Full text of Papers of Benjamin Strong, Jr. : Foreign Countries : Diary, European Trip, 1914

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AllicAti:).teAttia,041.4.c.,

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.ever

http://fraser.stlouisfed.org/had only
Federal Reserve Bank of St. Louis

wished
a general and rather brief talk with Sir Edgar Speyer, who

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instead of increasing their number, and that in proportion to the number of great

joint stock banks they are not strong enough to take the strain of bad times and
unsettled confidence.

He believes that the Bank of England should adopt a

olicy

of enlarging its business and strengthening its resources. and that as an
emergency measure it should be enpaTered to issue notes against the denosit of
prime paper and gold in a certain proportion, only, however, when the discount
rate is, say,

and the notes issued under such emergency arrangement to be subject

to a special tax.

Had a brief talk with him about the subject of a London office.

Sir Edward

apparently did not want to develop this subject very fully until Mr. Kent's arrival,
urging that we take a day, spending it in some
I could go into the subject thoroughly.

uiet place, There he. 1,11". Kent and

He said he was quite sure that it would

not do to think of opening an office in Paris without having one in London also, and
I gathered that he is not very likely to be enthusiastic on the subject.

Sir Award and the other bankers with whom I talked took a pretty gloomy view
of the banking situation in Paris, and
today would be about as follows:
Societe Generale,

should say a composite view of my interviews

The four big banks, that is, the Credit Lyonnais,

Comptoir Lationale. and t e Banque de Paris, with their large

number of branches throughout France, have developed an enormous investment business,
a large part of the securities

being sold to ignorant peasants, who buy these

entirely upon the recommendation of the bank, ;:ithout knowing what they are other

than that they are offered by a resronsible banking institution.

The three banks

mentioned (excepting the Credit Lyonnais) have found this business so profitable
and automatic, so to speak, that they have not been as particular as they should be
as to the class of securities they have handled, being governed tco largely by the
opportunity to make large profits in the handling of second and third grade investments.

Frisco was recited as one illustration, but the more frequent illustrations

were Brazilian, South American and Colonial securities generally.
Lyonnais

seems

to have escaned all criticism along these lines,

The Credit

the Comptoir

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Nprgan, Grenfoll & Co,
Had a very pleasant chat with Grenfell and Vivian Smith, and later lunched
with Grenfell.

They tell me that the Union Oil Company transaction has aroused a

gooc. deal of comment in this country.

It seems that Tilden Smith and his associates

have been mixed up in some project for handling oil in California which embarrassed
them somewhat, and in order to straighten the matter out they 7ot busy making up a
syndicate to buy the control of the Union Oil Company.

It seems that Frank

SO-rivZ

Anderson, of the Bank of California, is here on 110" business just no;.
to get particulars from him;

and they asked

but, quite contrary to the information I get from

the Pacific coast, there seems to be a feeling here that the whole Union Oil Campany
deal is a loose-jointed and rather uncertain affair and one to be scrupulously
avoided, although they say that the best information they get is that the Company
itself owns some fine properties an

under good management should prosper.

didn't speak very yell of Tilden Smith and his associates.

They

I am expecting to see

Mr. Grenfell again on returning to London and discuss the London office matter;
I had no opportunity to do so today.

ttedatidEt4stiithe

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Bourke, Schiff 6; Co.

Met all the partners at their office and explained to them in great detail
411

how we happened to be bro:,ght into the Southern Iron & Steel Company matter, and that

we now felt that we were through with the situation and had no further responsibility
in that connection, all of which they seemed to understand.

They all stated very

positively that any sale of the property for anything like 4,000,000. cash would be
bitterly opposed on this side.

They also seemed very keen to get reliable

information in regard to the rersonnel of the new Board of Directors.

I gave them

what little information I could and told them that I rec_narded the Company's future

as Lependent almost entirely upon the management and upon its being conservatively developed and not spread out too much.

They were all very much encouraged by the state-

ments coming forv;ard from Nev.- York showing the Company's operations, and particularly

indicating an improved situation as to quirk assets.
Platten and his control of the situation.

They seem to have confidence in

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11/lion of London &'

'Smith's Bank.-

Called and left note of introduction an

and

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unable to see him.

card.

Sir Felix Shuster was busy

Will do so later on returning from Paris.

Lloyd's Bank. -

Had a very pleasant chat rith Mr. Stevenson,
forward to seeing Mr. Kent on his arrival.

.110 expressed himself as looking

Discussed no particular business, alid so

far as I could gather he seemed fairly complacent about financial matters here in
He seemed interested in the object of my visit and we had just a brief discus-

London.

sion of the question of London offices by New York institutions, and,

he didn't

express himself very nositively one way or the other, I would surmise, by his general
attitude, that it didn't arlpeal particular17 to him.

In view of the comparatively

small business that %.e do with Lloyd's, it seemed to me better not to go into the

matter with him in any detail until Mx. Kent's arrival or until our oyn iLeas were
a little more matured.

Credit Lyonnais.-

Saw Mr. Buchanan aid had a very pleasant chat .1.th him.

The only special

matter that he mentioned was in regard to reimbursement of B. & 0. and other notes
in London, concerning which he vas now corresponding with the New York office.
He said he fully understood the advanta7es of sending th.
in London, on a:count of the difference of nearly

notes forward for collection

2d. in exchange, but the delay in

e'fecting the arrangunent was due to the uncertainty of the stamps to be attached.

The Revenue Office had made no final ruling as to whether they should be taxed simply
as commercial notes, which would be

ld.,

or as bonds, in which case the stamps

would amount to 4 of 1;, or possibly as collection items, in which case they would be
taxed one
New York.

mill.

He was hoping to get a ruling at once and convey it by cable to

I inquired a little as to the bank and security situation in Paris, and

his whole attitude was rather to deprecate the gossip in regard to the French

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Federal Reserve
Bank Benson
of St. Louis &
Robert

Galls

Co.-

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ax.

paying in over

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100,000,000. of capital for the reserve banks, and later the withdrawal

ilof funds from rew York by interior banks in readjustment of their reser7es;

that the

most natural immediate results would be higher interest rates in Few York and a lower

rate of exchange, and that the very high rate now prevailingwas probably due to the
purchase of American securities now held in Europe and, to some extent, to the
payment of maturing notes held abroad which Tare being renewed in America instead
of over here.

I judge from 2r. Goes attitude and likewise from other bankers

whom I have visited here, that they have a v ry high opinion of the Bankers Trust
Company and v.ould be glad to have us increase our business with them.

ance with so many of our directors impressed me in

Their acquaint-

many cases. and is one thing to

be figured on in connection with possible dhanges in our Board to meet new Federal
legislation.

Calls, Paris,

June 2, 1914.

*Morgan, Harjes & Co.
Yet fir. Harjes.

I told him that there would be no point in our

discussinp the details of our business with Morgan, Harjes

Co., as

Mr. Kent would be here later and go over that carefully.

I did, how-

ever, have a long general talk with him on various marters.
Regarding Frisco:

He seemed of the opinion that the French

,.` bankersEnd the Office Nationale would look a good deal to us to help in

that matter and avoid a transaction that would result in later difficulties for the road;

working it out.

thought that great credit would be gained

He said that unfortunately the 5,roup of bankers through

whom they had been sold in Paris were not just now

in very good odor

nor were they the best people, and there didn't seem to be any distinct
leadership among; the various banks that were interested.

He spoke of

Jarislowski as not being first-class, and said the same for the Banque
Privee,

excel t that the Societe Generale had been forced to acquire

a laxv.e interest in that bank in the interest of the situation, and
while they were ver:, sorry indeed that they

probably be obliged to work it out.

had it, yet they would

He spoke very well indeed of

2ony Chauvin, 71e6)er of the Office Nationale Committee, and spoke well,

also, of Guerin, the chairmLn of that committee representing the 5s.
On the other hand, he said that the New Orleans, Texas (I Mexico 4-1/2s

had been handled through an organization in which

S-eyer had been

interested, together with some of the more important and reTonsible
French bankers, and it was rather a pity that we were not detling with
that group, as, while Mr. Speyer was somewhat discredited in that circle,
still the other members were important and influential and would be glad
to deal with us.

The Frisco failure, and particularly the sale of a

block of bonds just before the failure, coupled with other important

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incidents,like the publicity in connection with the St. Paul's accounting,
and the une7pected issue of Telephone stock just after the listing, had
all combined to create much uneasiness about American securities,
would be

long time before French bankers and the public recovered from

their rrejudice.

He spoke very strongly of the high reputation for

good business judgment that the Bankers Trust Company enjoyed among the
banks here, and felt that it would not be difficult at all for us to
ensure t1.-_e influence and cooperation of all the French interests here

in case we took an active part in reorganization measares.

I explained

to him that the matter was largely in Mr. Speyer's hands, and ours was
an unprejudiced neutral position as trustee, and, so far as the reorganization was concerned, our financial interest in it wou16_ be determined

largely by our judgment of the soundness of the plan.

Mr. Harjes

wrote a very strong letter to Mr. Tony Chauvin in reard to our Company.
intimating that he could speak with the utmost frankness ai

confidence

to me and receive what I told hiW with equal confidence.
Regarding the Government bank position over here,

he was rzther

of the iLpression that the Bank of France, in strengthening its reserves
and increasing its gold holdings. was simply following the lead of the
Imperial Bank of Germany;

that the lolicy of the Imperial Bank really

emanated from the Emperor, who was a conservative influence in all
banking, industrial and military affairs in Germany, and that the Emperor
himself was

responsible for enlarginil- the military establishment

and for giving great Governmental encouragement to industrial ventures
in Germany, and, lastly, in strengthening the position of the Imperial

Bank, the latter inspired by the lessons growing out of the Morocco
incident.

Mr. Harjes seemed to be of the opinion that the German

industrial and financial situation was the strongest in Europe just now.

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and he said that,for the first time in the history of banking so far as

he was aware, Russia had recently been able to negotiate loans in Germany
at lower rates than could be obtained in France.

