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rob-fur-17 20ra:
Xi5.1N :2:n route itris

Tlebruary 20th:


F F Harjes








PLalain, 1;anoue

,a, vow G-1- %es, Lloyds


s at

Ch. s. 2hi]1


.-Teurm-:xy 25th:




1 1-

:.Iinistre (Les 7.:innce

- Harjes at ijrillon Hotel



'_aron Oe 2othschi'rls
J " cr

Phiild:is an

_ii( irew ('-

Suardt.,., 71.6ruary -6th:





1! q 1.-


Vi2it C. 2.), 7,:unine de .rjrce


ki-0-&c. c4.a......

Sunday, 7ebruary 27th:
Visit Le





'jompooir -

Inv:lidcs ...lusetun

Visit Cal:tains Iogtn and Syzlington

Diner Chas.

nondy, .-Abruary






Slade, Ec:uitable Trust Co





Baroh de 7erClize

Tue2day, February 29th:

I '414'tk4-0-a4o


11 '-


Chas. Sercnnt; Dannue



Cre,it Lyo_._nais



T.40 el\


Lewandowski, CollAcir


Pa. lain at liltz







1: 00


6. cc














iiu -arc an













.;icssaci or T- rp








.7a rjos




2 it















Harjes, Hotel Cri,


:arch '3rd :


ierican E.,lbass7




72-nckara, U.S.Consul
i:euflize at Henrits
Diner Ir. Phillips, Cat. Logan and
at Cafe (le Par





En route London
Sunday, :"..arch 5th:
L unch


i:15.- Lon, Lieut QuekeEyer and

C11-1-1( ,ii,derson


o1-16.y, ::arch 6th:

J. 2. llorgan


-id 1].

Dinner Ambassador Page

C. Grenfell


March 7th:


Lunch - Hartley Withers


la 5:00
8:00 I.


- Shiverick - Yotel ?Litz

Dinner - Lord Fairfax, 27 Old Burlington Road

Wednesday, Larch 8th:

Sir Edward Holden
Lord Fairfax
H. H. llambling

H. C. Norman
Hartley 71ithers

1:00 P.M.



Tea -




Brown, Shipley & Co.,

Lord Churston
J P Morgan, 12 Grosvenor Gdns

Thursday, March 9th:


Sir EdwardoHolden,
Pease- Lloyds Bank

James Simpson

2 :15 _

Siverick and Miss Devereux

4:30 _.;.



Dinner - Lord Reading



:arch 10th:


Christopher Nugent
Lord Fairfax and F C Violcott
J. P. Morgan

1:30 P.M.


F. C. Wolcott - Berkeley Hotel



Ambassador Page


Sir EdwardAHolden (London Clearing Bankers)
Savoy Hotel



Saturday, March llth:

Sir Felix Schuster


Capt. Symington, Lieut. Quekemyer and Shiveri,

0Sunday, March 12th:


Mr. and L,rs. Tritton

:larch 13th:


Lunch -



Sir Felix Schuster

Dig ner


Sir Edwrd:Holden
et al at Martins Bank


:00 P.J.

8:15 P.

Sir Charles Addis, Hong Kong
H. H. Hambling

Lnbassador Page

Lloyds Bank

Mr. Pollen, Brooks Club, St James Place
Bank of Englind ;,ith J P L,Ior

E C Grenfell

Captain Hall, AdAiralty Office
Sir Edward` Holden (Financial Editors) Savoy Hotel


Henry Bell, Lloyds Bank

Alfred Shepherd, Hotel Savoy
Vassar-Smith, Boodles Club, 28 St Jamess Street

Sdir Christo-oher Nugent

Sir Felix Schuster
Vivian-S ,ith,

d Dinner, ALliam Mackenzie, Hotel Ratz

Captain Hall, .0,1iralty 0 lice
414mr, Christo-oher :lucent




Captain Sy:aington e3 ailiverick
Lontagu Horman Thorpe Lodge Carsten Hill

Shanghai Bkg Corp.





S iverick

Carl ton Motel

.M. Di- or

Cf Azia Syinrto

:110 Si_iverick

Hondt-y, _:arch 20th:
1:eLf, London County ^, _estAnster Wank
:fr. Tritton, Barcl:_y Co!zoany

- Lunch







Princes givelm*



J. Grenfell

y, ::arch 21st:


-T. Hear



Bank of 7InFand



Straight and 1erkins


Sir Yelix Schuster, 48 Cadogan

5 j..


Bell, Lloyds

day, Harch 22nd:

Sir aobert Balfour


Alikm Christo.:her Uugent

0 L..




Sir Hery B Saith


Cartrin STnington



_r. Leaf, London County P.

7estfainster,41 Lothbury

ay, :larch 23rd:

Sir :elix Schuster


00 I.. Lunch



Sir J. I7ortescue nannery

Sir B. Seyuour King


, 1arch 24th:

0 1.11. Visit
0 1.21. Visit
0 2.m. Dinner

Bank of LInglamd Court
Col. Fitzgerald, War Office - Lord Kitchener
Sir Charles Lcidis, Hong Kong
Shanghai Bkg Corp.
Sir Frederick Huth Jackson, 64 Rutland Gate

aturday, March 25th:


Lord 2,eading, 32 Curzon Street
Sir George Faish
Captain Symington et al (Russian Military at-1,achesJ





Dinner Mr. and


Sunday, I:arch 26th:

Breakfast, Ambassador



8:00 T.:I.

Di,mer - Shiverick at Ciros


Montagu Norman

MondEy, March 27th:
Vicits Baring Brothers
Sir Felix Schuster




Lord aevolstoke


.fr. Henry Bell

Mr. Skinner, U..Consul



Dinner Sir :lobert Balfour,

eform Club

Tuesday, ?larch 28th:

kt0.4 6i7r d ALM/ hat.







Lord Jsoppme Bryce,

3 Buckingham Gate S





Dinner Lontar7u ITor.lan sac,. 2,.C.Grenfell, Thorpe Lodge

Campden Hill
dednesday, I]arch 29th:


Martius Ban L



:Ir. Laughlin anO Captain Sy_ington

6:00 /._


Mr. Ch_adler


C:,2tain Symington, ShiVerick (°: Quekernyer

11:20 _.._

8:00 L.



at the Savoy
Thursday, March 30th:


Friliv, Feb. 11th, 1916

Arrived at Falmouth late in the afternoon of February
100 10th and left today for London arriving at two o'clock L.L. :_

Saturday, Feb.12th, 1916
Called on Lr. Blackett who gave me a very warm welcome.
Had ouite a discu sion about conditions over here -nd_ we

arranged to have some further visits upon my retu n from

Lunched with

r. Harris and Captain Symington.

After lunch picked u.,c, 11r. Lowery of the Embassy and we all

motored to Aldershot where we saw the German prisoner camp
now practically empty, the prisoners having been moved to
some less ex_osed position.

Also drove through an

encampment which p.reared to be miles in extent.

The roads

were bt:.dly cut up and !Auddy due to constant trans ort.

Passed an aviation plant where aereoplanes are manufactured
and saw numerous arreoplanes being tested.


with Shiverick and a Lieutenant,of the American

Army from the Embassy and Mr. Harris.

Afterward Mr. Harris and

I wit to the theatre and later joined Captain Symington,
and the Lieutenant at Ciros for supper.
in the afternoon about my nose.

Saw Doctor Hunter Tod

Elaboration of conversation with 3asil F. Blackett:

February 12th, 1916

Blackett stated that the Bank of Eng and had paid the Government
for all guaranteed bills which the Bank had yurchased under the terms of the
Government's offer and that at that date there was about h30,000,000 sterling

' :he account had, at one tine, been somewhere from 11100,000,000

to 1,120,000,000 sterling and Vase remaining unliquidated were largely biTls
that had arisen out of enemy transactions

the accertances of the German bank

Later conversation with the Bank of EngLnd dis-

agencies in London, etc

closed payments wore being made only very gradually --I judged somewhere from

B50,000 to 1150,000 every day or two.
account for the Government.

The Bank of England manages the

Blackett also informed me that the Government

was .eing ahead on its dollar exchange account, the exchanges really having
been slightly favorable and enabled some accumulation of exchLnge.
He strongly favored shipping gold to Eolland, or oar -marking gold

for Dutch account but confiscating all securities coming out of Holland which
bore evidence of German ownership or origin.

Said that Lord Cunliffe was

o7 posed to shipping or ear-narking gold for Dutch account.

strongly that the matter should be corrected.

Blackett felt

He thought we ought to

establish close relations with the Bank of England, and that an arrangement
for ear-marking gold between the two banks should be concluded as soon as

There were, however, many serious problems ahead in the matter

of the London money market.

For one thing, he was sure that the relations

between the Bank of England and the London Joint Stock Banks would require
ti oraugh readjustment .

The joint stock banks wore getting too big for the

Bank of England and their effort ww rather to pull away from the Bank's

He thought possibly the whole joint stock bank situation would

require overhauling,

possibly by legislation.

Said that Holden was dead in

London-exceedingly unpopular and an obstructionist.

He also felt that

11116Federal Reserve Banks could 'erform great service by holding sovereigns

instead of having them melted down.
We discussed the currency/situation at great length.

Me seemed

sound in

Said that

is ideas, that they should be retired after the war.

the currency notes had performed great service in driving gold out of private
circulation and into the reserves of the joint stock banks.

He estimated

that-ir- 30,000,000 sterling of the notes in circulation had taken the !lc.oe

of a like amount of gold now held by the joint stock banks.

Figures later

furnished me by Mr. Tritton of Barclay e: Company indicate that 1,28,000,000

would be a correct figure.
Blackett stated that the adoption of the Compulsory Service Let
had given great courage to the ration, particularly the Government.

It had

solidified the Cabinet and in every way strengthened the Government's hand.

He deprecated the agitation about the strikes particularly the :trike of the
Welsh coal miners.

Said that it was duo to the feeling of the coal miners

that their enuloyers were making great profits out of the war and in which
they did not share; although, as a matter of fact, labor was row gett-ng a
very good share of the war profits.

That the difficulty with labor was its

vote to curtail the development of skilled labor now so largely required.

The recent vote of the labor unions was, in fact, a vote of confidence in the
Government and highly encouraging to everybody.

Speaking of the progress

of the war, Blackett said that he was convinced that the war would be decided
on the 7;ostern front, but that there was a long and difficult task ahead of the

Allies, one that entailed great sacrifice of men and money.

Sunday, February 13th



Visited with Chandler
Anderson in the hotel,
then we
took a short walk through
Hyde Park and later

This afternoon not feeling
quite up to the mark,
the invitation of LT. Harris
to go motoring and
put in the

time working out plans
for tomorrow.

Elaboration of conversation with Sir Edward Holden, February 14th:

Holden spent most of the evening after dinner in a rather violent and
extreme criticism of the Government, the Bank of England and bankers generally.
Said that the Guaranty Company had been protected in various transactions

with Germany which made them very suspicious

of their business generally.


park Bank also had been found participating in transactions between the Argentine
Republic and Sweden, the effect of which was to liquidate German bills held by
German banks in the Argentine, ear-marking gold in New York and releasing it
in Sweden to Germany.

Speaking of the bill market, he said the volume of prime bills had been
tremendously reduced on account of the extent to which the business of the
Nation was now conducted on a cash basis, the Government paying cash for everything.

He was disposed to think that the Government, after the war, should

impose restrictions by legislation upon the London agencies of foreign banks.

This, by the way, is absolutely contrary to the views held by other banksers
and by the Bank of England.

JO said to me that the bank agencies in London

were one of the chief instrumentalities in making London the bill market and
the money center of the world.

Holden strongly favored correcting the Dutch

exchanges between New York, London and Amsterdam and thought gold should be
released for that purpose.

He also thought that we woulduie an irrnense amount

of ,old when the war was over

I asked him what he estimated to be the normal

volume of bills carried in London prior to the war which had been drawn simly
for excly'mge purposes.

He said tiIlt he thought the total would be about

L200,000,000 sterling a considerable Dart of them being drawn by ..T.Ameletki bankik0
on London bank5a.64.aLiaa.

I discussed with him briefly t.e possibility of

the Federal Reserve Bank buying bills in England.

He said it was something

that must be considered most carefully in London as it might D!ove to be a

disturbing influence

and that whatever we did should be conducted in conjunction

with the Bank of Englandtas to which I made no comment.

Ho den's criticisms of she Government, and particularly of Lord

Cunliffe struck me as being exceedingly bad taste and in many respects
undignified and unjustified.



Sunday o P.M. Feb. 13.

Saw Doctor Hunter Tod, aboUt my nose.
Monday A.M. Feb. ,14.

Called at the Office of Morgan Grenfell
with Mr. Morgan and Mr. Grenfell.

