p.m. From Leffingwell for Strang, care Morgan Harjes 2877. and Company. Delighted you have abandoned. Constantinople trip. I had hoped you would be back about the first of October. I think we can do a big job together in the leot three months of this calendar year and perhaps clean up the whole situation. I do not went to interfere with your plans but the general situatio4 has radically changed here and I really feel that you can do the biggest job of all at home in that period.' LANSING. 4 WHB BLUE 292Z) Secstate Washington Dated August 22d, 1919. Reed 11:10 a.m. 23d. Ammission Paris 2923, August 22d, 7 p.m. From Leffingwell for Strong, care Morgan Harjes and Company. We do understand importance of refunding demand loans and have urged it upon British French representatives. I cannot make rogress without the Your 04. presence here of some one authorized upon their behalf to discuss it. 2923. LANSING. 2923 BLUE 4 -WHB Sec state Washington Dated August 22d, 1919. Reed 11:10 a. m. 23d. Ammission Paris 2923, August 22d, 7 p. m. From Leffingwell for Strong, care Morgan Harjes and Company. Your 04. _ 1 We do understand importance of refunding demand _clans and have urged it upon British and French representatives. I cannot make progress without the presence here of some one authorized upon their behalf to discuss it. 2923 LANSING 3-41.ff BLUE 2924 Wellington. kited ieug. 2, 1919. Ammiosion, Bee& 12v0 pm, 23rd. 2934, Aug. 22, 1 p.m. Prom Leffingwel for ainjumin Strong, care of LVrgvn Harges and Cop, Axis. Unsion's 1280.1 Jac. 10, 10p.. YourT3, L,ic.:11,o 129$, 19 12 midnight, Your 11-6. lot. Have giver, instructions for pnymont Lt :-AlwitIr of thirty zillion pesetLs bills mturing September Aconds itzch-mgc to cover ammo 101:40oon obtained by Federul Reserve 11Ak of York 2m4. fiscaa ant of the treasury. Have gtvon dirootions for ronewal entire seenty..five rillion.pesotas bills mturing August tmntyninth. Third. GrezAly sporectao informAion contalvd your calos. LAxszia. FEDERAL RESERVE BASK OF NEW YORK Copy 1 232 TELEGRAM Translation . Prepared by Departments Interested Checked by TEL. D. 1 FEDERAL RESERVE BANK OF NEW YORK PRIVATE WIRE-INCOMING 5bd mq Washington ha 6 FRB NY This will be followed by extremely important personal telegram to govr. Please take such steps as may be necessary for his attention today. Leffincwell. ASSISTANTSECRETARYOFTHETREASURY WASHINGTON October 2, 1919. Dear Ben: I received your letter of October 1st with the enclosed dile 'lc for -10.54 to cover your share of !oad transi)ortation t e room and rail- WaShingtan, which many thanks. Benjamin atronc, Jr., Governor, Pederal zieserve Bank, New York. for ASSISTANT SECRETARY OF THE TREASURY WAS H IN GTO N October 13, 1919. 1)\ 471 1:3. ' Dear Ben: 71 0 / I hand you herewith a letter which I r'' J :^ 1 l's have received from Professor Huebner, asking for an article on United States Government Bonds for the American Academy of Political and Social Science. I cannot possibly find time to write such an article, nor do I know of anyone in the Department competent to do it who could take the time at present. you know anyone who could undertake the job? Of course, you yourself are the right man to do it, but you should spare the time for it. Benjamin Strong, Jr., Esq., Governor, Federal Reserve Bank, New York City. Enclosure. Do not ASSISTANT SECRETARY OF THE TREASURY WASH I NGTO N October 13, 1919. ) 14 OCT I Dear Ben: I received your letter of October 8th. '919 I am glad that you arrived ahead of it and warned me of it, although in a sense it was only a detonation of the bomb you exploded upon your return from Europe. reconciling I have not given up hope of your views and mine when we stop talking economics and get down to the consideration of concrete plans and proposals. I am encouraged in this hope by the fact that your letter shows you have utterly misunderstood my views and attitude. I shall be very glad indeed to have the conference which you suggest with Secretary Glass and Governor Harding whenever you can arrange to be here. As to the conference with the Governors, that