He didn't think that

the policy of the Government banks indicated political strain, although
that interpretation might rea ily be put upon it.
General Banking Situation.-

Lr. Harjes is of the opinion that

the Credit Lyonnais stands out foremost among all the European joint
stock banks as having conducted an enormous business along conservative
lines. co that today- they have an absolutely clean balance sheet and

have the good fortune,-which is true of h4rdly any other French bank,of having avoided losses to their customers who had made investments
throug:sh them.

This was almost, if not quite, equally true of the

The Banque de Paris, on the contrary, had made quite a

Comptoir.

at any rate, a good many of their clients

number of bad investments;

had lost large sums of money through investments which the bank had sold
them.

The Societe Generale was undoubtedly in the most vulnerable posi-

tion of any of the big four.
had sustained. serious losses,

Through them many of the irench people
but, on the other hand, their business

this year had been abnormally profitable.

In the first three months

they made probably over 125: on their stock, and he thought that while
that might be the weaT7est spot.there was no reason for a breakdown, as

the banking situation here was so cohesive that such a thing was
practically impossible.

He said that some of the smaller banks,

mentioning particularly the Credit Lobilier. had had some very hard
cracks.

They had not scrutinized their investments carefully enough

and se7ere losses had been sustained.

Prance was not as good as it should be.

He thought that business in
American travellers and others

here were not producing the annual harvest of good times.

He was some-

what disturbed by the result of the recent election, which had returned

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an ultra Socialistic Radical house, and

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thou ht there would li ely

c some very drastic legislation and possibl

some ventilation oT the

financial difficulties.

Discussed this ma

Paris Office.

er at some length with Er.

Harjes and gathered -enerally the following impression as being his best
opinion:

An office for the convenience of travellers might afford them
some little facilities that they co not now enjoy, but it probLbly would
not pay.

It was an inopportune time to open an office for the purpose

of handling American securities, on account of the pressure on the
French market for new loans from so many different quarters, and particularly because of the unfortunate experiences of the French banks with
American securities.

Mr. Harjes, however, is of the opinion that if an institution
like the Bankers Trust Company should make it their business to become
personally acquainted, through frequent visits by its officers to Paris,

and establish personal relationShips with the iwortant French bankers,
lunch with them, entertain they for dinner, and gain their confidence,
after a period of careful cultivation of this character it would be quite

possible to start a business that would grow to very great importance in
good American securities.
adjustment of the St. Louis

This underttkinFf, however, should_

wait the

San Francisco and other Am,:rican difficulties.

He laid great emphasis upon the excellent position which we occupy in the

minds of Paris banks of having conducted a successful business conservatively
and of the very high character of the individuals, principally bankers, who
were associated with the Bankers Trust Company.
Schiff, Lir.

Speyer, an ,7

He said that Mr. Mortiwer

one or two others of the American Hebrew bankers-

had taj:en the trouble to come over here and spend a good det'l oir time
Digitized for every
FRASER year regularly

in cultivating these relationships, and the very

S
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considerable business they hid been able to do here in Paris was
undoubtedly the result of their taking the pains to esttblich
personal relationship.

He seemed to think that if these gentlemen, whose rersonality
was probably not an unusually attractive one to the Parisian bankers,
could be successful along this line, other Americans would certainly

meet with very considerable success if they would take the trouble to
cultivate the relationship.

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Comptoir rat. d'1:;scompte de Yaris.

Ur. Lewandowski seemed to be particularly pleased ut my call
and esrecially keen to puma me about American matters, our new banking
law an( the railroad situation, and even more keen, if anything, to urge
upon as an enlargement of our business abroad and giving them greater
opportunities for transactions with us.

He spbke in such very high

terms of the Trust Company and the wav it was regarded over here that
I could not help but be impressed.
our organization.

Seemed to know quite a little about

Knew Mr. Kent veri favorably indeed.

He brought out

the statement of our transactions with them, which he said was most
disappointing to them as a bank, ariC

our size and importance;

;7enerally for an institution of

that we should certainly be able to develop

a business in Paris that would be equal or superior to that of
Guaranty Trust Company.

the

Of course, I didn't tell him that much of the

business we had been doinc with them was now being done with Liorgan.
Harjes , Co.

He was not at all encouraging as to any advantage to be

gained by having an organization over here.

I didn't suggest to him

directly that we contemplated an office, but simply the apointing of
a representative whose business it would be to look after our clients
who were in Europe_ and at the same time a man of sufficient importance
to cultivate closer relations with the banks.

He said that it was a

very poor time to undertake any security iasues, thtt an

office such as

we might open would be an expense and no profit, and pointed to the

Farmers Loan and the Equitable as being quite negligible quantities in
Paris so far as bunking was concerned.

He was of the im-:ression that

in order to have an office here it would be necessary to organize a
separate corporation, on account of taxation, although I am not sure
that he is correctly informed on that score.

The Lloyd's Bank of Lon-

don, in order to get a hold on business in Paris. purchased some other

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institution.

6/q14

He said that that was about the only way they could

"succeed in getting an effective staff to handle the business, but he
didn't think they

were maloing any money and the business had caused them

a good deal of trouble.

As regards

eneral business conditions in this country, he said

that business originating in France was not necessarily bad, although
there had been some setback.

The business brou-t to Paris this year

by tourists had been distinctly poor,- just about as ha,

In thc jewellery trade there was a real crisis.

as it could be.

The dfessmakers

were

complaining, and tll of the dealers in luxuries. etc.. that are purchased
by I:orth and South Americans wel-e comr1L.ininF7 o' 1z.c]- of business.

As to our new bankinE system, he felt that it would be a
distinctly important influence in our a'`'-rairs and would afford oppor-

tunity for American bankers to become better known and more influential
here and in London.

Admitted without reservation that the bunking

position in Paris was quite strained, but his whole conversation on this
subject impressed me that he desired to gloss it over and would prefer
to pump me rather than helve me pump him.

His attitude was one of

r ference to such difficulties as existed as being those of institutions
of minor importance, although this is not exactly the information I get
from other sources.

He did admit that the Societe Generale had done

some very bad business and that their clients had lost quite a lot of
money.

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Credit Lyonnais.
In my first talk with IL.. Masson I did not discuss the Bankers

Trust Company business in detail with him at all, as he wasn't the man
to talk with any way, and he rather preferred, I think, to have a general
discussion and let the detail be taken up by Ir. Kent with nr. Cunradi
on Mr. Kent's arrival.

In regard to our having an establishment of some sort in Paris.
he really saw no point in it.

Said it would be an expense to us and

would likely develop no business in the present temper of the banking and
investment community here, which was highly prejudiced against American
investments, and Ehatever banking business we wanted to do in Paris could
be done cheaper and more effectively by establishing closer and more
profitable relationships with the big banks.

He said that if it was

simply an office for the convenience of travellers in handling trunks,

railway tickets, mail, etc., that would be simply a question of policy
as to how much of that sort of thing had to be done in order to hold
and develop the travellers' business.

He didn't seem to attach much

importance to it, End thought that the Equitable and Farmers Loan were
neither of them making any money or were ever heard of here except to
the extent that they extended some little banking facilities and convenience to their clients who came to Paris.

The question of taxes,

income and otTlerwise, is being an important one in its effect upon

foreign securities, but the present tendency is to direct the derosit
of such securities, and even banking accounts. to Zurich and Brussels
rather than to London and Now York.

In regard to the local banking situation, I discussed this on two
different occasions when I called to see Lir. !Aasson, and will consolidate

the impressions of the two interviews into one memorandum.

He says

-s to the Credit Lyonnais, they have no securities to speLk of of their

own, inasmuch

as they effect a turnover as soon as a new issue it purchase

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or even before it is purchase

They rarely carry an account for more

40 than a day or two. and it is a most unusual thing for the,Ito have a

new issue on hand for as long as

week.

Their hands, however, have been

tied recently on account of the attitude of the Government.

He didn't

say that they had been directly instructed by the Government, but

inferred that the Government had in some way conveyed to the big banks
here that they didn't want any commitments made by the banks thz.t would

exhaust their investing power until the French Government loan had been
placed.

The loan

would amount to

300,000,000. or thereto outs, and

it was imperatively- necessary that it should be promptly placed when
offered.

Meantime, on account of the uncertainty and distrust in the

thinds of all the bankers t,s to the new-Socialistic regime, there was

developing a very serious distrust, End he felt that the Paris situation
was approaching q crisis of real seriousness, if it were not already
at hand.

He reiterated what others have said. that the French peasant
to the principal of hi: investment,

does not seem to pay much at

does not watch the securities or know anything whatever about the chart-.cter of the bond or stock.

He relies entirely upon the bank, and

exTeets remittance of the interest promptly on the minute.

When a default

occurs the peasant goes right up in the air, becomes excited, his prejudices are easily aroused, and undoubtedly Llasson and all the other bankers

here are afraid of a possible default in any considerable number of
issues, which would precipitate an outpouring of securities that would
paralyze credit situations the world over.

One cannot go through the

vaults of the Credit Lyonnais without being terrified at the possibility
of r. n-; such occurrence.

There Ore literkUy ;Ines of corridors lined

with vaults filled with securities.
anywhere else in the world.
occupied.

I suppose no such thing can be seen

The entire b4sement of the whole block

the bank building is filled with securities, cove:ing five

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Dupont & Furlaud.
I had

talk with 1:r. FurlEud in regard to the scheme that he

111

wrote me about of having an office in Brussels or Switzerland.

He talked

so extravagantly, however, and is so consumed with egotism and the desire
to blow his own horn that I do not feel there is any advantage whatever
to be F.t,ined in developing matters with them. and it would only be a

waste of time to enlarge upon this memorandum.

Calls (Paris)

Banque de Paris etiPays-Bas.
Mr. 2urre 'Jini

spoke very poor English and naturally we didn't

*get along very well, except that, lacking a very considerable vocabulary.
I think he may have been led to speak a little more frankly than he
otherwise would have done.