C°, and talked

Received a cable from the

office indicating that everything was quiet.

Also received

a letter from

MacKenzie statintr that he would be in

London on March 7th.

Called on mr. Cambie at the Agency

of the Canadian bank of Commerce, and also saw his Assistant


then called upon Sir Edward Holden and spent about

half an hour with him.

Called twice to see Mr. Bell, of the

Lloyd's hank, but missed him; also called for Colonel Hunsicker
who was out.

Called at the American Embassy where I met

Captain Symington but missed Ambassador Page who was engaged.
Lunched with Symington and Capt?,tin quekemeyer at the Carlton

After lunch went to tie French Consul General and

learned that passports would first, have to be vised by tne

United States Consul General.


From there to the U.S. Consul

my passport was visid and 1 had a very pleasant visit


with Mr. Skinner, to whom I presented Ir. Carr's letter of
introduction, arranging to see him again and have dinner
upon my return to London.

Mr. Skinner gave me a card to

Captain Savy, which facilitated the visee of passports.
Dined that evening with 'Dlr. Shiverick, Captain queke-

Captain Symington, kiss Curtiss, and her party at
the Savoy Hotel.

Tuesday. Feb.15.

In the morning, had photographs taken for further pass-

port use and from there to the French Consul General who
verified my passports.

From there to the American Embassy,

where I spent about one and one half hours with Ambassador

I also arranged with captain Symington to make up a

complete set of enlistment posters at a cost of about 1,100.

From the Embassy I went to Lord Heading's Chambers, in Lhe

Royal Law Courts, Strand, where I had lunch and spent about
half an hour with him in his office and afterwards listened
for a short time to the trial of a case over which he was



Returned to the Hotel and at four o'clock had

tea with Miss Devereux, where we discussed arrangements about
her French Hospital Services.

After tea, saw Doctor Hunter

Tod and had my nose treated, Sir Edward Holden came for dinner
at seven o'clock and spent the evening.
Wednesday. Feb.16.

Took the 8.50 train from Charing Cross expecting to
connect with the 11 o'clock boat for Dieppe,

A violent storm

prevented tree boat leaving so we spent that day and night in

Folkstone, at the Hotel Pavilion, leaving at 7 o'clock Thursday morning for Paris.
Thursday Feb.17.

The steamer "Sussex", upon which we travelled across
the Channel left at 7 o'clock and the crossing was an extremely rough one - the worst I ever experienced,

Reached Dieppe

12.30 and arrived in Paris at 7 o'clock in the evening

going direct to the Hotel Ritz,

Dined with Mr. Harris at

the hotel, took a short walk and then went to bed.


Friday Feb.18.

Called at the office of Morgan, Harjes & Co, for my
mail but did not see Mr. Harjes.

Purchased some handkerchiefs

at the Maison de Blanc, a travelling bag, and one dozen cravats
at Doucet.

Calted at the Embassy to see Captain Sayles who

crossed the Channel with us and had a visit for about one hour
with Ambassador Sharp.

Lunched with Captain Sayles at the

Café de Paris, and then called upon B6r. Thack74A4,Consul General

.d presented hr. Carrib letter of introduction, returned


the hotel and had a little visit with Andrew Graves of Lloyd's

Charlie Phillips came over for dinner, and after dinner

we went to the Olympia.
6aturday Feb. 19.
Called at Equitable Trust Company and had a long- talk with

Mr. Slade their Manager.

Left with him about 1100 francs

in gold for which he gave me the Bank of France notes and
promised to send me a Certificate of Merit.

Called at the

office of Morgan Harjes & Co, where tney told me that Mr.



Harjes would be in Paris on Monday.

Then went over to the

Maison de Blanc and made some purchases.

Met Mr. Phillips

and had lurch with him at the Cafe de Paris.

From there went

to the American Hospital at Eeuilly.

Met Dr. Du Bousset wno

showed us all over the establishment.

I gave him a ,g 00


From there called on M. SerEent, Governor of

the Bank of France and arLanged to see him immediately upon
my return from Cannes.

Saturday Feb.19th.

Spent the balance of tne evening packing for the
trip to Cannes.

Left for Cannes on the 8.15 train taking

dinner at the Gare de Lyon with Ir. Harris.

ie reached

Cannes next day at about 1.30 P.M., Mr. Stillman and Mr.
Christianson being at the station to meet us.
Monday and Tuesday at Cannes.

Spent Sunday,

Mr. Harris returned to Paris

on the 2.46 P.L. train on Tuesday.
Sunday Feb.20tn.

Sunday afternoon Mr. Stillan took us for a beautiful
ride by automobile to one of the old Lagurian fortified
castles and town situated on the peak of a mountain some
miles north east of Cannes.
Monday Yeb.21st.

Made an all day trip to Monte Carlo calling upon
Tuck at his apartment.
Tuesday ieb.22nd.

After seeing Mr. Harris off on the 2.46 train, took
a long automobile trip north west of Cannes through the town

of Frei juse which, nearly two thousand years a Ko, was an

im.i)ortant Roman colony of 500,000 to 600,000 inhabitants.

Visited some of the old Roman remains.
Wednesday Feb. 23rd.

Left on the 2.46 train with Mr. Stillman and Mr.
Christianson for Paris, arriving Tqursday morning.

Thursday Feb. 24th.
Arrived from Cannes at 8 A.1

After breakfast Mr.

Edouard Vidoudez of the Banque Suisse et Francaise, 20, Rue
After he left I called at Morgan, Harjes

La Fayette, called.

& Company for mail, Mr. Harjes being out.

From there called

upon Lewandu:ski and had a very interesting talk for about
three quarters of an hour.

Stopped at the Grande liaison de

Blanc, and then lunched with Mr. Phillips at the Ritz.
lunch called at the Banque de France.
was home ill with a bad cold.


Found that M. 6ergent

An interpreter introduced me

to M. Pallain wno received me with great cordiality, and immediately upon my arrival presented me
with my name engraved upon it.

it a silver medal

The medal was to commemorate

the one hundredth anniversary of the establishment of the
Banque de France.

Had a very interesting talk with him, and

made an appointment to meet him again on Saturday at two
o'clock, with a memo of our program.
the Banque ae France.

He is to show me through

From there called on Messrs. Morgan,


Harjes & Co, and had a nice chat with Mr. Harjes.
leaving Mr. Ernest Mallet came in.

before lunch tomorrow.

As I was

Arranged to see Mr. Harjes

From there called at Lloyd's Bank

and saw kr. Graves and also had a long talk with th
Manager, Mr. Toulmin.

Returned to the hotel and sp

quarters of an hour with Ir. Stillman.
and Mr. Stillman at the Ritz.

Dined with


Friday, 2ebruary 25th:

10:30 A.M. called on Monsieur Ribot, who was particularly interested in learning of conditions in America, and anxious
to discuss, in general terms, the financial situation there,
and the possibility of French credits.

Left him at 11.10,

called on Mr. Harjes and had quite a long visit with him,
lunched with him at the Hotel Crillon.

From there returned

to the hotel and had a short visit with Mr. Stillman.


3 o'clock went to the American Embassy with Captain Symington
and spent about half an hour with 'Mr. Sharp who gave me some

interesting information in regard to the American international situation.

He asked me to reserve one night for dinner

at his house next week.

Went direct from the _:.lbassy to Mr.

Alfred Heidelbach's house, l9, Avenue d'Iena and arranged to
lunch at his house next Tuesday.

from there drove to Mr.

Harjes' office and went with him to Edouard Rothschild's
house and had tea with Mr. and Mrs. Rothschild.

Mr. Roths-

child was much interested with our new banking system, and
I arranged to lunch with he and Mr. Harjes some day next

Returned to the hotel to say good bye to Mr. Stillman

and then took dinner with Mr. Phillips and Mr. Graves and
went to the show.

Monday, February 2gth:

Called this morning at Morgan, Harjes k Company

VD get my mail and found that Mr. Harjes had not yet returned.
Stopped to see hr. Slade of the Equitable Trust Company and
had a long chat with him about conditions under which the Trust
Company was conducting its business here.

From there went to

La Rues with Lir. Phillips and Mr. Graves to lunch with the
members of the Monday Lunch (flub, consisting of Captain Mason,

Mr. London, Mr. Thackl;r- Mr. Monahan who represents the
American Radiator Company here, Captain Sayles of the Embassy
and three or four other americans who are in business in Paris.
It was a very interesting meeting and these men all explained
the difficulties with which they were now confronted in
developing the credit end of commerce between the United States
and France.

Aft 'r luncheon did some shopping with Mr. Phillips

and then called on Baron de Neuflize.

Later on went through

two or three of the stores and markets to get a little idea as
to the activity of business and the prices of meat, butter, eggs,


(Coal PO. per ton;

Lamb and veal from 5F:25c to 7F:$Oc;

p-r 1/11 pound 1F:35c;


800 per lb;

Eggs 600 per

chicken 1OF for a good big roasting chicken down to so much

per Int piece.

The:. sell a part of a chickenat a time.

cheese like roquefort 1F: 35c per 1/2 pound.

apples t2

2F: each.

Fancy eating

These prices were obtained in the best

general market in Paris, viz., Poulin's).


Tuesday Feb. 29th.


Called on Mr. Harjes and received only a cable from
New York.

Mr. Harjes had again been called out of the city

in connection with his ambulance.

From there to the Eanque

de France to see M. Sergert but he was out.

Then called on

M. Rosselli at the Credit Lyonnais, had a very pleasant chat
with him and arranged to take lunch together tomorrow, (Nednesday).

Lunched at M. Heidelbach's house with M. and Madame

Heidelbach, a relative of 'Madame Heidelbach and the Paris

partner of Coudert Brothers, whose name I understood to be


the latter impressed me as being exceedingly

well posted and an interesting talker.

Had quite a chat with

M. Heidelbach after lunch, generally in regard to conditions
in France, and the methods pursued by the different banks
and bankers.

From there went to the Comptoir and spent one


K 1, -cup -d'

and one half hours with,the general Manager of the bank, I.
Paul Boyer.

M. Lewandowski called in the head of his Port-

folio Department, together with the attorney who conducted


the American Correspondence, and the clerk in charge of the


settlements at the Clearing House.

They explained fully and

very clearly the operation of the discount department, the
collection of checks and the operation of the Clearing House
of which the following are the main points:
Credit and Discount Department.

Very limited dis-

cretion is given to the managers of branches within the city
of Paris.

They are given certain fixed lines of discount

which they may not exceed without authority from the head

The supervision of their authority is very close.

Somewhat greater discretion is given to managers of the
branches in the Provinces.


the supervision is very

close and maximum lines of credits are fixed.

Most of the

bills which they now discount are domestic - largely those
drawn by manufacturers, jobbers and commission houses.


some extent also bills of jobbers drawn on retailers and even
retailers on their private customers.

Prior to the outbreak

of the war it was not uncommon for a bank to handle 750 bills

They have in their Portfolio Department alone

in a month.


These bills come to the Head Office from all the

450 clerks.

branches, with certain exceptions, and are collected by the
Head Office.

The exceptions, of course, being agencies in the


Except in time of a great crisis, such as the

war period,

the Comptoir never melts its Portfolio, but instead

of collecting many of the bills itself through its own agencies or by messengers throughout the city it finds it
much cheaper to turn them over to the Banque de France, three,
four or five days prior to maturity and obtain an immediate
credit there.

The Banque de France makes a minimum discount

charge of 5 days at the bank rate even though the bill has
only 5 days to run.

This compensates the Banque for col-

lecting the bills.

Just now there is a dearth of bills and

such institutions as the Comptoir and Credit Lyonnais use a
good deal of their funds in short government obligations
which run for three, six and twelve months - three months
being at 4% and six months 5% discount.

They principally

purchase the six months bills which can be disposed of at

better than 5% after they have run three months as the
Banque de France is always ready to discount them.
Credit Department.

This department has been build-

ing up its information for thirty years and is managed by
a large staff of experts

if.ho keep very precise information

about their customers, even to the extent of visiting their
establishments and inquiring into the character of their
business operations.

Any bill which comes back unpaid, or

where a renewal bill is drawn is most apt to come to their
attention and is noted as an indication of weakness against
the dealer and acceptor.

There is no bill market in Paris

such as exists in London, as the brokers do not carry bills

Transactions between the banks in bills are

rather informal and arise simply when one of tne smaller
banks wish to realize on some of its bills, and they can
generally do so at the Comptoir or Credit Lyonnais at a
slightly better rate than at the Banque de France.


broker runs around inquiring for opportunities to trade and

receives a small commission. Sometimes they deal between
each other direct.