was called by Governor Harding and my participationin it depends upon him. More than conferences with others, I want an opportunity to lay before you the -2 -- ASSISTANT SECRETARY OF TH E TREASURY WAS H I N GTO N Treasury's plans for the immediate future,and to ask your October 13, 1919. help in perfecting them and bringing them to a successful d' issue. /f OCT 1119i9 Dear Ben: Sincerely yours, I received your letter of October 8th. I am glad that you arrived ahead of it and warned me of it, although in a sense it was only a upon your return detonation of from Europe. the bomb you exploded I have not given up hope of reconciling your views and mine when we Jr., Esq., Benjamin Strong, Governor, Federal Reserve Bank, New York City. and get down to posals. stop talking economics the consideration of concrete plans and pro- I am encouraged in this hope by the fact that your letter shows you have utterly misunderstood my views and attitude. I shall be very glad indeed to have the conference which you suggest with Secretary Glass and Governor Harding whenever you can arrange to be here. As to the conference with the Governors, that was called by Governor Harding and my -participation in it depends upon him. More than conferences with others, I want an opportunity to lay before you the ASSISTANT SECRETARY OF THE TREASURY WAS October 16, 1919. Dear Ben: I received your letter of October 15th. I think your suggestion that Mr. Jay write the article which Professor Huebner wants is admirable. I do not know of anyone that could do it better and I hope very much indeed he will consent to undertake the task. Pro- a reply. fessor Huebner is pressing me for Very truly yours, Benjamin Strong, Jr., Esq., Governor, Federal Reserve Bank, New York. INIIDEPT* a 2 I 1919 FDERAL RESERVE ASSISTANT SECRETARY OF TH E TREASURY WAS H IN GTO N BPSK October 18, 1919. Dear Ben: I received your letter of October 16th. ference: About our con- For no next Wednesday will be all right - the sooner the better. Secretary Glass is away today and I do not know whether he will be available uednesday. Probably he will. Gov- ernor Harding tells me that he will be tied up with a Reserve Agents' meeting and other matters and that he would prefer to have you came down week after next. I leave it to you. You will find a sufficient explanation of the inquiries you are receiving in the article published by the Wall Street Journal on October 9th, under the headline, "Higher Discounts Will Liquidate War Loans." As to the remedy for the situation: are barking up the wrong tree. until you come down. Benjamin Strong, Jr., Esq., Governor, Federal Reserve Bank, New York, You know I think you However, we will let that rest TREASURY DEPARTMENT Washington, ASSISTANT SECRETARY October 29, 1919 My dear Covernor: v( V/ I am writing to advise you that the Treasury Department will expect the Federal Reserve Bank of New York if at any time it becomes involved, or expects to become involved, in litigation in its capacit;.i ae fiscal agent of the United States, to report the facts immediately to the Department and request instructions as to the course to be pursued. I presume that you have already had this in mind, but I am calling it to your particular attention because the Department wielas to be certain thrt it is kept fully informed with respect to all such litigation from its inception, in order that all necessary steps may be taken to protect the rights of the United States and thit no action may be taken by inadvertence or otherwise which might prejudice its interests. Benjamin Strons, Jr., Esq., Governor, Federal Reserve Bank, Nevi York, IT. Y. 74" .44- 414 1/, NNNNN 4f,4. et %Sat Taiatourst s, -' au T ;al: 6619;34 CL: Y -T iort woo,: Itoeqze ' CH; R'L ,1 runt cic 9, L J' - tud *marf r.11.aroa rtir,S 7Ablo t: It of:: rvr, -peZ, it , arroiita , %Wile tt fterlte ta.se CopylorLetterFiles TRANSLATION OF TELEGRAM RECEIVED kr. ENTR S TO BE MADE FROM From R..:CLeffingxell,liaaitaxit_SecTerLary_e_tbe.area.aury, THIS COPY Washington, D. C. April 16, 1920. Date Addressed to Mr Copied by Benj. Strong. Translated