His attitude was to blame America,

d.rid

particularly President Wilson, for bringing about a world-wide crisis
in finance and credit;

thought his new policies and idealism were

the cause of the Mexican troubles and the upset in the value of American railway investinents; but 'e amitted that matters of considerable
seriousness had developed likewise in Brazil and elsewhere. and the large
French interests in these foreign countries were causing they great
uneasiness and that he feared we were approaching a crisis.

He reiter-

at.ed that the French banks were in the main in a position to staid
considerable strain, as money was easy here and the Banl: of France was
improving its position right along.
stated that

He was the only one who voluntarily

1-le rolitical relations between France and Germany were a

distinct factor in the situation.

He said there was a decided tension in

the relations between the people of the two countries
opinion was fomented by the newspapers.

so ft.i. aE

He used an expression, the

equivalent, literally translated. that the newspapers accelerated
fire.

the

Said that the sensible people of neither Germany nor France wanted

war. but the news-papers

were keeping the matter at boiling point right

along and creating a sentiment that had led to a tremendous increase in
expenditures for armament that would wreck any country.

He s id thtt no

losses had yet been incurred on account of the Balkan way; the loans were
protected. and he thought they were all good;

but much uncertainty

existed in Paris on account of the tremendous accumulation of short-time

borrowings by the French Government, and nobody was able to ascertain
or prophesy when the new Government would be able to arrange financing.

He said they were an ignorant lot, of a type that made trouble prior to

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:lye some
and that they would
unprincipled,
prejudiced and
important financial
the Revolution,
to
handle
didn't know how
and
and probably
very weak today,
*bad legislation
Bourse
was
he said that the
In
passing,
It was also weak
mat tars.
there.
situation
about the
stronger
seemed to be concerned
people I gained a
of
these
with all
what may
In fact, talking
yesterday.
mucb afraid of
of
them
are all
regard to
all along that they
impression
of the peasants in
and excitement
through the ignorance
develop

their investments.

Calls (Paris)

a 1

Paris Office.

Mr. Aubert brought up the subject of American business in Paris
when we were at Mr. Stillman's house.

He seemed to think that while

matters were in a very unsatisfactory condition now to do any business in
Paris, yet the day would come when an American institution, as distinguished from international banking houses, might find it desirable to open such
an office.

American international bankers, he said, had cultivated

business over here much more assiduously than the institutions had, and
he felt that there had been fault on both sides in connection with the
issue of second and third-grade bonds in Paris.

None of the big New Yor',;

institutions were associated with these matters in the minds of the French
banks or investors, and he felt quite certain that a concern like the
Bankers Trust Company would occupy a different position in the minds of
the big institutions in Paris from that occupied by the bond houses.
Said the Farmers Loan & Trust Company and the Equitable amounted to nothing
in Paris;

they probably weren't paying expenses, and were doing very

little business.

Mr. Stillman asked me if we were contemplating opening

an office here, and I told him that the suggestion had been made, but

particularly with reference to giving facilities to travellers who carried
our credits rather than attempting to do a banking and investment business.

He said there was absolutely nothing to be gained, in his opinion, by
opening a Paris office unless it was for that limited purpose.

The French

people wouldn't entrust their business to such an office, and he didn't
see how it could be profitable or amount to anything.

The Farmers Loan

& Trust Company, he explained, had during the war received large amounts
of securities for account of rich Americans who emigrated to France to
escape the difficulties of the war period.

This business had grown

somewhat and offered an excuse for their having an office in Paris.

411

Calls (Berlin)

Direction der Disconto Gesellschaft.

Presented Mr. White's letter to Herr vonBerger, Dr. Salomonsohn

OLeing so very much occupied in connection with the taking over of the
Herr vonBerger expressed regret

business of the Schauffenhaus

that they had been unable as yet to finally adjust the potash matter with
the International Agricultural Corporation, but hoped to be able to do so
as the result of the efforts of their attorney, who had gone to New York
for that purpose.

Herr vonBerger was most anxious that the Bankers

Trust Company do more business with the Direction der Disconto Gesellschaft.

He brought in their foreign manager, whose name I do not recall,

with whom I discussed relations in Germany and America for over an hour.
It seems to be the universal feeling over here, as expressed by him and
by others, that the most beneficial effect of our new banking system
will be to create a discount

market for bills or acceptances.

The

German bankers are also united in opinion that the Reserve bank system
should have but one agency in each principal city, and should conduct
their business with the more important joint stock banks, such as the
Deutsche Bank, Disconto Gesellschaft, and pJssible Mendelssohn, as no
object would be served by having direct relations with the Imperial Bank.

They are all keen to make the connection, and have asked me quite
particularly on this score what steps should be taken.

They all agree

that American securities have had a bad setback in this country, and it
will require a good deal of careful work by bankers to effect a restoration of confidence in these issues.

Suggest that Mr. Kent allow time

to have as visit with Herr vonBerger and his associates.

They all agree

that no object would be served by the Bankers Trust Company having an office
in Berlin, which would be an expense and without profit, as we could do
our business much better through our present banking arrangements.

Calls (Berlin)

Dresdner Bank.

Presented Mr. White's letter to Dr. Schact, who asked their foreign

manager to join us.

This gentlemen seemed rather less informed about

American business than the officers of the other two banks, but particularly
keen that the Bankers Trust Company should establish closer relations with
them and do more business through the Dresdner Bank.

Somehow or ether,

I got the impression that the officers of this bank were a bit cold and
not very sympathetic, although they dropped one rather important bit of
information, which was confirmed by the officers of the other two banks,

namely,- that the big banks here in Germsay have got a distinct agreement
among themselves as to the minimum rates to be charged for acceptances,
credits, etc., which is 1/4% for the best bank acceptances, 3/8 to 1.1)

for commercial acceptances, and 1/8% where the credit is confirmed, etc.,

and apparently they are very conscientious in sticking to the terms upon
which they have all agreed.

The German banker is quite unable to under-

stand the policy of our country in discouraging bank consolidations and
enlargements.

They seem to think that if our Government would encourage

consolidations, so that we would have but a fraction of the number of
banks which we now have,-those, however, being very large and powerful, -

our business would be better conducted, more profitable, and our bankers
in position to do their share of the financiaig o

the world's trade,

which we are now not doing and consequently are losing the nrofit.
One other thing that has developed in my conversation with all
the bankers here is the feeling, apparently, that our new banking system
invites inflation and that the present ease of money and exports of gold
may to some extent be attributed to expansion in anticipation, by our
bankers.

and costly,

They all agree that Wilson's policy in Mexico has been stupid
that his policy in forcing trust legislation at the present

time is unwise and that, while he is honest undoubtedly in his purpose,

Calls (Berlin)

411

he is theorist and impractical.

Dr. vonGwinner made the same statement

that others have made to me, to the effect that our railroads should get
40

an increase of 20% or 25% in rates, and even that would do no more than

enable them to carry out construction work that is absolutely essential
to the safe conduct of the transportation business of the country.

Calls (Berlin)

its connection with the New York Central, which eventually would turn a large amount
of traffic over their lines:

but it would need careful management and .suite a little

money spent for the physical betterment of the road to carry the enlarged traffic.
These are the matters in which Herr Bergmann will be active in New York.
He probably will have his office in 135 Broadway, although I tried to have him
consider taking offices in our building.

Am wriAmg Mr. Hugo Schmidt today, as

per copy attached, asking him to keep the matter in mind.
:Ir. Schmidt wants a good picture of our building to hang in his private

office, as he already had pictures there of the Blair blinding, the Stock Exchange,
and one or two others, and I promised to send him one on my return.

Berlin

1/1

Deutsche Bank.

Ily last interview with Herr Blinzig Saturday morning (June 16) simply added

INfurther confirmation to the suggestions made in former interviews, both by him and by
Herr VonGwinner, that they stood ready to co-operate with us, both financially and with
moral support, in any plan we devised along the line we discussed for a conservative
reorganization.

He was particularly anxious that I should write fully from London,

giving particulars regarding the situation in both Paris and few York, which I have
agreed to do.

Both Herr Blinzig and Herr VonGwinner will be glad to hear from us

from time to time regarding security matters, although at the moment there is little
prospect of doing much security business in Germany.

There have been too many losses

incurred and there is too much distrust of American political conditions.

Call/
British & American ITortRare Co.

London

to-do.

father,

loans wh

American

being in

loans in

American

debonlrur

exceed a

the dema

continuo

very mod

cover wh

debentur

seven or

a share,

paving a

conditio

London

11,

London
right class of experienced bank men;

that they are contracting their branches

*Instead of increasing their number; and that in proportion to the number of great
joint stock banks they are not strong enough to take the strain of bad times and
unsettled confidence.

lie believes that the Bank of England should adopt a

olicy of enlarging its business and strengthening its resources, and that as an

emergency measure it should be empowered to issue notes against the deposit of prime
pa er and gold in a certain proportion, only, however, when 4;1'10 discount rate is,
say,

and the notes issued under such emergency arrangement to be subject to

a snecial tax.
Had a brief talk with him about the subject of a :,ondon office.

Sir Edward apparently did not want to develop this subject very fully until jr.
Kent's arrival, urging that we take a day, spending it in some quiet place,
where he, 'Ir. Kent and I could go into the subject thoroughly.

He said he was

quite sure that it would not tkiek do to think of opening an office in Paris

without having one in London also, and I gathered that he is not very likely to
be enthusiastic on the subject.
Sir Edward and the other bankers with whom I talked took a pretty gloomy

view of the banking situation in Paris, and I should say a composite view of my
interviews today would be about as follows;

The four big banks, that is, the

Credit Lyonnais, Societe Generale, Comptoir National, and the Banque de Paris,
with their large number of branches throughout France, have developed an enormous
investment business, a large part of the securities being sold to ignorant peasants,

who buy these entirely upon the reconmendation of the banks, without knowing what
they are other than that they are offered by a responsible banking institution.
The three bankn mentioned (excepting the Credit 14yonnais) have found this business
so profitable and automatic, so to sneak, that they have not been as particular as

they should be as to the class of securities they have handled, being governed too

London

Bourke. Schiff & Co.