These brokers deal in a variety of

transactions such as securities, foreign exchange, bills,

etc., and,I gathered, were not particularly responsible.
The business of the private banks is somewhat different in
that they make advances on pension.
advance for considerable periods -

That is to say,


three or six months -

against bills as collateral, the obligation of borrower

being in each instance 30 days up to three months with a
general understanding that there will be little difficulty
about renewals.

The large private bankers, known as haute

banque, are also considerable buyers of bills.
Clearing. House.

This is of comparatively recent

development and has only about twelve members, same being the
most important and responsible banks.

Checks are so little

used, compared to bank notes, that when the war broke out
the operations of the Clearing House were entirely abandoned
and will not be resumed for another month.

They have two

clearings daily and the average turnover through the Clear-

by hand at considerable expense and inconvenience particularly as their clerical f-Jrce has been almost depleted by the

war, and have been largely made up by women clerks.
to that in

The practice here is quite similar

London, with certain variations.

I think it may

be said that checks are handled by four methods:


Given immediate credit where the customer is undoubted but charging the customer interest at bank
rate,plus 1% to 2-1/2%, for the period allowed for
collecting, which would vary from 1 to 3 days.


Giving deferred credit, in which case the account is
credited with the amount of the check and the customer charged with interest at bank rate plus some
addition in case he draws sufficient to pinge upon
the amount.


Credit upon "advice of payment" which means that the
customer is not permitted to draw, and if he does his
check will not be paid until "advice of payment" is



Giving immediate credit by red check on the Banque
de France for a check which the customer does not
expect will be paid until the following day, in
which case tne check deposited is a white check.
This is simply another method of extending credit
and the customer is charged bank rate plus a commission i charged for collecting a check,aRrei

first method described is rather a rare occurrence.
The operation of re-discounting bills with the Banque


de France is apparently closely associated with the general
system of settlements between banks, only two or three of
the larger banks apparently not availing of the facilities
of the Banque de France for converting their portfolios when

It is quite apparent that French banks rely upon

tne balance at the Banque de France as reserve to a much
greater extent than was even prevalent in the United States,
under our old banking law, between banks and reserve city


After leaving M. Lewandowski, I called for M. Harjea

at 5.30 but found he had left.

His secretary called M.

Pallain who had endeavoured to reach me by telephone earlier
in the day and I was advised by him that my memorandum had

been favorably considered, practically in its entirety, and
he hoped,if it was convenient to me,to see me tomorrow to
discuss matters.

Upon reaching the hotel ne telephoned that

he would call upon me between 8.30 and 9 o'clock this evening.
harjes also telephoned advising he would call at the
hotel about 7.30 tnis evening.

Saturday, Feb. 26th.


0 being a reserve institution holding reserves of other banks
and unless under unusual instances such as wars, financial
crises, etc, would not contemplate endorsing bills.


general purpose of our plan was elaborated, and it was explained that the entire conversation was tentative, subject
to the approval of directors and officers cf our bank, and
by the Reserve Board upon my return to New York - particularly,

that unless unusual circumstances made it necessary, it was
highly improbable that any arrancemerts could be completed
and put into operation until after conclusion of the war.
To this they all assented but later on in our conversation

M. Pallain emphasized his view that the sooner an arrangement
of this kind could be brought about the more advantageous
it would be for the interests of both countries.

He explained

that whatever information was furnished us in regard to banks
and banking conditions, or bills, would be without responsibility to the Banque de France nor would they hold us in any
way financiallyo)r in any other way) responsible for such


information as we furnished them.

improbable that similar arrangements would be made elsewhere
than in London and Paris, at the outset, for some time although it was impossible at the present time to state positively how our plans would develop..

That if satisfactory

arrangements could be made, it would be for the purpose of
stabilizing exchange, gold shipments, etc.

M. Pallain in-

quired whether this meant that the money employed here would
remain indefinitely.

I explained to him that deposits would

be made and purchases of bills effected in the markets where
exchange rates rendered it most desirable and profitable, and
that there would accordingly be arbitrage in the various
markets where our business was conducted.

I also stated to

hir. very explicitly that while profit was a consideration, it

was quite subordinate to safety and that our policy would
confine us very definitely to the purchase only of bills of
the very highest grade and which were undoubted.

He desired

to know the character of information we would find it neces

sary to accummulate.


I explained, would include not

only general conditions, but the character, management and
responsibility of financial institutions and firms with
which we conducted our business, as well as the character
and responsibility of the drawers, acceptors and endorsers
of bills which we might buy.

That the volume of our business

not develope more rapidly than was made possible by

reason of the information which we were able to accummulate
and which must be authentic and complete.

I explained also

that the operations of the London Bill market were not only
well known to us, but were of a character that made it particularly easy for us to conduct the business we had in contemplation in London (referring to the operations of acceptances, discounts and the bill brokers).

That the situation

in Faris was somewhat different and I felt our own interests
would require a careful study of this matter before we could
undertake any extensive business.

After my interview with these gentlemen they showed


me somewhat through the Banque de France, particularly that

portion of the building wnere the notes of the Banque de
France are printed, and where I was asked to sign a register
provided for visitors.

It was four o'clock when I left the

bank and too late to make further calls.

Commander Symington

and Captain Bayles dined with me in the evening.
Sunday Feb. 27th.
At 10.30 A.M. M. Lewandou-ski, Comptoir, called, and

I went with him by tube to Montmartre, visiting the new and
old catnedrals on top of the hill.

From tnere we returned

by tube, had lunch at the Ambassador
Champs Elysees.

restaurart on the

After lunch walked to the Invalides museum,

saw the war trophies and Napoleon's tomb.

The museum was

very crowded.

At 3.30 P.M. met Captain Logan and Captain Symington,
and then had a call from Mr. Cromwell.

Dined with M. Phillips

and with him went to see a little show in the Capucines theatre


Tuesday, February 29th:


(gist of conversation with Y. Pallain
in the evening during his call at the R
Ritz Hotel, Paris)

7onsieur Pallain called at 8:30 with an interpretwter to
report the outcome of the meeting of the regents of the Banque
de France in respect to possible arrangements to be concluded
between the Federal Reserve Bank of New York and the Banque
He stated that the matter

de France at the conclusion of the war.
had been submitted to the regents, all

of whom were present, and

that in all respects the memorandum was satisfactory.

He de-

dived, however, to point out one matter which would have to be
handled with considerable delicac:1, and that was the subject of
credit information.

It had been the invariable practice of the

Banque de Frence never to Live official information in regard to
credits, believing that the bank was required to act with
entire impartiality and to strictly avoid anything which might
appear to injure the credit of any party.

He expected that the

lank would be able to meet this situation by pointing out to us
various channels of inquiry through which reliable information
could be obtained, and in case the information obtained through.
such sources was not sufficiently complete or satisfactory the

Banque de France would assist us in obtaining the information
and give us informally and unofficially certain of their views
in regard to credits.

He thought,

in such cases, if we had a

representative here the question could be readily dealt with
by having our representative visit the Banque de France.

I also

understood from him that the sources of information suggested
by the Banque de France would be reliable and for which the Bangs

de France would vouch.

Of course, the Banque de France allows no

interest whatever upon deposits but would be most pleased to have
our account carried there and would place their facilities at
our eLtire disposal.

The Banque also thought that we might be

of some service in New York,particularly in the matter of exchange
We discussed the subject at ,rreat length, Monsieur Pallain

remaining for about two hours, and I think he thoroughly understood that the arrangement discussed could probably not be put
into operation until after the conclusion of the war.

That at

the outset it probably would not necessitate our appointing a
personal representative here and that the growth of the business
which we might transact here would depend upon the experience
we gained as it gradually developed---that it would depend
2-articularly upon the character ane reliability of the credit

situation information we were able to obtain through our

He also understood that a part of the

arrangement would consist of our establishing accounts with
banks and bankers elsewhere in Paris, in the course of time,
where we would receive interest on balances.

Monsieur Pallain

was most emphatic in his asmurances that the arrangement was a
most welcome one and the sooner it was brought about the better
satisfied he would be and that this was the unanimous view of
the regents of the Banque.

I was not quite sure that he under-

reasons for deferring action until after the conclu-

sion of the war nor did it seem desirable to raise the question
of neutrality.


In a subsequent conversation with Baron de


P la, Larch 1) at which Yr. Harjes was

present and at BarcE/Rothschilde residence, the theory of the
law was quite fully explained and I also took pains to explain

that while the present moment might seem opportune for accumulating francs on account of the rate of exchange, there were

foit61 ecifteur
other arxwagmate

which would make it impoerible for us to

conclude arrangements now.

We thought, however, that the

experiences of the past eighteen months demonstrated the
importance of perfecting plans in advance in the event of new
emergencies arising, and that we preferred to conclude our
general understanding of the character of the arrangement at
the present time so that with the approach of the conclusion of

the war we might so conduct our operations to furnish u mitk a
steadying effect upon the exchanges.

This of course had some

bearing on the question of gold shipments, all of which was
apparently clear to Baron/Rothschild and he seemed to endorse
the suggestion very positively and warmly.

At the conclusion of my interview with M. Pallain,
it was understood that considerable time must be allwed for

cussion of these matters after my return, as it involved the
interests of twelve separate banks and of course was subject to
the consideration of the Federal Reserve Board in Washington.
agreed that the matter would be kept alive by correspondence
between us from time to

and whenever occasion arose for

taking the matter up actively, I would promptly advise him and
possibly visit Paris again.


Tuesday, Larch 1

This morning received a call from Yr. RoEsier of the
Banque Suisse et Francais who had just returned from London qnd
with whom I had a very interesting chat.

He left shortly after

ter o'clock and at 10:30 i called upon Mr. Harjes.

At 12:15 I

stopped in to see 3"r. Thackara to learn what changes had taken

place in regard to passport requirements.

He ascertained and

will be prepared to do the needful Friday morning.

From there

I met by appointment Yr. Rosselli of the Credit de Lyarrinds at

one o'clock and had lunch with him at Henri's.

Did not leave

our room in the restaurant until nearly five o'clock.


minutes before six o'clock met Yr. Harjes at his office and we

called upon

Baron de Rothschild.

Dined, at eight o'clock,

Thursday, _arch 2nd:
This morning called at Lloyds Bank to say au revoir to Mr.



Toul-fnim. Mr. Graves told me that there were between

116 and 118 different Chambers of Cori.ierce which issue small denomination currency.

He is getting up a cou lete set of clean samples,

of each denomination, issued by each Chamber.

It will take about

two months to make up this collection, and when it is complete he
will send it to me in ,merica.
with me.

Prom there went over to _:organ,

Company and made an appointment with

. r.

Harjes to lunch

Called upon Lonsieur Rossier of the Banoue Suisse et

Prancaise, of which he is manager,


and had a very interesting talk

in regard to the bill business--going through his bill re;--ister and
the credit files.

4 there

went to

Picked up Harjes for lunch at Henri s, and from
American Clearing House where I was introduced to

the sister of the Queen of Belgium who was there to attend a meeting
of the


Also met the Chief Justice,

Interior and the Servian Minister to France.

he Minister of the

Left the Clearing

House in time to keep my appointment with Monsieur Pallain, Monsieur


Rubin., and the Secretaire Generale, discussing the subject of bills,

methods, finance, etc., concerning which I will later dictate a
separate memorandum.

I then called upon Monsieur Sergent, and had a

very pleasant talk with him.

x...Monsieur Pallain presenter

From there returned to the hotel.

le with another medal which had been issued

some time ago by the Banoue de France and also with a copy of his
iork upon the correspondence between de Talleyrand


nd King Louis =VIII,

,ell as a first press )roof of the new ten franc notes to be issued

by the Banque de France.

Sent the rest of the afternoon ,ith Phillips

and in the evening took dinner with Harjes at the Hotel Crillon meeting
Monsieurs Pallain,
Federal Reserve Bank of St. Louis

Goveror of the Banoue de Prance; Bethenod, President

IOf the Credit Lyonnais; Edouard Noetzlin, President of the Banque de
laris & Des Pays-Bas, the Banque Francaise et Italienne and also the

nemins du Noir;

Paul Boyer,General Manager of the Credit Lyonnais;

Baron de ileuflize of de ileuflize ", Company;

James Rosselli of the

Credit Lyonnais, and Ernest Mallet of Mallet Freres.
Friday, :larch 3rd:

Went to the E.Abassy at ten o'clock and met Mr. Fraser who was

arranging a diplomatic passport and mail pouch for me to take to London
Sharp, but for jut a moment.

Saw Ai


From there went to Morgan,

Company and saw Mr. Harjes who was arranging about having my
While there I dictated the substance of a

passports visaed for me.

conversation we had in regard to a method of negotiating commercial

credits, which he promised to develop,

as his MA suggestion, and which

as I pointed out to him, it would not be desirable for me to appear t
From there I called upon

-tom wrgttuT.

o-fice, who I found had written a very strong letter to Major Langford
in Faris who was in charge of the new Passport Bureau.
telegraph Thackara of my safe arrival in England.