FEDERAL RESERVE BANK OF SAN FRANCISCO Checked by Mis. 73 0 (10-19)-20 .000-2-6-20-143 G Thanks for your good telegram. from you. 7(Uki It did me good to hear I did not know where to reach you or you would have heard from me. Basil Miles sent me a postcard picture of you and a bully big dog,which stands upon my mantlepiece. I am glad to have your words of approval. It will probably amuse you to know that you had scarcely left this part of the world when, in January, I became an earnest, and, in some respects, successful advocate of dear Money, 3s I had always said I would if liquidation did not come with the turn of the year. I cannot, tell you how much I have missed you. The old crowd has broken up and the problem seems to me to be a banking rather than a Treasury problem. I have no official status in the banking problem, and am not willing in peace times to assume responsibility or exercise powers which do not really belong to me. My resignation has been accepted to take effect upon the appointment of my successor. When you come back you will probably find me in the stodgy, but I hope profitable, profession of the Law. COPY DELIVERED TO Mr Mr Mr To be handled by Mr. Mr Mr Mr. STRONG Mr Mr Mr Mr Mr Mr Copy for Letter Files TRANSLATION OF TELEGRAM RECEIVED ENTRIES TO BE MADE FROM From lifTHIS RA -.C. Leffillzwellk.AasisUnI_Secrary_e_the.arfaaury, Washington, D. C. Date Addressed to Mr Beni April.April.16, 1920. Copied by S:t.rc416 Mis. 73 1,0a Translated FEDERAL RESERVE BANK OF SAN FRANCISCO 0 COPY Checked by (I0-19)--20,000-2-6-20-143 G Thanks for your good telegram. from you. It did me good to hear I did not know where to reach you or you would have heard from me. Basil Miles sent me a postcard picture of you and a bully big dog,which stands upon my mantlepiece. I am glad to have your words of approval. It will probably amuse you to know that you bad scarcely left this part of the worlb when, in January, I became an earnest, and, in some respects, successful advocate of dear Money, as I had always said I would if liquidation did not come with the turn of the year. I cannot tell you how much I have missed you. The old crowd has broken up and the problem seems to me to be a banking rather than a Treasury problem. I have no official status in the banking problem, and am not willing in peace times to assume responsibility or exercise powers which do not really belong to me. My resignation has been accepted to take effect upon the appointment of my successor. When you come back you will probably find me in the stodgy, but 1 hope profitable, profession of the Law. COPY DELIVERED TO Mr Mr. Mr To be handled by Mr Mr Mr Mr. STRONG Mr Mr Mr Mr Mr Mr Copy for Letter Files TRANSLATION OF TELEGRAM RECEIVED From ENTRIES TO BE MADE FROM THIS COPY R. C. Leffinwell, Washington, D. C. Date Addressed to Mr April 1..03 1920. Copied by Be1.1.j Strong. Translated FEDERAL RESERVE BANK OF SAN FRANCISCO Mis. 73 0 Checked by (10-19)-20,000-2-6-20-143 2 I hope you will take care of yourself and come back to us all well and strong, meanwhile having a bully time. It will comfort you to know that I think Case taking good care of your bank. and Jay are Jay I have always known and admired, but Case I had not fully appreciated until quite recently. Good Bye and Good Luck. R. C. Leffingwell. 335p COPY DELIVERED TO Mr Mr Mr To be handled by Mr Mr Mr Mr Mr Mr Mr Mr Mr Mr Copy tor Letter Files TRANSLATION OF TELEGRAM RECEIVED From ENTRIES TO BE MADE FROM THIS COPY R. C. Leffingwell, Washington, D. C. Elate Addressed to Mr April 16, 1920. Copied by Benj. Strong. Translated FEDERAL RESERVE BANK OF SAN FRANCISCO Checked by Mis. 73 ® (10-19)-20,000-2-6-20-143G - 2 - I hope you will take care of yourself and come back to us all well and strong, meEnwhile having a bully time. It will comfort you to know that I think Case takinp, good care of your bank. and Jay are Jay I have always known and admired, but Case I had not fully appreciated until quite recently. Good Bye and Good Luck. R. C. Leffingwell. 335p COPY DELIVERED TO Mr Mr Mr To be handled by Mr Mr Mr Mr. Mr Mr Mr Mr Mr Mr