411

hot all the partners at their office and explained to them in great
IP

detail how we happened to be brought into the Southern Iron & Steel Company
matter, and that we now felt that we were through with the situation and had no
further res onsibility in that connection, all of which they seemed to understand.

They all stated very positively that any sale of the property for any-

thing like 2 3.J0J,000. cash would be bitterly opposed on this side.

They also

seemed very keen to get reliable information in regard to tho personnel of the
new Board of Dfrectors.

I gave them what little inform tion I could, and

told them that I regarded the Company's future as dependent almost entirely upon
the management and upon its being conservatively developed and not spread out too
much.

They were all very much encouraged by the statements coning forward from

New York showing tho Company's operations, and particularly indicating an improved
situation as to quick assets.
control of the situation.

The7 seem to have confidence in Platten and his

London

Llo

411

London

look

busi

cial

and

ins

the

par

with

deta

London

Credit Lyonnais.
Saw :Ir. Buchanan, and had a very pleasant chat with him.

The only

special matter that he mentioned was in regard to reimbursement of B. & 0. and
other notes in London, concerning which he was now corresponding with the New
York office.

He said he fully anfterstood the advantages of sending the notes

for. -yard for collection in London, on account of the difrerence of nearly 2d° In
exchange, but the delay in effecting the arrannoment was due to the uncertainty
of the stamps to be attached.

The Revenue Office had made no final ruling as to

whether they should be taxed simply as commercial notes, which would be ld.,
or as bonds, in which case the stamps would amount to

of 1;0, or possibly as

collection items, in which case they would be taxed one tier mill.

hoping to get a ruling at once and convey it by cable to Now York.

He was

I inquired a

little as to the bank and security situation in Paris. and his whole attitude
was rather to deprecate the gossip in regard to the French banking position
generally.

He mentioned particalarly the unfavorable influence created by the

fiasco in both Frisco and the American "later-7brks & Guarantee, as well as some

other minor security issues from America, but didn't go into particulars.

was most anxious that we should make use of his services in any way possible in
London and that I should see 7T,r. "Hasson at the head office in Paris.

London

http://fraser.stlouisfed.org/
Federal Reserve
Bank Joint
of St. Louis
London
Stock

tendon
Bank. Ltd.

London

Mor:,:

Paris

Parisu

Paris

Paris
11:rjes

Co.

http://fraser.stlouisfed.org/
I lunched
Federal Reserve Bank of St. Louis

with Mr. Harjes on Wednesday (June 3rd).

We continued our

Paris

111

Paris Office.

Hr. Aubert brought up the subject of American business in Paris when

He seemed to think that while matters were in

were at Hr. Stillman's house.

a very unsatisfactory condition now to do any business in Paris, yet the day would
come when an American institution, as distinguished from international banking
houses, might find it desirable to open such an office.

American international

bankers, he said, had cultivated business over here more assiduously than the
institutions had, and he felt that there had been fault on both sides in connection with the issue of second and third-grade bonds in Paris.

None of the big

New York institutions were associated with those matters in the minds of the
French banks or investors, and he felt quite certain that a concern like the
Bankers Trust Company would occupy a different position in the minds of the big
institutions in Paris from that occupied by the bond houses.

Said that the

Farmers Loan & Trust Company and the Fauitable amounted to nothing in Paris;
they probabla ure.ren't paying expenses, and were doing very little business.

Mr.

Stillman asked me if we were contemplating opening an office here, and I told
him that the suggestion had been made, but particularly with reference to giving
facilities to travellers who carried our credits, rather than attempting to do
a banking and investment business.

He said there was absolutely nothing to be

gained, in his opinion, by opening a Paris office unless it was for that limited
purpose.

The French people wouldn't entrust their business to such an office,

and he didn't see how it could be profitable or amount to anything.

The Farmers

Loan & Trust Company, he explained, had during the war received large amounts of
securities for account of rich Americans who emigrated to France to escape the
difficulties of the war period.

This business had grown somewhat, and offered

an excuse for their having an office in Paris.

galls (Berlin)
June 9

Deutsche Bank.

I presented Mr. Kent's letter to Mr. Hugo Schmidt, who was most

*gratified indeed to see me
with their various officers.

and urged that I allow ample time for visits

At the outset he said that our business with

them was of so satisfactory a character and was so carefully handled
that it really required no discussion, and he hoped that the service which
they were rendering us here was as satisfactory to us as ours was to them.

We spent fully an hour. both with him and with Herr Hermann, the head of
his department, in discussing general business conditions here, in France,
and in America, and discussing our new banking bill.

Herr Schmidt first

asked me to convey a caution to Mr. Kent in regard to the Banco Espanol
de la Cuba.

He said that Mariana was here in Germany, and he had seen

him, but that there was something radically wrong with the bank.

didn't care to give me particulars, and we should be exceedingly cautious
in our dealings with them.

He was lead to mention the matter because he

had seen a transfer going through the bank with which we were in some way
connected, and thought we might be doing business with them.

I thanked

him and said the word would be promptly conveyed to our office.

While he

gave no particulars, I rather felt that it referred not only to financial
conditions, but also to questions of honesty and straight dealing.

As to conditions in Germany, he says that they are vastly
improved and that all the German banks, particularly the Imperial Bank,
are now in very strong position.

The one weak spot was the Scharfhausen

Bank, which had been offered to the Deutsche Bank and after consideration
had been declined.

The Disconto Gesellschaft had taken them over, with

all their branches, and he felt that it required a good deal of courage
to do so, as the bank was badly tied up and would have to mark off
+40,000,000. Marks out of their capital of 140,000,000. Mks., and it
would take four or five years to put the business on a safe and profitable basis.

The Deutsche Bank had also recently completed the purchase

Calls (Berlin)

11, of a bank in which they had a large interest formerly, the name of which
I do not recall.

He said that in this case the purchase was a good one

dbpd would be profitable.

There had been some trade depression in Germany,

but not as serious as in France, and he was very confident that the banking
position in Germany is today stronger than any country in Europe.

The

policy of the Imperial Bank in accumulating gold has been one of general
caution, on account of political reasons, but also largely because they
felt that all the great Government banks required the protection of larger
gold reserves, particularly in London, where the banking position had
been weakened by the business of the country outgrowing the size and
importance of the Bank of England.

This is largely Sir Edward Holden's

view.

As to our new banking system, they seemed to agree that it was
a long step ahead, but that the most careful management would be required
to ensure its success and to avoid inflation.

He thought, however,

that such management would be given the bank and that the plan would prove
a success.

Herr Hermann commented strongly upon Mr. Vanderlip's plan

and said that it was the ideal plan and should have been adopted.

They

recognized the difficulties of a central bank plan, however, in that we
had such a vast territory to cover and so many different divergent business
conditions.

He thought that it would be most unwise for the Federal

Reserve Banks to have more tne.n one agency in each principal ioreign city,

and botn Messrs. Scnmidt and Hermann agreed tnat there would be no object
to serve for an American institution, other than the Federal Reserve banks,
to have an office in Berlin.

As to conditions in France, he said they were exceedingly serious.
The French banks had been guilty of reckless, extravagant promotion in

the sale of foreign securities of doubtful value, and it looked as though
the day of reckoning was at hand.

This was further complicated by the

difficult political condition of the country, which seemed unable to

Calls (Berlin)

Calls (Berlin)
411

Deutsche Bank.
June 10.

Met Hugo Schmidt and Herr Hermann by appointment at

*the bank, and they took me through the institution, showed me the vaults,
etc.

It is a vast place and undoubtedly well managed, and impressive in

the volume and importance of its business.

After going through the bank

we had luncheon together, and at lunch they opened up pretty frankly in
regard to American matters, discussing a wide range of subjects, including their relations with New York institutions and particularly the
question of our new banking law.

As to the former, they said that they

regarded the business of the Guaranty Trust Company, as conducted by
Max May, as being too speculative.

They took very large lines, and they

were particularly criticized over here for drawing long bills on their
own London office.

He thought Max May wanted to do all the business

without regard to profit, and undoubtedly a large amount of of the
business which they did paid them no profit,- possibly caused a loss, -

and they were not compensated for the risk.

Said they regarded

Mr. Kent as by far the better man for that business, that he was considered
a safer and more prudent banker on this side than was May.

Thought Kent

was the ideal man for the new Federal reserve bank in New York, and hoped
May would not be appointed.

As to the National City Bank, while it was

a fine institution, they always wanted the lion's share of the profit
and their relations with the Deutsche Bank were not as close as they had
been on that account.

The First National Bank had recently been charg-

ing them too much for carrying their securities,

1/4 of lro, and as it

not only took all the profit but also caused a loss on the business, they
were obliged to make a change.

I didn't feel inclined to go into the

details of our business relations with them, preferring to let Mr. Kent
take that up later, but I am satisfied that Mr. Kent, by conference with
Messrs. Schmidt and Hermann, and possibly with Blinzig and vonGwinner,
can very much enlarge the scope of our business with the Deutsche Bank

Calls (Berlin)

Berlin
June 9

Deutsche Bank.

I presented Lir. Kent's letter to 2±. Hugo Schmidt, who was most

gratified indeed to see me, and urged that I allow ample time for visits with

thfr

various officers.

At the outset, he said thk.t our business with them was

of so satisfmtory a chracter and was so carefully handled th:t it really required no discussion; and he hoped that the service which they were rendering
us here was as satisfactory to us as ours was to them.

We spent fully an hour,

both with him and with Herr Hermann, the head of his department, in discussing
general business conditions here, in France, and in America, and in discussing our
new banking bill.

Herr Schmidt first asked me to convey a caution to Lir. Kent

in regard to the Banco Espanol de la Cuba.

He said that Marianna was here in

Germany, and he had seen him, but that there was something radically wrong with
the Bank.