Promised to

From Thackara's

office we _t to meet Baron de ileuflize and took lunch with he and his

Returned to the Embassy and received my diplo-

partner at Henri's.

matic passport from - . Fraser.
his son.

Returned to the hotel

Had a visit with Ambassador Sharp and
nd found that Monsieur Rosselli of

the Credit Lyonnais had been quite anxious to see me and I got him on
the telephone.

He came right over and explained that he and Monsieur

Bethenod, President of the Credit Lyonnais,

had some discussion as to

.hat I st ted in red;.: rd to commercial cr-dits.

Apparently Mr. Harjes

had said something about buying bills in Paris which he had confused

with UmplgVig dollar/


He left and Er. Phillips came in.

We took a

Iliramp through the Latin ouarter visiting the Ecole de Beaux Art where I

purchased samples of some dinner cards which are now being painted by

alasts who are practically being supported by the sale of these cards
in the United States and which sell for about fifty cents.

Some of

these artists earn as hich as 1000 to 1500 francs for painting a portrait.
Returning to the hotel I received a call from 1.x. Harjes who stopped in

to say good bye and to express his gratification at my visit and its

Hr. Lhillips made .I:r. Logan and Captain Sayles dine with me

at the Cafe de Paris, and we all spent the evening together.

Saturday March 4th:
Took the 7:50 A.


train from Saint Lazarre station for Dieppe.

A man from Er. Harjes' office met us at the sta-,ion to see about our
Cuggage, accommodations etc.
thing done for our comfort.

Had a fine compartment reserved and everyLrrived at Dieppe at 10:45 expecting that

the ho_t would sail some time between noon and one o'clock.

The train

conductor was the same one we had when en route to Paris, spoke English
fairly well and (for a consideration)
was arranged.

undertook to see that everything

He certainly did--our luggage checked without opening

for customs inspection and our Passports visaed without waiting.


exhibition of 1:ionsiuer Ribot's letter proved to be an open sesame with

all of the Frenchmen.

Special Commissions

7;e were able to leave our passports with the

while we had lunch at the Grand Hotel.

The pass-

ports were not generally to be examined until two o'clock and the boat
sailed at four.

It was raining and storming at the time and it looked

like a bad crossing.

Succeeded in obtaining a very comfortable cabin

Illto ourselves on the boat, well located amidships.

At lunch met a

young French Captain who was on General GALIS staff, and formerly a
Lieutenant in the cavalry, but who was now doing staff duty owing to

paving been wounded.

He was on his way to London upon some diplomatic

Likewise met at the dock the British Captain of the



Intelligence Department who rescued me from the crowd and gave instructions to the officer on the steamer to see that I received every
courtesy upon arrival at Folkestone.

We left Dieppe at 4:10 P.



slept about half way across the channel, _nd it was rretty dark when I

Shortly afterward all lights on the boat were extinguished and

the trio was finished in darkness.

Reached Folkestone at about nine

They had arranged to examine our passports, along with a few

others, in the smoke room of the steamer which avoided all delay and

A young English officer took us off the boat, arranged to

have our baggage marked by the customs without inspection and saved us
considerable bother.

Got some coffee at the station, secured a co -

ilartment on the train to ourselves and finally reached London.


train left Folkeston at 11:40 and ;e reached London at three o'clock
Sunday morning.

Slept until noon Sunday.

Sunday, March 5th:
Lunched ;.ith

Shiverick and Captain Quekemyer at the

Savoy Hotel and scent the rest of the afternoon writing mail.


the evening dined with Ch_ndler Anderson.
Monday, March 6th:

Called at the American Embassy the first thing and delivered
the mail pouch together with a packet entrusted me by Mr. Frazer.


ell, Secretary at the Embassy, explained that my Embassy Passport
would also have to be surrendered, and Burrell delivered it by hand in
the afternoon to Captain Symington.

rch 6th co,tinued:

Had a chat with Captain Symington, and before leaving,Ambassador
Page came in.

After a little talk he invited me to dinner tonight.

I then left for Liorgan, Grenfell & Company's o:fice where I found Mr.
Grenfell, Jack :.=organ and Mr. Vassar-Smith.

Explained to Jack and

Grenfell, in a general way, thescheme which we had in mind for the
Federal Reserve system stating that it was in every way confidential;
that whatever we undertook would, in all probability, be subject first
to an agreement of comity with the Bank of England as I considered it

would be unwise for our system to enter into this market in any way
which might be regarded by the Bank of England as antagonistic to their
plans or interests.

I also felt that our business would necessarily

have to be conducted through a number of the large joint stock banks
Ilas well, both in London and Paris, and that I would feel better satis-

fied to undertake the establishment of business relations without the

appointment of an agency; provided, that we could make some working
arrange_ient with ::r. Morgan's firm in these two cities.

Jack appeared

to be much interested and Grenfell solliewhat reserved but no more so than

an English banker at any time, particularly in view of the present
system in regard to the Bank of Engl_nd and the joint stock banks which
has been fully explained to me.
Jack at his house.

Arranged to dine on Yednesday with

It was arranged that I be in there every day or

two and that Mr. Grenfell would have a chat with Lord Cunliffe, Governor
of the Bank of England, and endeavor to arrange a meeting _t some time
when he would_ be free from the obligations of his office.



From ::organ,

Company stopped in at the London City (7 Midland Bank to see

Sir Edward Holden, but he was engaged and e:pectly shortly after to go
to the TreaEury.

Then called upon Lord F,Arfax and _"'ounc1 hiu with


Are angel to dine Tuesday night with Fairfax, and from


Company's office went into Lloyds Bank to see Er. Bell who

gave me a very interesting hour.

Showed me through the bank and gave

me considerable information in regard to the way they ran their branch
system and also the handli.:g of checks etc.

The understanding was

that I would call back some other day this week and he would give me
all the time I recnired.

I elained to him that I had just received

Vassar-S.L:lith's invitation to dinner for 'jednesday night 4urt an hour

or two before that.

He undertook to say that he would see Vassar-

S ith this evening and arrange to postpone the dinner until next

From there returned to the London City & Midland Bank and

found that Sir Edward Holden had not :et returned from the Treasury.
'returned to the hotel i_nd Let Liss Devereux, XXJUALE

Shiverick, and

arranged with the former as to what she should do to get hospital
in France.

Dined at 8;7_5 with Ambassador Page.

him was delightful and most interesting.


my evening

Mr. and Lis. Page and a Miss

Tracy were the only ones there, and after dinner Ambassador Page and I
s ent an hoar in his dining room alone, and he was good enough to tell

me a great deal about the situation which probably no one else could
have done so well or with such comlolete knowledge.

Tuesday, March 7th:

Spent the morning dictating mail etc.

Then went to Morgan,

Grenfell & Company and had a long talk with Jack Morgan.

Vie discussed

at considerable length the nece sity for developing the nrogrn_me of

11 he Federal Reserve Bank here through the Bank of England with which he
heartily agreed.

It is undoubtedly a fact that extensive o)erations

by our system, in this market, might run Quite counter to the policy

of the Bank of England, and inas uch as they are carrying the load for
a416nitions etc., (without as com lete cooperation from some of the
other bankers as would be desirable) it would only develope antagonism
for us to ignore their interest in this money market, and its bearing
I um under the impression that it will take some

upon the nation.

time, judging by what Jack and Grenfell said, to m,Lke very much headway

with the Bank of England, but the obvious advantage of some mutual
arrange,aent being ready for employment when the war is over, or before

if necessity reeuires, will probably result in their accepting our
Left :.organ, Grenfell & Company's office and at 12:45


met lir. Hartley ,ithers and

lunched together.

From lunche n

returned to the hotel and cleaned up dictation of mail.

Expected Mr.

livolcott in at five o'clock but he telephoned he was unable to call.

At five o'cloc Mr. Siverick called and took tea with me.

At ei-ht

o'clock took dinner with Lord Fairfax.

Those at the dinner were

Captain Symington of the U.

Hr. Holland of Martins Bank;

S. Embassy;

Mr. Bell of Llbyds Bank; vrid Mr. Castles of the Canadian Bank of
Comi:ierce, and who is Lord Fairfax's room-mate.

Wednesday, March ath:

Stopped in at Morgan, Grenfell & Company -- all the partners

From there went to call upon Sir Edward Holden and had a short

visit with him.

Called on Lord Fairfax and found Mr. Wolcott out.

From there stopped in at Blown, Shipley 1 CoApany, met the partners



and Monsieur Carton de Wiart who had recently arrived from New York.

After an interesting talk about conditions here and in America, took
lunch with the Partners and retarned to the Ritz to keep an engagement
with Mr. Simpson.

He was unable to get here, however, and I spent the

the rest of the afternoon dictating

nd writing the family

A_ve o'clock Aien Lord Churston called for tea end staid until

laVen o'clock.

Guards but on reserve.

He is in

S ends his

mornin s doing tilitary duty and afternoons attending to his duties
representing Messrs Hallgarten & Company.
with Jack Morgan at his house.

At eight o'clock dined

At the dinner were Mrs. Morgan, Lord

and Lady Bryce, Lady Silversmith of Belfast, Miss Grenfell and Mx..
Vivian Smith.
After dinner/Lord Bryce, Sraith and I had a long chat
in Jack's library.

Lord Bryce g_ve me a very interesting statement

of what he understood to be the English opinion in regard to American
attitude toward the war.

Walked home with Sith and on the way

stopped at a curious little club, largely freciuented by the hunting

fraternity and which, even Jt twelve o'clock was pretty well crowded.

41Thursday, March 9th:

Thursday, March 9th:
Called at .:organ, Grnfell " Company for mail and found
rcHL part Hers out.

From there stopped at the London City e: Midland

Bank and had a chat with Sir Edward Holden, ascertaining that there
would be about fiftee_i to eighteen for dinner Friday night, and that
I would be expected to say something.

Vassar-Smith will act as

Chairman in the absence of Lord Aldwyn.

Returned to Llorgan,

Grenfell & Company and had a long talk with Jack Morgan about the
Bank of England arrange dents.


e:-_oresseC the opinion very

strongly that the only feasible _nd dignified arrangement for the
Federal Reserve system iraxiiimxi0Eri-erR37,21TE-ExIngxkludr to contemolate

business here would be directly with the Bank of England, just

had with the Bank of Prance in Paris.

The Ban:: of England

ilhad bought bills in large volumes at different tiJes for the
Banque de Fra_ice and for the Reichsbank.

Of course they were

pretty slow to enter into an arrangement of this kind, but that
there were obvious advantages for the Bank of England as well as for
the Federal Reserve system, and he felt that both he, Grenfell and
Montapi ilorman would be able to facilitate making an arrangement

which would be satisfactory to us, as all three were most friendly
toward the development of cooperative relationship between the two

He has invited Cunliffe to dine with he and Grenfell

Lord Cunliffe, just now, is very deeply engrossed in

the work of the ba.k and in looking after the finances of the
Government, and it would be quite difficult for him to give the
necessary time to discuss the matter in detail--that he was tempera-

% mentally very slow to act and would require time to think the matter



I told Jack that my

over before reaching any conclusion.

inquiries here had convinced me that the relations now existing

ist-:een the Government on one hand, the Ba

of England and the

Joint Stock Banks were such that I considered it highly inadvisable for us to attempt any arrangement with the Joint Stock Bankers
or Discount Houses or any others until we had thoroughly investigated the situation first with the Bank of England.

That I was

prepared to return home without any understanding at all as to our
business here unless the Bank of England displayed enough interest
We certainly did not
want to undertake business arrangements that would be ilixt.xxtfixk
in any way t2Jthe efforts of the Government and the Bank of England
to give the matter careful consideration.

were designed to bring about.

That the whole arrangement, anyway,

would ,,robably not be put into operation until the coiclusion of
Othe war but that

e did not Pro-nose, if it could be avoided, to be

caught unprepared again and have situations develop

that would be

expensive or Possibly disastrous to the interests of both countries,
when that could be avoided by reasonable foresight.

It was quite

clear to me, from what he said, that his views and my own regarding

the desirability of such an arrangement as I had descaibed to him
were in entire accord.

I Arranged to call tomorrow morning and

have a word with him, it being the last o,portunity before he sails.
Returned to the Ritz with Li'. Stettinius who is hoping to sail
on the "Hew York" the t\.enty-fifth.

Immediately after lunch James

Simpson of the Bank of Liverpool called and we had a short but
very satisfactory chat in regard to conditions over here and con ditions in Liverpool.

He says that, in his opinion, English Joint

Stock Banks have nev r been in better condition Lhan at the present

time, with

ossibly one or two exceptions, and with the exception0,

diof course, that they are carrying a very large load of Goverir.lent
bonds and short Govern...lent Bills.