He didn't care to give me particulars, and we should be exceedingly

cautious in our dealings with them.

He was led to mention the matter because he

had seena transfer going through the bank with which we were in some way connected,
and thought we might be doing business with them.

word would be promptly conveyed to our office.

I thanked him and said the

While he gave no particulars, I

rather felt that it referred not only to financial conditions, but also to
questions of honesty and straight dealing.

As to conditions in Germany, he says that they are vastly improved
and that all the German banks, particularly the Imperial Bank, are how in a very
strong position.

The one weak spot was the Scharfhausen Bank, which had been

offered to the Deutsche Bank, and after consideration had been declined.

The

Disconto Gesellschaft had taken them over, wita all their branches, and he felt
that it required a good deal of courage to do so, as the bank was badly tied up
and would have to mark off 40,000,000 :silks. out of their capital of 140,000,000,

and it would take four or five years to put the business on a safe and profit
able basis.
The

Deutsche Bank had also recently completed the purchase of a bank

Berlin

in which they had a large interest formerly, the name of which I do not recall.

He said that in this case the purchase was a good one

and would be profitable.

There had been some trade dearession in Germany, but not as serious as in France,

and he was ver confident that the banking position in Germany is today stronger
than in any country in Europe.

The policy of the Imperial Bank in accumulating

gold has been one of general caution, on account of political reasons, but also

largely because they felt that all the great Government banks required the
arotection of larger gold reserves, particularly in London, where the banking
position had been weakened by the business of the country outgrowila; the size

and Lkortance of the Bank of England.

This is largely Sir Edward Holden's view.

As to our new banking system, they seemed to agree that it was a long
step ahead, but that the most careful management would be required to ensure its
success and to avoid inflation.

He thought, however, that such management would

be given the bank and that the plan would prove a success.

Herr Hermann comrented

strongly upon Mr. Vanderlip's plan, and said that it was the ideal plan and should
have been adopted.

They recognized the difficulties of a central bank plan,

however, in that we had such a vast territory to cover and so maw different
divergent business conditions.

He thought that it would be most unwise for the

Federal reserve banks to have more than one agency in each principal foreign

city, and both Messrs. Schmidt and Hermann agreed that there would be no object
to serve for an American institution, other than the Federal reserve banks, to
have an office in Berlin.
As to conditions in France, he said they were exceedingly serious.

The French banks had been guilty of reckless, extravagant promotion in the sale of
foreign securities of doubtful value, and it looked as though the day of reckoning was at hand.

This was further complicated by the difficult puttlam political

condition of the country, which seemed unable to develop any strong financial la

Berlin

policy and to crystallize sentiment in regard to the three-year term of service.

Said the Societe Generale, while in perilous condition today, would probably be

asslied over its difficulties by the other banks, unless the distrust became so
widespread that they would need all their resources to help themselves.

didn't intimate that the German banks would help, but I rather imagine that their
attitude would be one of assist-nce than the reverse.

Schmidt said that conditions

in the Argentine were today vastly worse than at the time of the Baring panic. The

country was suffering a paralysis of trade and overexpansion, which had been promoted by the outpouring of French money.

They not only got all the money they asked

for on application to the French banks, but the bankers there wore urging them to
take more, with the inevitable consequences.

The same thing is true in Brazil.

The Brazilian Government absolutely had to arrange a loan of about $100,000,000.
to save a complete breakdown, which would affect the French banks seriously;

that negotiations were now being conducted in London, the Deutsche Bank having a
representative there, and, while they didn't want to do so, they probably would

find it advisable to participate in the Brazilian loan, which he thought would be
successfully concluded at an early date.
I expect to lunch with these gentlemen tomorrow, and

t the conclusion

of the interview Herr Schmidt took me to Herr Blinzig's office, where I spent
another hour with Herr Blinzig and Herr VonGwinner.
see me in regard to the Frisco matter.
that heading).

These gentlemen wanted to

(:demo. regarding the interview under

Berlin 4
1;a1,ionalbank for Deutschland.

Saw Mr. Hans Winterfelt, who has within the last few weeks taken charge
)f this bank, the President of which recently died.
10

I was informed by the officers

Deutsche Bank that the Nationalbsnk for Deutschland had been pret y badly

tied up and their prestige considerably affected, and that it would take some time
for thorn to work out of their present position.

Winterfelt told me, however, that

while he had found a great mass of underwritings and participations there from
America, such as we wouldn't think of touching at home, he felt confident that the
business of the bank could be put in good shape;

and he himself, having consider-

able knowledge of American affairs, was in a good position to do so.

He hasn't

had much experience in strictly banking matters, but is anxious to build up the
banking business of the institution.

He would like very much if the Bankers Trust

Company could arrange to do some business with them in connection with banking
matters, exchange, travellers credits, commercial credits, or the handling of
securities.

I told him that the details of these matters could be discussed with

Kent, who would be here in July, and I would see that :Ir. Kent called to
visit him.

Berlin
Deutsche Bank.

(June 10)

Met Hugo Schmidt and Herr Hermann by appointment at the bank, and they
took me through the institution, shored me the vaults, etc.

It is a vast place

anAlkndoubtedly well managed, and impressive in the volume and importance of its
business.

After going through the bank we had luncheon together, and at lunch

they opened up pretty frankly in regard to American matters, discussing a wide
range of subjects, including their relations with New York institutions, and
particularly the

liestion of our new banking law.

As to the former, they said

that they regarded the business of the Guaranty Trust Company, as conducted by
Max May, as being too speculative.

They took very large lines, and they were

particularly criticized over here for drawing long bills on their own London office.
He thought Max May wanted to do all the business without regard to profit, and
undoubtedly a large amount of the business which they did paid them no profit, Said they

possibly caused a loss,- and they were not compensated for the risk.

regarded Mr. Kent as by far the better man for that business; that he was considered a safer and more prudent banker on this side than was May.

Thought :Cent

was the ideal man for the new Federal reserve bank in New York, and hoped May
would not be

appointed.

As to the National City Bank, while it was a fine

institution, they always wanted the lion's share of the profit and their relations

w7th the Deutsche Bank were not as close as they had been on that account.

The

First National Bank had recently been charging them too much for carrying their
securities,of 1;-,- and as it not only took all the profit but also caused a

he business, they were obliged to make a change.

I didn't fool inclined

o the details of our business relations with them, preferring to let

take that up later, but I acq satisfied t:iat Mr. Nent, by conference with

chmidt and Hermann, and possibly with Blinzig and vonGwinner, can very

rge the scope of our business with the Deutsche Bank and establish a much

Berlin
closer relationship.

I was most favorably impressed with the intelligence and the

wide range of information displayed by all of these gentlemen in regard to American
affairs.

Schmidt is leaving for a vacation shortly and will not be in Berlin until

about the 10th of July, so it will be better for :Ir. Kent to defer coming here

until after Mr. Schmidt returns.

I cannot help but feel that if the matter is

put in just the right way to these gentlemen, they will be disposed to send us a
considerable part of their security business. and very much increase their balances
and transactions with us.

The important thing is to find out what is a fair

arrangement both ways, so that both the Deutsche Bank and ourselves can make
money on the account.

Would suggest that 7Ir. Kent give some thought as to arrange-

ments for joint account business, and investigate while he is here just what kind
of business of that character would appeal to them.

Berlin

Direction der Disconto Gesellschaft.
Presented :Ir. White's letter to Herr vonBerger,

Dr. Salomonsohn being

so very much occupied in connection with the taking over of the business of the
Scharfhausen Bank.

Herr vonBerger expressed regret that they had been unable as

yet to finally adjust the potash matter with the International Agricultural Corporation , but hoped to be able to do so as the result of the efforts of their
attorney who had gone to New York for that purpose.

Herr vonBerger was most

anxious that the Bankers Trust Company do more business with the Direction der
Disconto Gesellschaft.

He brought in their foreign manager, whose name I do not

recall, with whom I discussed relations in Germany and America for over an hour.
It seems to be the universal feeling over here, as expressed by him and by others,

that the most beneficial effect of our new banking system will be to create a
discount market for bills and acceptances.

The German bankers are also united in

opinion that the Reserve bank system should have but one agency in each principal
city, and should conduct their business with the more important joint stock banks,
such as the Deutsche Bank, Disconto Gesellschaft, and possibly Mendelssohn, as no
.,bject would be served by having direct relations with the Imperial Bank.

They

are all keen to make the connection. and have asked me quite particularly on this
score what steps should be taken.

They all agree that American securities have

had a bad setback in this country, and it will require a good deal of careful

work by bankers to effect a restoration of confidence in these issues.

Suggest

that Mr. Kent allow time to have a visit with Herr vonBerger and his associates.
They all agree that no object would be served by the Bankers Trust Company having
an office in Berlin, which would be an expense and without profit, as we could do
our business much better through our present banking arrangements.

Berlin

411

Dresdner Bank.

Presented Mr. White's letter to Dr. Schact, who asked their foreign
4111

manager to join us.

This gentleman seemed rather less informed about American

business than the officers of the other two banks, but particularly keen that the
Bankers Trust Company should establish closer relations with them and do more
business through the Dresdner Bank.

Somehow or other, I got the impression that

the officers of this bank were a bit cold and not very sympathetic), although they

dropped one rather important bit of information, which was confirmed by the officers
of the other two banks, namely,- that the big banks here in Germany have got a
distinct agreement among themselves as to the minimum rates to be charged for
acceptances, credits, etc., which is
for commercial acceptances, and

for the best bank acceptances, m 3/8 to

where the credit is confirmed, etc., and

apparently they are very conscientious in sticking to the terms upon which they
have all agreed.

The German banker is quite unable to understand the policy of

our country in discouraging bank consolidations and enlargements.

They seem to

think that if our Government would encourage consolidations, so that we would
have but a fraction of the number of banks which we now have,- those, however,

being very large and powerful,- our business would be better conducted, more
profitable, and our bankers in position to do their share of the financing of the
world's trade, which we are not now doing and consequently are losing the profit.
One other thing that has developed in ray conversation with all the

bankers here is the feeling, aenarently, that our new banking system invites
inflation and that the present ease of money and exports of gold may to some
extant be attributed to expansion in anticipation by our bankers.
that Wilson's policy in Mexico has been stupid and costly,

They all agree

that his policy in

forcing trust legislation at the present time is unwise, and that, while he is
honest undoubtedly in his purpose, he is a theorist and impractioal.

made the same

Dr.vonGwinner

statement that others have made to me, to the effect that our rail-

Berlin

roads should get an increase of 20,, or 25;0 in rates, and even that would do no

46more than enable then to carry out construction work that is absolutely essential
to the safe conduct of the transportation business of the country.

Berlin

Trehhand Gesellschaft.

It was unnecessary for me to call at this office, which is purely a

ministerial office, the management being in the hands of the various banks.

It is

the oldest and most responsible trust company in Berlin, and has for many years
conducted a business as acting

for bondholders when occasion arises.

Mr.Blinzig

tells me that where they are employed there is rarely a connittee appointed, the
trust company itself acting as committee.

In the Frisco case, they have about

113,000,000. bonds on deposit, of Which about $1,000,000. came in recently, after
the offer to purchz:.se the coupons was made.

He says that they are in such shape

that the bonds could be shipped to New York at any time, if developments made it
necessary, but it is (iiite important that notice by cable bo given, of at least

a week if possible, of the intention to ask for their shipment, as a little time
for negotiation may enable then to avoid the payment of another stamp on the issue
o:r the new securities, which amounts, as I recall it, to -- of lciJ.

Berlin

Deutsche Bank.

Friday afternoon (June 12) Mr. Hugo Schmidt brought Mr. Bergmann of
their office to the hotel for tea, in order that I might have good opportunity for
a visit with him, as Herr Bergmann is going to New York in September, and will
there officially represent the Deutsche Bank in place of Mr. Edward D. Adams.
I doubt if Mr. Adams is yet apprised of this decision.

The change,

Herr Schmidt informs me, is one of the results of !Jr. Adams's mistake in Western
1!aryland, and to some extent due to the fact that Mr. Adams is not popular with

New York bankers and does not succeed in making friends and suitably representing
the bank in its many interests.

Mr. Schmidt was verT frank in discussing the

matter, and expressed the fear that Mr. Adams was going to be annoyed and hurt
by the change, but it was inevitable.

Herr Bergmann is most anyious to cultivate closer relations with our
office.

I think they feel that in these matters our advice will be valuable to

them, as it is largely unprejudiced in the matters in which they are or will be
interested.

I told Herr Schmidt of our relations with the Western Maryland and our

feeling that the Directors had been deceived, and in consequence of that fact we
had been compelled to decline their application for a large loan, which had con,-

siderably annoyed Mr. Adams and Mr. Rockefeller, as well as our good friends,
Blair .1 Co.

Explained that I had met 4r. Adams end told him the reason, and, on
the whole, rhile I had some fear that the Deutsche Bank had been annoyed by our
attitude, I now think that they believe we showed good business judgment and
respect us for our independence.
Herr Schmidt says that everybody in Germany, in the Berlin district,

holds some Western Maryland stock, from fifty shares up, for which they paid about
65, and there is now great distress with the stock selling at 15 or 16.

one of the matters

This is

that has injured American securities in Germany almost more

Berlin

411
than any other.

I told him that, notwithstanding this distressing development,

I couldn't help but feel that in the long run Western Maryland haul a future, on

account of its connection with the New York Central, which eventually would turn
a large amount of traffic over their lines;

but it would need careful mandgement

and quite a little money spent for the physical betterment of the road to osrry
the enlarged traffic.
These are the matters in which Herr Bergmann will be cctive in New York.

He probably will have his office in 135 Broadway, although I tried to have him
consider taking offices in our building.

Am writing Mr. Hugo Schmidt today, as

per copy attached, zzking him to keel) the matter in mind.

Mr. Schmidt wants a good Picture of cur building to hang up in his
private office.

He already had pictures there of the Blair Building, the Stock

Eichangeo and one or two others, and I promised to send him one on my return.

Berlin

I do not bolloVo it is oither, a

no ow,rosnod moat'.

and intoront rater

ore unusually

or at loast failing to

at a tiro when money had piled up in NuV York
The shan-o in our exports and imports has

doubtless had nom influenza but I dol:bt if it has boon of sufficient influence

to =Inn t 0 nharp rino of the last vook or to.
Gompany, ac rued

it vas a healthy sign for America.

Guaranty Trust

yne, of t1),

mo as to tho latter theory.

Lone of tum sowed to fool that

I vcralu approolato it 17 you would drop no

a lino,or oablo mu from time to time, just how thinge do look injiew York, for I
rof no mem'inruiries that 1 would liku to havo t-ie last 7ord in the

informtion.

gY of

If you and Dan and William could 7;et your heads tocuther every day

or 1A-40, and Gamow a cable tollingmo just '..hat in doing, I wouWd arpreolato it.
Another matt or that has improauod ono a good doal is the, probable difficulty
that we sould oxporionce in opon.t
tiler° which

an offloo in London and developing a buoinono

ould really be any factor at all for ntlny yearn to come.

r:11

problem

of getting the rigit kind of man-genont, art: then, 7hon ,o havo cot it, of letting

the rirfit kind of buoiness, Is a v ry sorious ono.

koop until you got over hero, a

it looks to ran an tho,li

rica were probably taking back nooLxitioe in solo volume

know abroad maturin- note in es

miantimo i an loin g to keep perring may no as

over an much ground an pooniblo in anticipation.

tomorrow for Paris, whoro

All of thin, hoydror, will

Ur. Lewis and I use 1,avinc

ill spend a '...kak probably.

Part of the Wino

Jevoto to vinitinc: bankers and havIrc a' eneral dincrusaion-ith theca-

a lc

hope to

pait

The time of -I)urno to the Frit= matter.

I omittod to mention ebovo en incident that Andornon told mo,

improoned ro a bit.

blolk of stock.

He in hero olosiw: a contract for tho sale of nuito a larr7e

The contracts wore all proparod and ready for ninaturo*.

it wan fault; impouniblo to got all the nirmaturoe nocoonary until next 6edneaday.,

tam batty; Fricay.

Ovin

imported in the acx client

to thin dolly, the hhgliah bankers muirod a clauso to be
t.0 Cfoot of 'Al-1,h rAS that the

ontract wan void in

cane
Should bo a decline of one and a half points In 1ritiah connole, er9
Digitizedthere
for FRASER

- 3.
in other words, In =so at*

29.

break out

souim a Dilly augepetion to

make t:iat awl such devologaont could occur, oven in Ulster, in five or ails dap;
If.t that as thoi requE.o:13nt, and it indloatou in a measure the foolin:; hore.

1;otv;ithetark..1111C a serious resolution to take tiiIrkp rathor easy i find

that thoro 1:; a good deal of trotting around ',;o do and late ho re, if one a::;oepte
,

all the in:itationo tondored; but tin aZtontoon I havo things pretty Well cleaned
up, and toraorrie
Jearie.

till devote to shopping and ti R,11 procoo. loieurely to

1 won't have so Lrac..'h to do in _'uric, on account of having fasior friends thoro,

i.on't you tell tliz bola that I miss tiara all very =oh ant

ill be mi,-;hty u;ln..d to

(et back to the Old town. Ploaoo givo than all my host rocp.rde Eu2d toll Dan and
William that I will .,,rite thom soon.

Faithfully yours,

Paris, June 4, 1914.
Mit D. E. Pomeroy,
New York City.
'

Dear Dan,

I had a nice letter from William which I 'mild like to answer,
only the amount of dictation is piling up on me pretty fast and I will
have to postpone writing him until later.

I am sure he will understand.

After talking with Mr. Reid about Rock Island I cabled you as
/er confirmation, and hope -you understood.

I think Mr. Reid feels

that there is a pretty slim chance of getting the underwriting; at any
rate, I gather from what he says that he would not be ver:- yuch inter-

ested in the underwriting personally and that Judge Moore is relying
considerably upon

a*. William A. Read being able to complete a syndicate

without very large assistance from the inside group of stockholders.
Of course, their opinions are liable to chtnge under circumstances, but
I have explained to him that our ownership of the debentures and their

future value seems to be a little speculative for us, inasmuch as their
position will be affected very materially by the outcome of the reorganization negotiations, which are not yet certain by any means.

Won't

you please hold this quite confidential in your own mind and Harry's ?
You night take op-nortunity to have a private talk with Harry and deter-

mine whether we ought not to let go of an additional amount of our
debentures.

The would Rock Island situation is ,t present an unsound

one and going to be most difficult to work out.
I have been continuing my cells on the Paris bankers, getting
really the frankest expressions of opinion from Mr. Masson, of the
Credit Lyonnais, and today from Er. Turrottitti, of the Banque de Paris.

The former is a very discreet, careful fellow, who doesn't make rash

statements,
nor

hasty statements,

and the latter, who is a Swiss

D.E.P.

I should suppose, much more outspoken and possibly a bit hasty-tempered.
They say that the political situation in France is very bad indeed,

praktically amounting to socialistic domination, and,ac the result of
the recent electionothe prospect of a lot of drastic legislation by
The position on the Bourse is

incompetent and unreliable people.

exceedingly sensitive and the Government is gre,tly overextended with
short-time obligations, which must be refunded in order to avoid
difficulty;

but the new Government has not yet gotten

hold on the

situation and are probably not in a position to negotiate for a new
loan.

ilasson's idea is that the new loan will be issued before the end

of July and will amount to about
seems to have stopped.

300,000,000.

Meantime, financing here

Both Masson and Tur-ettitti stated unequivocally

that finances here were approaching a distinct crisis, which might be a
serious ono, althoagh they say that the great banks are in very strong
Position, there is lots of money, the Bank of France is getting stronger
every day, and the crisis will be due to sentiment and unsettled confluence rather than to actual lack of resources.