He feels that the Government

should Dtwfi-gtxtirwalr definitely request the banks not to attempt to

market these securities until after the conclusion of the war, as
the banking institutions should not be absorbing investdent funds
fro., the market while the Governilent is placing loans--particularly

as the Government has informally advised the banks that it will
sob that no injury arises to any of the banks by reason of their
holdings of Government securities.

There is an understanding in

regard to the discount of short bills by the Bank of England and

advances upon the securities of Government bonds which in itself
should be aLiply sufficient to protect any bank against exhaustive

He also expressed exactly the view that I hold in regard

to the trade situation after the war.

Germany will have some hard

problems to face, but that when the war stops --it should actually
STOP, and not be continued in the form of a trade war with the
object of destroying Germany totally.

That agreements will hove

to be entered into which will have the effect,in a greater or lesser
degree, of continui.g Germany as a co petitor of England and the

Allies, although,of course, her economic condition may not enable
her to make this condition effective for some years.

Any other

skate of affairs would lead to a renewal of the very conditions
which gave rise to the present war.

Speaking of the Bank of

Liverpool which has about forty million serling of reserves, it
was in excellent shape.

The outbreak of the war found them with

sonly £16,000,000 of enemy paper in their

ortfolio, all of which

had been provided for notithstanding their own customers were

liable for much of it and that he felt cuite sure that the large
German banks were not going to repudiate their engagements, and

'Fuld ultimately pay up.
in his estimation.

The loss to the bank would be trifling

He said that the bank would be very glad to

place at our confidential disposal their comalete list of bill

acceptors, cotton dealers, etc., with their ratings and an indication
of their opinion of what line could be ta::en of their obligations,

and which list would be revised annually.

aith credit information a

They would furnish us

desired, anC correspond with us from time

to time regarding conditions.

We discussed the exchange situation

for this fall and he agreed with me that the outlook for the fall
position was not a satisfactory one, and when the weight of exchange
produced by cotton and grain ship.ients began to be felt in the fall,

41(nrticularly if the Allies credits as well as bank credits in New
York had been pretty well used up, we were liable to see a considera-

ble decline in sterling at New York unless steps were taken, well in
advance, to control the matter.
meeting tomorrow night.

He urged me to refer to this at the

I returned with him to the city, and

arranged with Lord Fairfax for a meeting with Wolcott and himself
s).e time tomorrow, of which he is to advise me the hour by tele.)hone.

Called at Lloyds Bank and had a chat with Mr. Pease in the absence of
Bell, and arranged to stop there next week an

go through their

bill )ortfolio and to make a personal examination of the country
cleari. g matter.


From there returned to the L7:itz Hotel, had tea

_r. Shiverick and Miss Devereux.

Arranged, by telepho_e, with

Captain Symington to stop at his apartment after dinner tomorrow
Saight if it is not too late.

Dined with Lord Rea

g, the Chan-


311or of the Excheouer, licKenna and Sir Edward Holden at the Savoy.

i the course of an iiterest:az discussion, Sir Edward Holden made a
statement which indicates the aptitude of the English Joint Stock
Banker, in regard to gold payments.

The Lianager of one of their

branches advised him that an American lady claiming to be the daulater
of Mr. Charles

Schwab presented a cheoue for £3,000 and demanded
The Eanager demurred and the lady became Imfdammant and rather


adignant,declining, however, to ex,-lain for what purpose she desired
ae gold.

Lanager undertook to require her to close her account

ad take bank aotes.
IvIrd Holden,


A]:ter sale discussion she was referred to Sir

Ins ach as she ha( threatened to report the matter

Schwab, and in a way which would cause a good deal of discussion

in regard to English finance and the solvency of their banking
Istitutions, Sir Edward saw the lady and with a little gentle PersuaLon induced her to

the reason for her demand.

It seems that

ae had r ceived a letter from an American statja- that the United
ates would shortly be dravai into the war and that there would be a

)1d panic--that it was desirable for her to get a store


gold in

.n.d for her owl" protection while there was still a chance to do so.

Sir Edward pacified her and finally persuaded her that it was ouite
unnecessary for her to act upon the advice of her friend.
Likewise, in my talk with

Simpson, he el pressed the same

criticism of the Bank of England which has been much in my mind.

'heir reserve percentage is now 27.

They hold in their Banking

)epartment nearly thirty-three million sterling Bovernment securities
id ninety-three million sterling other securities.

He is unable to

iderstand why, during the past months, when the market has been uuiet
:and liouidation has been possible, the Bank has not been able to retae i


so as to make a str3nger showing by liquidating acs

other securities and decreasiLLg its deposits, thereby increasing the
4Lonortion of Fold to other liabilities.

During the week ended March 8
gold on foreign account was £334,000, net influx of
a contraction of £202,000
and the
as apparently £365,000 in the note circulation, was
in coin
the net increase in the reserve went into active use,
proportion to current liabilities only £171,000 ; its
rose j per cent.
Public deposits increased
while the other " securities a million and a half
ran down by 34 millions,
the private deposits
being about 5 millions lowebalance.
r on
We append the

figures :-

s. £73,545,975 Govt. Debt
Other , neoities

Notes Ised

,, t11,015.100

Gold Coln n: bullion.


Silver bullion

650% ,975

BANEnro DEPAIrratrirr.
£14.553.000 , Govt. securities .. E32.838,644
o;its*Notes 3,659,954 Other securitiea ,
.512 Gold and Silver corn 40,441,695
ngs Banks. CommissionersL167.442.888
of NaCana

Capital ..

Inc. or Dec. on Inc. or Dee.
last week.
last year.
54 +
90',- 1,543,933
2,ai,E. ;8
121- 4,982,988
- 32,728,467
46! No change
631- 3,562,880 + 5,700.849



- 33,829,854
170,887 - 2,606,5'. 6



3,798,5S 6

31,333 -




fa.rch 8 the total
e of 251,500,000. Sum was
For the
g days less in an increase of



Clearing, Total.


3.820.000 15.170.000 L51.148.000


3.652.000 8.849.000 49.342.00(
3.489.000 6.683,000 45,480.00C
2,818,000 Notes in circulation
5.779.000 47.70.000
2.804,000Treasury account enrrimt
5.930,000 45.236.000



585,985,960 + 7,580,520
1,859,960 Other accounts current,
49,423,760, - 1,083,080
20.029,000238.894,004288,675,000 Paris..
Do., Branches
politan Gold in hand Total.
Silver In hand
learing. Bills discounted (Paris and
15,288,720 - 1,630,520
825.000 Advances to the public and on
,623,000 £6.913.000 £39.907.000
5.723,000 38.683.000
bullion (Paris and Branches)
49,929,920 161,480
,340.000 Advanct. s to the State
.. 244,000,000 + 8,000.000
185.000 Foreign bills 89,213.000
4.277.000 44.117.000
62,440 +
557.000 4,399.000
Proportion between
552.000 b.(184.000 35,837,000 bullion and circulation, 36.72 per cent
(last week. 37.17 per
Adjourned payments of drafts In Paris on account of
moratorium, £32.322,360-decrease, £159,800 ; branches,
£36,140,760-dccrcase, £96,280.


March 4.

Gold in hand
Silver in hand
Foreign bills









924,704,210 10,084,027


. .
Discounts, &c.
Treasury acct., &c. 741,844,452,
Notes in circulation 2,147,503,400, 10,276,700
Current accts., dm.
Dividends, &c.
52,468,1231 14,018,9341
Govt. securities ..

The following rates of exchange were current pesters

day at places abroad :-

March 9.


March 8.

.. 281. 120.-281. 17e. 281. 10c.-281. 15c.
Amsterdam . 116. 24c.-1111. 29c. 110. 24c.-11t1 . 29c.
.. 311r. 95c.-321r. 05c. 311r. 924 c. -321r. 02}c.


Christiania ..
Stockholm ..

Petrograd ..

Alexandria ..

Bombay ..
Calcutta ..
llong-kong .
Shanghai ..
Singapore ..




March 9.

24p. 95.-25p. 05
241. 90c.-25f. 00c.
16kr. 73-16kr. 80
16kr. 70-16kr. 80
16kr. 75-16kr. 82

la 4110.-3ted.
ls. 4110d._316,5.
la 4i1ed-316d.
la. llted.
2s. 7788 .
2s. 4532(1.-9321.

New York ..
Montreal ..

*Buenos Aires
90 days 491552d.
Federal Reserve Bank of St.85;611.
90 ylays

25p. 00-25p. 05
24f. 95c.-25f. 050,
161a. 75-r6kr. 85
16kr. 73-161u. 83
16kr. 75-16kr. 83




4116(1 --3164.

15. 4110.-310-

ls. 4110.---3166.
Is. 1114d.
2s. 778d.
2s. 45328 -532d.




Friday, March 10th:

Called at Morgan, Grenfell a Co., for mail and had a short

*risit with Vivian-Smith and Grenfell.

Grenfell stated that he, Jack

I:organ and Lord Cunliffe had dined together the previous evening,and
had uuite a discussion in regard to the Federal -_eserve Bank matter.

That Lord Cunliffe seemed quite interested, and some time during the
early part of next week hoped to have matters so arranged that I
could have ample time with him for a thorough explanation of the

Then called upon Sir Christopher Nugent, at the Union Discount Company of London, Limited, who was very glad to get the

message from Mr. Jay, and asked me to remember him most kindly upon
my return to New York.

I had suite a talk with him about the bill

libusiness as conducted by his bank, and about the London market.


says that the volume of bills is seriously curtailed by the war
situation, -n6 of course the Discount Company has felt it somewhat
as it reduced their turnover.

Prior to the war much too great

latitude had been allowed the large acceptance houses like Kleinwort

Co., - Shroeder ", Co., et al, who sometimes had from 15 to 20

million sterling in the market, and as they never made a statement,
no one knew what their capital was.

The Bank of England, on the

other hand, did reouire the private acceptors to make a statement to
them of capital, responsibilit :, etc., and unless they could get

such a statement they took a very limited amount of bills from those
houses, declining from tine to time/when it.suited them to say to
the brokers that they were taking no more of that name at the Present


This generally had the effect of brinetng recaltrant


acceptors to the mark as the bank desired.


1hile 7:e did not under-

to discuss the business in detail (arranging to do so at a

future date, I did ask him about the collection of finance bills,and

as an illustration of his remark that

it was a very indefinite term'

he brought out a batch of new Russian bills, of which they had just

purchased a nuantity, that were in the form of finance bills but considered as having a commercial basis, and which would be accepted at
the Bank of England.

They were all, without exception, bills drawn

by Russian banks and banking institutions on English and Scotch banks
and banking institutions.

?.`any of them, if not all, were endorsed

with recourse by Barings, who were apparently the intermediaries in

They were identical in character ec., with the bills

drawn by Bonbright a: Company credits.

Sir Christopher said they

Swere finance bills in form but were drawn to enable Russia to pay for
heavy purchases in England, and conseouently were regarded as sound.
He showed me ( uite a large batch of acceptances drawn by various

concerns on the Equitable Trust Company of London, and accepted by
them payable at Lloyd s Bank, or soille other bank in London, and the
same from the Farmers Loan

Trust Company.

He sai,

that it was

their Policy to get all drawees in England, Scotland and Wales etc.,
to accept their bills payable in London and have them drawn on London
which was quite possible here as most of their provincial banks had
London offices.

He also showed me some draltts drawn by the General

Rubber Company of Brazil which were accepted by an agent in London
payable at one of the large banks, and which he criticized somewhat
as being really one name paper, although it bore a good endorsement.

that the General Rubber Company of New York or the United

IIStales Rubber Company should appear on the bill, and that it should be

drawn and accepted under a bankers credit.


going to show me his portfolio.

At my next call he is

He said that the rates for such

bills as he showed me this morning would run from 5:. to 5*',' and

wanted to know if vie would not like to take a block of one half million
He also

sterling at that rate--it was, of course, most tempting.

said that they occasionally had bills come in drawn in dollars on
good ..Imerican concerns, and would like to know whether he would be

free to send those through to New York for offer to the Federal
Reserve Bank.

I told him he certainly would be, and recomaeade, that

he inform himself suite thoroughly in advance regarding names which
we took, and which I ,?romised to give him either now or immediately
after returning home.


He is very anxious to do business for us in

London, and I have arranged to take lunch with him on Friday next at
the bank, stopping somewhat in advance of one o'clock.

He is also

going to take tea with me some afternoon at the hotel.

Sir Christo-

pher Nugent im ressed me as being one of the most likable and active
of the men I have dealt with here, and is most anxious to
possible information.

ive me all

Hr. Frazer, of the Guaranty Trust Company's

London office, called while I was there.