Masson's view is that

the supply of fixed capital for investment the world over is pretty
well exhausted, and that a long breathing spell will be necessary, when
the stvings of the people will bring about a recovery.

It is a fact,

and quite observable by any casual traveller over here, that the shops
in Paris are not doing any business.

They sLy that the jewellery

trade is in ve y bad condition and that the dressmakers are feeling it
severely, and the universal opinion seems to be th.t there are no
extravagant /rgentine buyers here and very few Americans compared with
,,:cmer years, and the latter all seem to be economizing.

There is a

great deal of criticism of Wilson's policy in _:exico, which they say is
stupid, theoretical and ide,listic.

tendency
to blame

Of course there is a natural

America for the financial troubles of the world.

D. E. P.

I have taken care, however, to call their attention to the Tact that

America is the only country today which seems to have a free supply of

go004; their use over here, End we are so far not hesitating to let
it go.

On the whole, I should say that if there is goinr, to be any

breakdown on this side of the water it will start in Paris, and if the
French peasants once begin selling securities
of them.

there will be an avalanche

One cannot go through the vaults of the Credit Lyonnais, as I

did yesterday, and see that exhibition of wings without being appalled
at the consequences of an outpouring of securities that h, ve been gathered
together from every part of the world.

They assure me that this is not

likely to occur unless default takos place in the payment of interest,
and I notice in discussing the Frisco situation that tho Office Nationale

Committee that the one point in which they seem to be more interested than
in anything else is how it may be arranged to pay some interest to the
French holders.

The French peasants almarently don't pay nuch zt ention

to the principal, once they invest through what they regard as t responsible bank, and nothing will alarm them seriously until their interest
remittances are discontinued, and then they get frightened to death.
All of this, of course, is just by way of a little interesting

light as to what is going on over here, and I would be glad if you
would show this letter also, in confidence, to Fred Kent.
over hero are looking forward to seeing him,

that he has decided to make the trip.
very best regards.

His friends

nd I um more than glad

Please give all the boys my

I wouldn't have missed this trip for a good deal,

nor it has been educational in more ways than one. and affords a

pretty good insight into what is going on over here and what their
attitude is towards our securities.

http://fraser.stlouisfed.org/
Federal Reserve Bank
of St. Louis
2.S.-Please

Don't work too hard.

Faithfully yours,

tell Giles that I got his cable an(' an very much 0)1i-ed. A

June 7, 1 p14.

Kent

Banktrust

Newyork

Paris cuhydjygod very critical luryrfikna distrust
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cunujefeol

fotokcudsa

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in-newyork

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adlon

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condition

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Strong

Paris banking situation very critical with growing distrust of
conditions of various banks. particularly Societe Generale. ::any
runs on Societe Generale in provinces and some in Paris. Good
opinion here believe crisis take pl'ace this week, with other less
important banks iiigiplvs4ronilljEle RttiistoiCredit Lyonnais excellent
How are thins in New York. Telegraph fully Adlon until
condition.
June 11th.

IL
\

ow/

Berlin,

Juno 9, 1914.

Dear Dan,

The last few days in ''aria were exceddingly busy ones, and

r. 1,ewiu wa0 pretty well loaded up with work on account of monoranda
to be written and a couple of long cables to
code.
it.

offico to be put in

I startod a le ter in longhand, but didn'

have time to finish

?here is no particular need for mo giving you now an account of

the various doings. all of which will koop until I get home, ex cep

write :or about an evening 1 spen: with

Stillman on Saturday,

which, actor a good deal of consideration, I cunt you a cable
as =nor enclouod copy.

:r.r,Vaillerlip had asked me to see

Stillman, but I was too

boy to get in touch with him until Saturday, when I called him on the
to see if ho was in 7'r.ris and ic wat., Lood enough to wk roc

out that night for dinner.

r..o

Mon I arrived ho infor'iod me that ho had

invited a Mr. Aifoert, as I undorstand it an editor and part owlior of

the ?aria "Figaro;"

Stillman, :.114.

and spent tlo evening until 10.30.

Aubort and I ha,

Of source, you know

dinnoi. togc,h,r
r.

and how hard it is to draw him out, and-as to what little lo said, and
what he said, I

thln4. you should bold it in strict confidence, exec-ot

that I would like to 'rave you convey it in confidonco to Fred 'on
to 1:arr:.

and

Lir. Stillman and I 'fad a brief chat before dinner, in

wIlch he said very littlo about conditions over lore, but was much
intorocted in what was going on in Ilew York, 1.articularly rc,7arding the

dovoloplIont of the now banking system.

i am sure, fror what he said,

that ho hasn't 1.-mcb confidence in the plan

adninistored by

except

a very stro;10 ca)able _oderal hoard at

it would be
hington.

Ho is looking forward to a period of grow

not neoessarily a financial crisis, which he thinks is not at

'ousiltAss;
-)resion

difficulty in American

indicated, but pocribly come serious industrial troubles;

and

fool certain that he is anticipating that the operation of the new
',an'Ang law will

cian inflation in some form or °tier, anC. later on

sorious trouble.

He says that the most :rite eating subject to lim

in America today is a study of the men who have am:wooded the older
:oneration;

thinks Choy have still to go through their trial;

the panic of 1907 wac not a N11 test of their ability;

tin:l

that

he is very

certlin that the clay is coming when they arc going to havo it in a big

After dinner ho set out, rather deliberately I thought, to
draw out Aubort for my benofit in regard to political conditions over

hero, throwing in comments now an
fo

then as Aubort won

along.

Ho talked

over an hour and a half, and the substance was us follows:
T?oincaro, the President of the Republic, is a woak 7,an and

not capable of forming or conducting a strong adriniatration in qie face
of the combination against him in the House .T1(1 Senate, which is led by
the P,Elical Socialists.
inability to face -.

Furthermore, he is weakenod somewhat by his

somo private scandal in his family

used against him.

which is being

The Government is borrowing about A!50,0),),000. on

short notes, and mobs a voy large sum boyond that for commitments

alroad undertaken,

ana a loan of h0J,J00,000. or thereabouts is

needed simply to clean pr000nt accounts and leave a small balance.
lie had entrusted the formation of a cabinet to

Viviano, who had

endeavored to form a conservative cabinet, but was unsuccossfrl in
getting cood men, and finally, on Friday, hud soourod the plodgo of
twelve -ion for the various cabinot offices, all of whom, howover, ;yore

forcod upon him by the jooialistic element and none of them satis
factory Vu tic

busineas interests.

At Lon o'clock Friday niEht he

said that the President of the Bank of Prance had calla,. on Poiacare and

infoiped him that if Viviano's cabinet, as suggested, should be named,
it would precipitate a crash in the city, and as a result Viviano v'ithdrew and abandoned his e..!7forto to form a no

Until a now

Government.

c::binet is formed the fiscal policy of the Governmo:lt is uncetaini also
continue
there is uncertainty as to whether the Government will xxxxxx he tiro

of military service from two to 'hree years;

whole

and ap,2er,aaLi-

country is in somet;ing of a tumuli on account oC the inability of the
-'roam' ent and his svicers to handle the situation.

on the financial situation, because tho big ban

This has

bo ring

have been ar'viced by the

Govern rent that no large financial cammitments,or new loans or now security iBUTIOS, can be made until

() Government loan is financed, onti ihere

are undoubtedly many important corporations which have always got ;r t1eir

money in taris, w ich need money badly
account of this situation.

and atich are being held up on

-centime, there has been a tremendous shrink-

ace of values on the Boum), and of inveataent securities.
°errs°, have occurred in some rather im;ortan

issues, including Frisco,

a_,ny °Aexican securities and some Brazilian securities.

bran placed by

-611'.

Defaults, of

Theo°

aye laxa;ely

principal ':'rench joint :,toe'k banks, which are the issuing

and distributing houses.

Aniarently all cecopt the Credit Lyonnais aro

charged with seating their clients with bad investments

for the sake of

the huge commis: ions which they have charged, and the people, particu-

larly the more ignorant poacant classes, are becoming seriously alarmed
about the .soundness of

of the banks.

it investments ani. about the condition of somo

Mr. Aubert stated that the market for many of those

securities had become so narrow that the only way the people could
realize at all was by the supporting orders of some of. the banks who had
made the issues, a_ C. then at coneiaorable sacrifiees.

a fact that th

It is undoulAoOly

people are withdrawing money from ban:s all over trance

and looking it up.

Even at the llotol IA.to, whore one would exoect freedom

front' fooling of that oort, Lhey hesituto to

ivo you more than one

hundred francs in gold at ono time, and it is certainly becoming J matter
or current

ouoip among all the poople that some of tho banks are in shaky

condition.

Rumors in regard to the Sooiote Goneralo are stated to have

originated in Germany. and been octivoly whispered about in Paris end

whore by a group of Gornan speculators, who aro cooing to injure
b-nOiro7 situation in ''arcs for speculative reasons.

had really reached something of a crisis.

L1,

On Sat7,rday ma..oro

Runs were in progrose, some of

them ouite coven), on a good many of the branches of the Societe Gonorale
in the provincos,

anlf%

Aubert described as %.,Olon- runs on Lleir Paris

o floes wore also in progross.

They had boon able to handle the matter

so that no disturbance was apparent at any of the offices, but ho groetly
feared that within the next wee': the panic would extend in proportions co

that it would affect all the banks without exception and might loo:
outoyuring of oocuritios.

Ho said that in all of his oxperionee ho had

never known as serious a condition in Prance as existed at the present
time.

More vole lots of money in the banks for the moment, and the Bank

:? ranee was in a strong oosition, bu i the possibilities of a breakdown

credit here, brought about by the ignorance of the pooplo, wore beyond

conception.

ho wont so far as to say that if the crisis arose,- and ho

expoctod it within the next woo

or ton days,- he bolieved it was ,rite

within the range of possibility that all the banks would have to suspend.
I don't think that Sr. Stillman sharos this viow, but ho apparently is pretty well convinced that matters are growing very aoriouo

and, wore it not for the great wealth of the nation, there might be a
severe shakedown.

There doesn't seem to be much doubt that tho Sociote

Generale is protty well loadod up with socuritios, although the

have A V.

amount of short bills in their portfolio which can be discountod at the

11111116,
%ow

DmE,P.

Bank of Franco.
11*

I was unlaced at the frankness with which ;dr. Aubort otated the

seriausn se of conditions hero, but it vine; most gratifying- to have him say,

as everyone also does, that the Credit Lyonnais has a record trite unique
in that it has handled

21.1y good securities with very few exceptions, that

people have great confidence in it, and that its condition un6. management
is beyond criticism.

The banks in 7ariu seem to

o }living meetings every

night, such as we held in ::ow York in 1907, and the rolLtionship between

them is so intimate that it is hard to conceive that they should not be
able to pull out such a greet bunk as the Societe Generale.

3n the other

hand, I was a good do:.1 z:.:17u.sed by tewandowski telling no that the Comptoir

was in an unusually strong position to lend assistance in case tero was
trouble.

He said they had over /23,00),0 O. cash in their vaults.

You

ctn realize what a bagatelle that world orove for assistance when one
Cerro° to consider tho enormous volume of deposits of tl,e four or five
largest banks.
Eid.

The situation in France is certainly well worth watching

I hope before leaving either Berlin or t.ondon to get some word as to

how it is all going to turn ant.

I will he here for a few days, probably until Friday, during
which time I hope to have a visit with all of our banking friends )ere,

and then spend a day or two in Amsterdam, t.en back to Wndon, whore I
will neet rred.

I tot nothin7 but good reports of the Bankers Trust

Corn any over here, and am glad to feel that we have such an excellent
rope Cation.

On reaching the hotel I received your cable. stating that

letters were coming for, ard from both you and Fred about na tore in low

York, anC noticed by the palers that money is piling vo there, so presume

that things are prtty comfortable and easy wit

;jou.

Roberta Walter a brief account of the Frisco situation.

the boys 7y best

regards.

I a

writing

11!easo give all

Anotordam,

Juno

1914.

Dear Dan,

Your bully lotter of Juno 2nd reached me hero in Awsterdam
today, an0 it made me feel

littlo guilty for not havlip; written you

more fully ere this regarding. trip.

Lverythin4 you say in your

letier is or much interest, but reouires no special co .rent
to look Island.

In t,lat mattor you rooall the terms o

except ae

the memorandum

I left, to the eff et that we had kept our participation in the

47,500,000. loan as small

possible in order to help take. care of the

cituntion, which might readil3 develop during the month of Juno.
I as not keen about the loan that has been suggoated, as some of the
collateral

not vely good and, off -hani,

46,000,000/ sema to me too much to lend.
ground and can judge better than I can.

s I recall the loAi,

However, you are on the
the plan of reorganization

oropoued can be put through, it certainly inoanc a future for the road;
but tho ability to a derwrito 132,0ii.;0,0010. of proferrod stook with the

dictruet that nor: exists iv doubtful, to say the least.

Once moro

to review matter° tht havo boon somewhat covered.

Cy oablo:

Banco Lekauel411% Iola do Cuba.

Lr. Hugo Schmidt mentionod

this matter again the last tie I vow him, and intimated strongly that
the outfit was ()rooked and that anything in the nature of a cre:i_it was
dangerous.

Marianna(tho manager of the bank) informed fit) on tho boat

coming over that he vaa polling a good deal of sugar exchange to the
Guaranty Traut Company.

I wouldn't liken to be responsible for closing

up his crodit there, but it might be just as well to slip a su,7goution
to Charlio,

lte confidentially, that it wouldn't hurt to investi4ato.

D.E.P. -2
Frisco.

Briefly, this situation is developing on this side tx

better than at home.

The most serious thing is the doubt which has

*ached Germany and Prance as to the paymment of the refunding coupon
July lot.

They simply must be paid.

Ur. Speyer is wrong in think-

ing that a default will facilitate negotiations with Mr. Strauss. The
last word

from Krauthoff and my last talk with the Deutsche Bark con-

vine's': me that we can make a good conservative plan for reorganization

over here, and it will be up to Strauss and Speyer to say whether
this plan will go through or not.

I am intending to cable fully

Tuosday,after meeting Mr. Krauthoff in London, the terms of our discussion in Paris, and of mine in Berlin, which will enable Volker,
I hope, to make strong representations to Judge Sanborn in regard to
the necessity for payin. the July interest.
Paris situation.

Some slight improvement has developed there

as a result of the reports of the probable success of negotiations

for a large .razilian limn, to be taken by London, Paris and Berlin
barks.

The minimum amount mentioned was

considerably more is needed.

10O ,0 0,000.;

they say

Part of the proceeds will be applied

to paying the railroad subsidies now in arrears, and removing dai ger

of default on the securities of the roads, largely held in France.
This, however, is but one of many situations, Herr Schmidt telling
me that the situation in the

Argentine

is worse than in Brazil;

fact, mach worse today than it was at the ti,le of the Baring crisis.

The situation as to the Societe Generale became so acute last week
that the Bank of France oame out with a sta,erient that they had
examined the bank' and found it in good condition, but, as

ohero stated this morning and as is t e general
and Aerlin, the examination must have been e

Labou-

impression in Paris

-ery hasty one and

probably a whitewashing affair anyway, in order to allay public fear.

D.E.P. -3

The stook of the bank is still declining

and they arc; a long way

The other banks who have been

from being pact the danger point.

actively criticised are the Banquo de Perla and the Banque la Union
de La 2arisionno, as cell as a number of smaller banks.

The Credit

Lyonnais, which shows only 9,000,000. Francs invostments, is apparently
the Ito

to the situation.

It has a magnificont credit, and probably

a crisis would be ablo to render the greatest assistance outside

of the Bank of France.
1 still think that there is danger of a breakdown in Paris,
and if it comes it will be a bad ono.

This morning I hear that Ribot's

raw cabinet has also fallen, and of course that will make matters worse.
things get proVty bad there after I reaoh London, I may decide
to slip batik for a fow days and keep you fellows in touch by cable.
Berlin.

The Ger:lan baakeru all stote with great sati-faction

that the banking position there has tremendously improved and is now
Bound and stable.

The Imperial Bank has accwiuilatod tremendous gold

holdings, alid th

big private banks have atrengthenod their position

very largely.

There is great rivalry between tho Deutsche Bank and

the Dieconto Geuollsohaft, the latter having not: oututripped the former

by the

purchase of the acharfhausen Bank.

Dp2ratt's friond,

of the Disconto, impressed me very favorably indeed.

voaerger,

He is a young

fellow, a nobleman, and appears to have a good deal of American onerr.
Ho is anxious to aultivato oloaer relations with the Trust Company;
the officers of the Deutsche Bank,

but

df whom I mot a good many, inoludist,

Herr VonGwinnor, the head of the establiahment, impressed me as being
the best informed and the most alive of them ail.

In fact, there is no

reason for us to change our opinion that our banking connections abroad
are the best that possibly could be made, and I am glad to say that all
of oar banks over hero seom to have the highout possible rer;ard for the

D.S.P. - 4

management of the Trust Company and its conservatism and stability.
Confidentially, the Deutsche Bank will relieve Lir. Edward D. A.daiAs o.

office as Dew York representative in September, sending out Herr DergmaL:
to take over their How York office.

I had a long meeting with him before

leaving Berlin, and we discussed various matters whore our relations can
be improved and you will find, when I bring my voluminous memoranda home,
that there is at present opportunity with the Deutsche Bank to cultivate
a very close and satisfactory relationship.

Both in Germany and hero

in Amsterdam I have heard the report that Lr. Kent has been selected for
en office in the Federal reserve bank system.

Mr. Kent seems very vc,".

known among all of our banks, and I am satisfied, from what they toll
me, that he stands top knotch among the men who conduct foreign businest
in Row York.

Rook Island.

On Monday I meet come of the people interest

in Amsterdam, where, as you know, they have 1040,000 shares, and will
bo interested in gathering their point of view.
Tondo/ca.).

I have written little in regard to our London busines14

as my visit there simply skimmed the surface and will be concluded more
satisfactorily when Mr. Kent arrives.
of our relations there.

The came remark is true, howeve7c,

Sir Edward Holden I believe is forging rigtt

ahead as the leading and most progreseivo London banker, although ho has
become rather unpopular by reason of his criticism of the policy of some
of the banks and of the Bank of England, in the matter of gold reserves.
Lomolga!aggiatE.

It is a visionary project for us to consider

opening an office that will be a real 1)aliking factor abroad.

The more

inquiries I make the more convinced I beoome that we must be very cautious

in the matter, unless we aigply want to send money for advertising and
for certain faoilities for travellers, which are probably unnecessary
and would. prove expensive out of proportion to the advantaze gainoe.,

D.E.P.

I can form a better idea after going over the matter with 1.1r. Kent in
London.

You will be interested to learn that the imprecaion seems
JIL
vnoral among all the bankers over hero that the ease of money in Kew
York and the exports of gold resulting therefrom are conearhat of a

preliminary development of our new banking uystem;

that we are already

beginning to expand and inflate, and in consequence are losing gold.
I am sure that there Jo nothing in it, but it shows how sensitive they
are over hero to iA)ressiona of that character.

In oonolusion, I have been delighted at the reception accorded
me by everyone that I have met.

hey have all boon most hospitable,

anxious to give me lots of time, and all the information poacible
regarding affairs over hare.
at home.

They are equally curious regarding affairs

The chief oriticiam that I hear of our Administration is the

lack of a sane policy in Lexie() and too much idealism in its attitude
to practical affairs.

Please give my beat regards to all the boys, and the came to
your good self.

I shall write you again fully from London, and, if

time permits, may take another short flier to Paris an& have a little
fun before sailing for home.

Puithfully yours,