He is one of the Directors

of The Union Discount Company, and both he and Sir Christopher asked
me to explain somewhat in detail the operations of the new Federal
ieserve System which I did.

Both stated that they were satisfied

from my description that we were handling our bill business along
sound lines, and strongly recommended insisting upon information in
regard to capital and wealth of the Private acceptors and also urged
that it would

be increasingly important that we should develop

IP drawings instead of open accounts in our domestic commerce.

prom there I returned to 1:organ, Grenfell

say goodbye to Jack


Company to

He told me, in more detail,ihe substance

of his conversation with Lord Cunliffe.

They apparently discussed

the program, which I had explained to Jack, at considerable length.
Lord Cunliffe a)peared to be attracted by it, and Jack said to me

he thought it would be a mistake for us to contemplate having any
other agent than the Bank of England, and that we should endeavor to
get them to buy bills for us.

I asked him what possibility he

thought there was of our making such an arrangement, and he stated
that not only did he think it was possible but quite probable, if
handled right, as Lord Cunliffe had suggested that they might be

willing to buy bills for us and have the Bank of Englund guarantee



That, inasmuch as the Bank of England had never lost money

in its business, such an arrangement would be far better than any
contemplated, and on this hint from Jack I think we may be able to
do something.

If we do not Perfect an arrangement with the Bank of
England, it will undoubtedly be necessary to make a number of different arrangements over here with various concerns--both banks and
discount companies.

Jack Horgan is particularly enthusiastic about

concluding an arrangement of this character and says that he,
Grenfell and l_ontagu Harman will make a determined effort to bring it

In all of my conversations I have made it clear that under

present conditions I hardly saw how anything could be definitely
concluded until after the war, and I think that is thoroughly under-




I then took luncheon with Fred

'olcott at the Berkeley- -those

present being lidmiral Lord Warrenden and Lady Warrenden, flr. and LIrs.

Guinness of New York (Ladenburg, Thalman :2 Co) and another lady whose
name I did not catch.

After luncheon the

iral, Fred L.nd I had a.

long talk about the Poland matter in which 7olcott is acting for the
Rockefeller Foundation, and later Wolcott and I had a chat about the
situation over here--the English feeling abut _Inerica etc.


data and observations in regard to Poland and Germany are of immense
interest, and in some ways startling in disclosing the frankness with
which German army men are willing to talk about their aflairs.
:.:et Captain Symington at five o'clock and went to Ambassador

Page's house ,_or tea.

From there returned to the hotel, dictated

so.:ke mail and then went to the Savoy Hotel to dine v,ith the London

:1". Vassar-Smith presided, and t ose ,)resent were

Clearing Bankers.
as follows:
J. H. Tritton,

Barclay ?4 Company, Ltd.

Sir Gordon llairne,


Bank of England

Deputy Chairman, London County & Westminster Bank, Ltd.

Sir Edward HoldelBart., Chairman London Cit:7

Midland Bank,

The RjJ_:ht Honorable Lord Inchcape, G.C.H.G., - K.C.S.I., President, Institute of Bankers and the National Irovincial Bank of England,

R. Vassar-Smith, Deputy Chairman, Bankers' Clearing House and Chairman of Lloyds Bank Limited.

Honorable Lord Faber, President of uhe Lssociation English
Country Ban1Lers, and of Blackett's Bank
Sir Felix Schuster, Bart.

Sir Charles hddis, Hong Kong

Gover..lor, Union of London and Saith's

Shanghai Banking Cor ora


3a_kers dinner continued:



Whalley, Deputy Chairman, Parr `s Bank Ltd.,


C. Cassels,

Heilry Bell,

Hanchester (P: Liverpool District Banking Co., Ltd.,
Bank of ITontreal,

Gen':ral-ilanager Lloyd's Bank Ltd.,

Sir John lurcell,

National Bank

Sir J. 1.ortescue Flannery, Bart., 11.2.,

Walter S.


J. Beaumont Pease,

South Western Bk.

London Joint Stock Bank, Ltd.







Deputy Chairman Lloyd's Bank Ltd.,
Hon. Sec'y., Ball.,,:ers' Clearing House,


Martin's Bank Ltd.,


T. H.




J. Ho ,e Simpson

.:Tilliams Deacon's Bank Ltd.,

Chartered Banl, of India, Australia ("; China.

Bank of Liverpool Ltd.

.Lfter a toast to the King, and to the President of the United States,

_r. Vassar-Smith proposed my health and made a very complimentary
speech, referring Particularly to the work of organizing the Federal

reserve Bank of New York and to the system as a whole. and expressed
the good will of the London bankers etc.

In response, I expressed

my thanks for the courtesy extended me by the Clearing House bankers
and particularly for the hospitality they had individually extended
to me on my visit at a time when they were overburdened with work
and anxiety.

I referred to the ;.onderful display of strength and

resourcefulness made by the British Banking system in the crisis


of 1914 and since.

Explained the difficulties of the prompt Pay-

. ment of our debts when payient was reouired, reminding them of the
old saying that the borrower is the servant of the lender which did
not apply to the borrower who did not find himself able to nay the
debt promptly at maturity, whereupon the lender promptly became the
servant of the borrower.

I stated that I would feel unable, however,

to accept the hospitality which they were eztending to me were I

not willing to make a brief reference to the present situation in

That one could not help but be impressed with the signifi-

ccmce of all these young men, possibly some of them their sons, in
uniform, many of them leaving for the front.

personal view was

that they were enlisted in a stru'gle in which they might have to

sacrLice their lives in the defence of institutions created by
English speaking people of this country for the benefit of all
English speaking people of the world.

That these English institu-

tions were a British inherit :. :-rice of the peole of the United States

and that upon their Permanency depended our security and happiness.
That some americans had been guilty of visiting this country and
indulging in views J.nd criticism of the Lmcrican Goveralent and its

attitude toward the war---that I felt no good could possibly come
from such statements being publicly made or privately repeated.


our Administration had faced a most difficult situation and whether

we agreed or disagreed with its course, we certainly reserved the
right exercised by all Englishmen, of criticizing the Government but

should exercise thLAt right at home and not abroad.

on further to say that my brief stay here had disclosed


I went

America to pursue wealth and happiness by the same processes

Americans had employed for the past fifty years; that is, diligently
developing the resources of a great undeveloped country.

I stated

that ev(,r siAce the ..merican Republic had been founded it hdd been

unnecessary to develop a foreign policy except in three matters.


One% that some sacredly regarded the advice of George '::ashington
fact that in we hadrespects conditions, public opinion, and the

to avoid foreign entanglements which he believed would Prove F. menac

to the unity of the new nation, bound together by slender ties.
That we had developed a strong sentiment in regard to the so-called
Lonroe Doctrine pronounced by Doctor Monroe at a time when the
South American states were stru, gling _or their freedom, and when he
felt that interference by foreign nations would. Prove a menace to

our nations; and, lastly, that we had recently developed rather a
hazy notion, under the leadership of I.r. Hay, that the people of the

United States should enjoy ecual ri hts of trade with other nations
in China.

'xcept in these matters we had no foreign policy and

likewise no international financial policy.

Our preoccupation in

the nrofitable development of our own national resources had not

only kept us out of foreign finance, but had led to our being simply
a borrower in the cheapest markets of the ,orld.

It was,therefore


14040 during periods of uncertainty in financial matters.

The new

banking la14 reouired no explanation as I had found thatthe

bankers of London were Peculiarly well posted as to its provisions
and meanings, but in one resPect, I felt that they might not
realize what it had developed indirectly.

The reduction in the

minimum reserves reciuired by law for the national banks had

released nearly five hundred millions of hold.

Since the exchanges

had turned in our favor, we had im sorted, net, over four hundred

e had the resources of the

millions of gold, and in addition

Reserve Banks which controlled over five hundred and fifty million
of gold practically untouched.

This enormous addition to the

fundamental wealth of the country, and upon which the entire

banking credit structure rested, presented the Possibility for
credit expansion of such vast pro ortions that it was inetritable

that the bankers of the United St tes would seek foreign fields
for she employment of their funds.

So far this employaent had

been principally directed - Pirst, to the repurchase of enormous
amounts of imerican securities;

Second, making loans to foreign na

nations and banks exceeding one thousand million dollars; :_nd

Third, to the financing, reorganization and development of an

industry and coerce grown up over night in connection with the

The influence of Ldic change in our banking situation had

led to entravagant statements being made by the newspapers, and by

some public men, in rerra to our position in internatio_ial commerce
We cid not, how
money for some years to come.
It seemed quite likely that we woald have cheap
and finance.


facilities of banking machinery with which to m ke this cre;C:it

available with English banks, and that such banking machinery must
be developed as rapidly as it could be.

Our a,_vcntage

cheap money and theirs the machinery and facilities.

ould be


should be a fair competition, and that they must not be deceived
into thinking that the \reight or influence of cheap money could fai
to be felt.

This war might entail tre.,endous sacrifices upon the

English people, including the bankers, and if it involved
render of some part of uh,

he sur-

worlds banking to hew York, at least we

believed that it would be surrendered upon fair terms, on fair
competitions, and that some of us felt that if t'ilis great sacri: ice

had to be made, England, which had established the standard of


commercial honor and banking integrity throughout the world, would
rather relinquish this great trust into the hands of those who spoke
their own language and who believed in the s--e institutions, and

I hoped, the s.le high ideals of honor and integrity.

That they

must not be deceived with to public sentiment--there was a

great deal of talk that the United States and the Goverment was
managed by Germans--the answer to that was to state that in this
cosmopolitan population, one half as yet hardly assimilated, there
had been launched the most thorough propaganda to influence public
opinion that the world had ever witnessed, and it ha
lost dismal and ignowinius of failures.

Proved the

Possibly the ex-1 nation

was that the Anglo stock in the United Sbates spoke the same English
language as those present, and they sti I referred to England as the
Ail:_other Country.


have ten on a new Chairman, a Canadian, who is yuitc energetic
and endeavoring to bring the business of the bank up to larger



It would be well to t_ke this Lito account, and renew

the innuiry later, after the new man has had experience f116 is

better known in the city.
V:ith reg rd to their figures, nr. Bell said he would not

hesitate to take their bi_ls freely.


This bank is ably managed in London, and generally well
regarded but on account of the Japanese character it is most
difficult to get a good line on their operations in comparison
with what can be ascertained about Eastern, American or Continental

They are very secretive about their methods.


Yokohama Specie Bank represents the Bank of Japan in foreign
countries, and at times has large sums to loan in the London market

which gives them a standing and influence of some importance.
undoubtedly use their creit freely.


Their operations are so

closely related to those of the Japanese Governaent, the Bank of
Japan, Hitsuie and other permanent Japanese interests that it may

be said, roughly, that they

re just as good as the Japanese Govern-

ment so far as their obligations go.
manap:ement of the bank. etc.


With due allowance for the

Lloyds Bank would t-ke their bills

with fair freedom, and Lr. Bell feels
that the London market

gpli generally maintains the same attitude towards their credit.


always figure close on teams etc.

After going over the foregoing matters matters with
Jr. Bell, he showed me a portion of the bank's Portfolio,
I intend to look into more thoroughly later on in the week.
Their short money (so called; was in the shape of seven day loans
to bill brokers on bills, many of which I recognized. an0 a
considerable nu_aber consisting of the Hong Kong P4 Shanghai Banking

Corporation, from the East and bearing that bank's endorsement.
The principal amount in the short loans book was represented by
advances on short time securities of the India Government and

short time bonds of the India GoveniAent, always guaranteed by
bonds, consols, etc.

the India Goverm_ient, as well as

These seven day loans

re secured by what they call "floaters'.

That is the type of security that is circulating in the market.
The a:vance being made

or seven days, the brokem calling prior

to the expiration of seven days to ascertain if they may have


The account, at present, la/comparatively small

one as the market is bare of bills and of borrowings of this type.

The brokers are generally getting


at least on these bills and

borro-ing say at 42i) - --if the marl:et went

gainst them and the

loans were called they would 'melt" them at the bank.
From there I looked over the department where they keep
a record of the emPloyes of the bank .

It requires about 40

rha- to do this work Lich covered a :orcc of 750 oeople.



40,) of the employees of this bank are in the war service.
tilipt anticipate will be increased to 50,



and a total of

those that are eligible, the rest being regarded probably as
indispensable to the bank.

The bank continues full pay to th

uen durini, their absence and calls those filling in their places

as "temporaries" mit which there are now many voalen.

Bell explained to me at great length the most interesting featgre
of their business in regard to advances to their correspondents
and customers, just how they are handled through the branches,etc.

From there I went to the Brooks' Club and had lunch
,with hr. -. Hungerford Pollen, Sir

-orace Plunkett, Captain

Symington, Captain Hall of the Inte ligence Tepartment (Secret
Service) and a

r. Spender, editor of one o_ the London JoLLnals.

It was a most interesting luncheon, and Sir Horace Plunkett
showed me a confidential report he had made to the Govern_aent,
following a recent trip through the middle :lest, reg riling

conditions there, which impressed me as being a most intelligent
and fair report.

He see ed to think that public oninion

throughout the United States was improving towards

ngland for

various reason which we discussed- -the principal one being the

flich the Governient here was exercising not to peruit

criticism to appear in the press, and to encourage friendly
and intelligent discussion of that subject.

'Prom luncheon

went directly to __organ, Grenfell ,", ComPany and with Grenfell
to the Bank of Enp_a nd, meeting Lord Cunliffe and -ipen(ing from


3:10 o'clock until 5:00 o'clock with him, having tea. also.

CWiffe impressed me most favorably,
to make one.


relishes a joke, :n.0 likes

He joshed me when I came in and sL.ic that he

understood that I had attended a dinner of the bankers the other
ni-ht, making a speech that had hypnotised them a bit and that
_ow they were taking me through their banks and showing me

. c

,-..nti lo know why I had not let him

of my cominr, over.


now in adv ,nce

I thou .ht he was reproaching me,



I st_rted to explain that I did not think my trip was of

suicieflu import nce to advise him in advance, he said he would
like to have known it as he would have had me taken off the
steamer and pushed through to London in short order without all
the fuss and delay that I was subjected to.

1,__ter come p7eneral

discussion, I explained the bare outline of our situation with
reference to oneratio s over here.
to say

Sail; that it was impossible

hen it could be undertaken, or yhen it

ble to undertake it.

Explained the relationshi

.o116 be advisa-

of our baik to

the Government and the necessity of observing; a course which
would not implicate our Govern Jent in any _ping that i.lig:ht be held
to be un-neutral.

That my personal view had been that the more

existence of a state of war in Europe should not be allowed to
defer or to suspend the operation of the Federal 2.eserve Lct,

which was really destined to meet emergency situations; in fact,
just such situations as would arise in times of war and Laoeril
our own Position.

That were it not for so :2e cuestion s of

this character, it seemed as though the Present, or at any rate


next fall, would. be a favorable oportunity to start our
e realized,however, the extent to which Present


conditions im--osed resnonsibilities on the Bank of England, and

that they were, so to speak, headuarters, and that our plans
should naturally be shaped with due regard to the local conditions here, in which the Bank of England controlled, not
only as a matter of comity but in order that our transactions
.light be more effective in the future through being conducted
harmoniously with headouarters.

Lord Cunliffe asked me to explain exactly what our
business contem-91ated, and I repeated to him the language of that

portion of the /let referring to our foreign business; pointed out

that we had a choice of methods--we could do our business through
the Joint Stock Banks entirely, or, we could appoint an agent and
deal directly with the bill brokers and possibly by that method
our operations would be little known in this market but necessarily
we would h_ve to assume entire responsibility, or, we could conduct
our business through the Bank of England-

I personally felt that

the business should= develop gradually and that we should be able

to establish such an Litimate relationship with whatever correspondent


apointed as would warrant their accepting cash in purchasing

bills in our behalf without reservation or separate inouiry.


to conduct this business either through an agent or with the Joint
Stock Banks would put us out of touch with Banic of England. and that

we might not, in such case, develop the relations of co-operation
that I hoped would exist with the Bank of England,
and therefore,

rather than conclude any arlangement at the Present time, if the

Bank of England was not interested, I would prefer to go home and
le d16 the whole subject open.

I also e:Iplained to Lord Cunliffe

that the matter had not yet been discussed with the Joint Stock

Banks, an

that it was difficult to say when we could actually

start business.

I had felt strolil; during the past eighteen or

nineteen months that seri

losses were involved to the commerce

of both England and the United States by the complete derangement
which threatened a suspension of international gold settlements,
and that in the interests of both countries we certainly should be
able to work out some

for co-operation in these matters.

Lord Cunliffe said that he agreed with me about the exchanges
and was anxious to see that matter in better shape.
how I felt about the future.


He asked me

I Pointe: out to him that there

were still difficulties ahead--principally those to be apprehended
from the volume

of cotton and grain bills coming forward this

fall, and that plL:.ns to meet that situation should be made well
in advance.

I also pointed out to him that both Engl,nd s..d the

United States had incurred great losses and unnecessary risk in
gold shipments for many years.

That our rather uncontrolled

money market,under the old banking system had been more or less
of a menace to both of us in times of difficulty, and that some
sort of co-operation which could only grow out of experience and

mutual confidence should enable us to minimize these risks and

losses, but the :irst step in that direction was for the country
which held the sur-lus funds (just now the United States) to
invest some portion of them in this market.

That the Federal


Reserve Ba.iks could afford to do that better than any other as
theiii funds cost them nothing, and it would be some time before uh

their credit facilities were needed at home.

Lord Cunliffe, as

Grenfell had warned me, is very slow to mLke up his mind,
and always wants a few days in which to think things over, particularly if they are important and a little outside. the line of
his experience.

He said that, of course, the Bank of Engl nd

did not allow interest on balances but that the Bank was really
a law unto itself and means could be found to overcome that
difficulty w_ich I interoreted

to mean, that lhe Balik of Englt:nd

would borro- our money rather than hold it as a guaranteed dePosit.
He also said that the B_nk of England discriminated very rinorously
in dealing

as to the paper it bou;-ht or discounted and conse,uentl,

with the Bank of England, rates would not be as high on any paper
they might buy for us,under such an arrangement, as we might
realize through the bill brokers and the Joint Stock Banks.


the paper would be unaoubted and carried.
He sL.

difficulties in the


acting for us

in the

purchase of bills, and then much to _y surprise, said that they
coul6 c-11 be overcome--that the guggestion aope,led to him as having

and of course if the Bank of England acted for us they


liaratitee all the paper purchased for us and be responsible

for its pay,lent, that uhey had never lost money on bills, Lnd would

not expect us to.
be shi-cped to America.

He wanted to kio-:; if .he °ills would have to

I told him that ultimately I thought thEt

would be the case, where the bills rm for some time.

If we

were putting out short money,that could not be clone.

If an arr

meriwas concluded before the war ended, we probably world not %.
the bills shipped owing to the risk of loss etc.

Pinally he s

that he thought the best plan, at the outset, would be to have t
bills held in "pension".

It was understood, he said, that the

matter would recuire thouht, and he wanted to consult with
Lontagu Norman and with the Deputy Governor, but on the whole,


am most favorably impressed with his attitude, :;Mich was ::1ost


aL the conclusion of the general discussion rounly

outlined above -Je had coffee and cigars and a general discussion
about the war.

Lord Cunliffe undertook to josh me a good. deal

about the trio over here and of having stirred the bankers up and
setting all their ears wagging.

He said that at the Clearing

meeting that morning they had all been talking about my speech at
the dinner on Friday night, and I could .lot help but draw the

conclusion that while he was only joking, he would have been a
little better - pleased had I written him in advance of my coming.

I explained that I had felt right along that my trip was making a
good deal of trouble for everyone concerned, and that had I notified
them in advance, it coa16 not help but to have been construed as an
invitation to facilitate my trip which I did not want to trouble
them to do.

On the whole, I believe there will be little difficulty
about coming to an underst nding regarding an arrangement.
After leaving Lord Cunliffe, I went to the Ldliralty by
appointment to meet Capt in Hall of the Intelligence Bureau.

He is


Ipp most interesting man, and showed me a lot of data he had in regard

to the German Secret Service, and told me of some of their exPeriences


He is particularly anxious to find out about

it down.

early record in the United States from whom he had
credentials when he came over.


is apparently a very

important member of the German Secret organization, and one of those
who is responsible for the attempt to implicate the Federal Reserve

Captain Hall said that if I would let him know when I was

leaving, he would see that everything was smoothed out.
Dined in the evening with Sir Edward Holden, and those present
were as follows:

Sir Edward Holden, Baronet,

Chairman London City (7: Midland
Bank, Ltd.,

Sir George Paish,

The Statist,

d. biddy,


Mr. H.



Morning Post,
Financial Times,
LonC,on City ("4 Midland Bank,Ltd.,


H. Hackett, F.J.I.,

Yorkshire lost,

Mr. Norman E. Holden, B.A., and LL.B., Camb.,
r. P. Hyde,
M±. E. R. LI'Dermott,

London City (7: Mi land Bank Ltd.,

Railway News, - Daily Graphic,

Mr. C. -. Reeve,
Daily Telegraph,
(Barrister at La., Inner

Er. E. T. Powell, LL.B. and
B.Sc., Lond., (Barrister
at Law, Inner Temple)

S. B. Murray,

Financial News,

London City




The St:Indard,

would only promote the right kind of relationshi, we ought to be
014, to consolid-te the English and
or other :ork out a complete cord.
but was roundly cheered.

rican system, and in some way
This caused seine amusement,

I did ,iot find the gentlemen present at

the dinner particularly well Posted in regard to the Iierican
financial system.

Sir Edward stated at the outset that it was

understood that this meeting was private, and the discussion confilential.

':;hen I spoke, I stated that I would rely uoon Sir Edwrdis

commitment, and therefore would feel at liberty to speak with more
freedom that otherwise I would.


loan, he believes it will be difficult to carry out this business,
ipp after the conclusion of the war,with Germany as a partner.


thi_iks that the United St ,es should interpose no objection to

baners taking an active Part in this form of Govern lent

He recognizes that there are difficulties in a

policy which :.light later involve the use of the big stick, but

China is such an important field of commercial development that he
believes we will find it necessary to undertake business of that

character if we vii:h to eablish ourselves in the Orient.


Charles has live( a good while in the East, and I believe hi,' to

be an authority on these matters.

Then called upon _r. H. K. Rambling of the London &
Southwestern Bank Ltd.

He is in fax or of transferring the bill

business to hew York to assist the exchz- 70S and as a means of

getting large credits, and states that he has so urged.
there returne- to _:organ, Grenfell


Company and had a chat with

hr. Grenfell and Vassar-Smith about the money market and Bail: of
England practice.

The Bank of En,Yland, of course, allows no interest on

deposits but they get around that by borrowing money from the

The detail of

he arrangement was not explained to me

but I e::pect to get it later.

They regard it, particularly in

present times, as a most im.)ortant function of the bank.

regard to the arrangement for making the rate.


This is discussed

every -:eanesday at a meeting of wh,t is described as the "Inner

" and is the equivalent of our e:_ccu-ive
coIlittce, and

where all features of the situation are discussed.

.Lt the Thursday

meeting this is a regular order of ousiness and most important
The matter is then

sometimes, being the sole item of discussion.

laid before the whole court _nd a decision reached.

Only most

infrequently is a decision arrived at that effects a change in the
The rate is
intervals between Thursday meetings.
lost frenuently
by the bank borrowing in the market which I surmise/takes he form
of operations through brokers,

nd sJmetilles direct transactions

;ith the Joint Stock Banks.

This is doubtless one reason why the bank's deT)osit account has
been somewhat inflated during the recent months.

The Intelligence

(information or statistical) Department is not vex.- fully developed

and not as fully developed as Grenfell thi as it should be.


says that the Banque de France undoubtedly has an extensive depart-

ment of this character, particularly as to domestic credits, as
they stand ready to take French bills and do tae -Clic,a from ba_iks

all of the time and prcticlly without limit.

Grenfell is under

the ilioression, as I am, that the Credit Lyonnais° has the most

etensive intelligence department of any of the banks, with
possibly the Deutsche Bank ranking second.

The Banque de France,

of course, has access to all of the information held by the big
French banks.

Lr. Grenfell has made an appointment for three

o'clock on Tuesday (tomorrow) with Lord Cunliffe.

He tells me

that Lord Cunliffe is very reserved, diffident,but nevertheless
Quite Positive in his views.


Grenfell is hopeful that a2ter a

from American banks, and that if the exchanges started -rong in
the fall, it will withdraw all of these 'elances and investments,
and might be expected to make situation worse.


thought there wa:


something to this and that it should at any rate.

7e are to discuss it further ;lien we meet Lord
be considered.
few il_terviews that some satisfactory arrangement can be reached.
The lan is to hove a preliminary talk with Lord Cunliffe, then a
Sir Felix
Returned to the hotel, and dictated mail.
meeting between Lord six o'clock and remained until 7:45.and myself
He disSchuster called at Cunlif2e, Hontagu Norman, Grenfell
some length
to go into matters more in detail. of We discussed at End other
the Government
cussed at great length th, policy
The high rates
the (uestion of the level, of interest rates.
He was strong in condemning the policy of borrowing so
such (443 million sterling) on short bills, and said that in his
opinion the GoverA,Lent must find a way to fund the war expenses

on permanent stocks.

He thought. that the

,:ere carrying too

much in Goverment loans, as well as the public, and that was the
one -eak spot in the banking situation here.

I aske, him to tell

me the policy of the bank in regard to the market.


He said that

on r,,re occasio_is she bank went directly to the Joint Stock ]3.111:..s

and borrowed their surplus fund at interest in order to stiffen



money rates.

Generally, however, they employed a broker who

borrowed large sums in the market on collateral, the bank in tur
borrowing money from him.

Both operations Lnflated the bank's

deposit account, raised money rates, but weakened the technical
position of the bank.

He discussed at great length possible

methods of unravelling the e::tended credit situation, feeling
strongly, as I did, that the positioa of the Bank of, the

Joint Stock BL.nhs, and the Government, depended in the last analysis

upon the ability of the Government to fund their bo_rowings into
long loans.

I asked him how he felt about the level of interest

rates, and he said that he thought large balances here just now
were a menace, particularly if exchange on London should fall at


New York.

He was not sure, however, that generally speaking a

lower level of interest in London would be a good thing.


was just now a dearth of good bills for the investment of funds at
the banks, and of course a low level of interest rates always promoted bad banking.

From there went to Hartin's Bank Ltd., and

had lunch with some of the directors of the bank.
were Sir Frederick _lartin,

a. Holland,

lit the table

1.:±.11orton Jr.,


sitting at my right Sir Frederic:: Jackson of Frederick.fluth

Company, also Jir. Guinness of Ladenburg, Thalman


Chaplin of Coutts & Company, Herbert Balfour and one or two others.

7e had a very general discussion of conditions here, but nothing

of ia-J rtLace in connection with my trip.
From there sto oed in
which he e:aa,ined to me ,ould be
to see Sir Edward Holden and learned about attended by a number of the mem
r2uesday night's dinner,


His bank would take any amount of

Undoubtedly 1.-1.


bills with their acceptance endorsement if offered.

not hesitate to take a half million sterling in one batch,
and considers them about the best in the market.

Very com-

a very competent man.
petent management, Sir Charles
T. r. Harris, one of
clerks and the mana e ent of their buildings.
An excellent board of directors who take an active interest
He i, sailing tomorrow
their directors, came in by request.
in the bank's affairs, and they are entrusted with considerathe United States to be :one about two months, _nd expects to look
ble transaotions by the British and the Chinese Governments.
Bell says that he is L very rich man, connected
me up in New York.

with one of the large shipping firms, and one of their active

After a long chat, I arranged to return there to.

morrow between 10:30 and 11:00 -.


I asked 1:r. Bell about the Hong Kong

to continue discussing matters.
Shanghai Banking CorPoration;

the Chartered Bank of India, Australia and China; the Colonial
Bank, and the Yokohoma Specie Bank.


ITot as large as the Hong Hong


Shanghai Banking Cor-oora-

tion, but most conservatively and ably managed.

It is in the same

class as theHXLSBCorporation, and hr. Bell, of Lloyds Bank
London, would not hesitate to take their bills for any amount
Of course, when the war first broke out, there was some


suggestion of German influence in the management which was promptly

I recall Sir Charles L.ddis telling me that while at first

the war interrupted their business, he thought it was now within

of normal.

They had no trouble with bills coming through from

the East whatever.

The trade there seemed to keep up astonishingly

well notwithstanding the heavy freight rate.

That apparently


consuming power of the people there was unlimited.
We should nay some regard to the disparity of size.


This bank operates exclusively in the East.

It is a very

old institution and has Lone business for many years with Lloyds
Bank which is its Principal banking connection in London.


some years before his death, my old friend Sir E. Brodie Hoare was
Chairman of the Board and it has always been managed most conserveLively.

There Capital Z500,000; heserve ;L100,000 sterling.

re:-arded as a mall bank,


It is

small fi,-ures should be taken into

-1 in all respects.

Quite recently they

..;ednesday, March 15th:

Company for mail and found

Called at Morgan, Grelifell

a cable from the office urging that there was no immediate necessity
for my immediate return to New York.

From there called, upon - r.

Henry Bell who showed me through the bank's (Lloyds Bank Limited)
nortfolio of English bills.

These consisted of a very large

amou_it of bills running, however, in small denominations, prac-

tically all of them representing the drafts of houses dealing in
various kinds of merchLndise. accented by the buyers, and in some
cases b

the buyer's banks.

It also included t:enty-one day

bills which are (n.wn by a bank agency in the provinces upon the
head office in London, anc which are sold to customers for the
ilurpose of meeting obligations due in London and payable under a

trade custom in twenty-one days.

Hr. Bell told me that uhe

volu_le of bills I saw was not more than 10

normal in normal times.

of what would be

These bills were almost without e::ception

payable at the offices o :[ London banks and bankers, it being the

custom throughout the provinces to accept bills payable at London
institutions; in other '.orris, to domicile the bills in London for

convenience in handling End collection.

When the bills are payable

in the Provinces they are sent by the London bank to the respecuive
branche., for collection from eight to ten days in advance of

Inland bills are invariably paid by the inland bank

to the city bank, and failure of the London bank to receive advice
of the drawing would result in telegraphic inouiry, a good deal of


and dissatisfaction with some reflection on the credit of the
This is not always true of bills drawn on the city,


where by custom, the banks

usually willing to construe the

acceptance of the bill by the customer as instruction to pay the
bill and charge to the account.

Bell seemed to think that

a large volume of the domestic comLlerce was settled by the use of

Sir Felix Schuster, however, in my recent talk with him


took a contrary view.

He thought altogether too small a pro-

portion was settled in that way and that Enfa.nd had over developed
the practice of permiuting open book accounts to run for long
That this was particularly true of the retail trade.


I noticed some bills in the Portfolio, drawn for the purpose
of settling accounts for the repair of ships---accepted by the
ship owner and accepted by the ship builder.

were there representing a portion of

In some cases, bills

he ship built by some shippin-

In some cases these bills are secured by a bond on the

vessel, insurance, etc., and in other cases no security given
where the credit of the acceptor is regarded as sufficient.


great volume of the small bills appearing in the portfolio of a
bank like Lloyds are sent in by branch managers from their various

They have a very comprehensive system of checking

these bills and credits, which is ingenious and seems to be

Each branch runs a register of each customer's account,

carried in a small cheaply made book, in vertical columns.


register which is Prepared, say on a Saturday night, and the other
on a Jednesday night.

This book keeps the balance, the turn-over

for the ')rovious year, the overdraft, the advances upon security,

how much is secured and what it consists of, and the authorized
limit together aith any ex

column for remar-as ex-)lan

authorized to go up to a c

and is then authorized .di

amount for which he must m

this book goes to the home

while the first is being r

that each week the bank co

all advances by each agenc

com-olete re ort with comme

alternating back and forth

I was surprised to find th

overdrafts--the great majo

many of them without any s
,:reements or notes taken

the debtor and creditor re

customer ex Pressed a suffi

A good many of th

by security in the shape of

freehold or leasehold prop

in the Liverpool district -

steamers, anC covered by wa

Deart,lent of the bank wer

agencies and of all the cr

rrd apparently very

ell kept.

The Advance Department has men of

AlIt 7 experience who are checking no this work constantly and who

either go to the various agencies to make inspections, or send for
the managers to come to London and report.

The entire list of

accounts of each agency, together with the lines established rre
revised every year.

Much dependence seems to be Placed upon the

general reputation and character of the customer.

The officers of

the bank, and the men in the departments having charge of these
matters,Cisllay a surprising familiarty with the character of the

bills in their Portfolio; she business Cone by the drawer and
acceptor in each instance, and the history of each account which,
of course, extends back in most cases for a long period of years.

They do, however, impose great confidence on the men in the Advance
Department, whose business it is to check these trLnsactions and

keep themselves informed of the ki-d of business done by the drawer
and acceptor.

The drawer is usually a customer of the bank although

the acce-ntor may at times Prove also to be a customer.


interesting illusration of the care with which this business is
watched developed in coAnection with some bills drtwn by some
lumber concerns.

They freouently will receive a bill drawn by

lumber manufacturer "A" on lumber merchant "3", and likewise receive a bill drawn by "B" upon "A" wnich superficially would
indicate that they are giving accommodation notes to each other.
This is not the case, however, the explanation being that "A" is
an importer of mahogony from Central America while "B" is an

importer of white Pine from the United States--they are both

general dealers in lumber although each has certain snecialties
11140 he imports, co.aseouently they are buying and selling, from

-nd to each other, -nd as a matter of custom they never draw for t
the net difference of the account but always for the full amount
of each account.

Ti_is is regarded by the bankers as a sounder

method that would be .;iLh the settlement of net differences.

Mr. Bell showed me the

ay all of the records of these transactions

were kept, and the general conclusion to be drawn was that the
big English banks -Lust their clerical force and the judgement
of their men in cre,it matters to a much greater degree than we
do our men at home.

They nut responsibility upon them and look

for results.

Mr. Bell also showed me the de )artment in


budget is kept, and the surplus call money-nrincinally seven
day money was loaned or where the loans were called.

L11 depart-

ments of the bank sent their figures to the man in this department
who had to k.iow every day by a certain hour what foreign drafts

were likely to come in; what debits and credits would likely arise
through the agencies; what loans matured; what new loans were to
be made; what the result of the clearings would be; and, then he

based his opinion upon these figures and advised the short money
brokers -:;hen they came in whether their loans would be renewed,
_list be paid, or .whether they could have additional funds.


never expected to come within more than 200,000 to 500,000 pounds
of an exact calculation as so many unexpected items came through;

but, the balance at the B,nk of

igland which .i[ht run from

Live, six or eight million sterling al"ays took care of the

'.21-1e bank has ?, comittee3of its directors which


supervises every department, including the clerical force, etc.,
These co:imittees, on which the Chairman and Deputy Chairman always

serve, meet weekly, commencing at ten o'clock and lasting until
about twelve o'clock, each meeting taking from fifteen minutes to
The entire board then assembles and receives

half an hour.

reoorts from the various committees, and take final action on all

_11 loans exceeding £15,000 are submitted, the general

statement of the bank is submitted, and I gathered that only in
exceptional cases does the Board over rule the recommendations of
the committee.

The directors are very diligent in attending to

their duties and seem constantly to be running in and out of the bank.
From Lloyds bank I went to the Savoy Hotel, met Alfred Shepherd

for lunch and spent the afternoon.

Nothing of importance transiired

except that'he told me uhe Scotch investment companies had li(uidated a very considerable amount of their

merican invest,:lents--one of

his companies, and not a very large one, having recently sold no
less that £1 0,000 sterling.

The Scotch companies all along have

felt a Preference for !_merican securities and invested heavily in

_fter leaving Sherherd, I Played squash with CL.--)tain


He introduced me to a Mr. Marborg of Baltimore who was,

as I recall it, formerly our ambassador to 1,ustria.

aviator and recently had a fall losing his leg.


son is an

He said that he

had j,st recently returned from France and, while I did not agree
with him, he thought that France was "busted".
knows anything about it.

I do not think he


_t eight oTc_Lock I went to Boodle's Club to dine with Vassar-Smith


Those present were Sir E. Seymour King, a Mr.

flayton, cotton merchant of Liverpool and London, .11r. Pease Depu*y
ihairman of Lloyds Bank, lir. Henry Bonn and one or two others whose
tames I did not get.

"t the dinner there was a good deal of discussion about
our new banking system and a great many
about it.

uestions asked

Sir Seywur King located me as the son of his

)1d friend, and after dinner he was so anxious to tf-lk over

old times that I had no opportunity to chat the others
t all.

I Promised to t, :e dinner with him next Thursday

at eiht o'clock: at his house.

of the gentlemen that

loI meet in London are deeply interested in imerican political

affairs and evidence the greatest anxiety to see our politics
so develop that we may be able to give them support either
now or after coi.clusion of the war, but particularly now.
There is ::such difference of opinion as to whether it will be

an advantage or disadvantage for us to be involVed in the
war, but they all agreed, that it would

he war to a

sppedy conclusion, and thL_t is what they all want.



Thursday, 'larch 16th:

Shiverick called shortly after breakfast time, and


immediately after I called upon Lmbassador Page.

I ex )1ained to h

him exactly what the object of my visit was, and what progress I
had made, as well as the cuestions of neutrality involved. stating
the proPosition as fully and clearly as I knew how.

He th')ught I

was pursuing exactly the right course and said in his opinion, it
would do
could get these arrangements made with the
amount of foo6 if we



ag1ish banks.

I then discussed with him the subject

of Dutch exchange, and his suggestion, with which I heartily

agreed, was to take this up with absolute frankness Ath the
authorities here and tell Lhem just what our position was.

Lmbassador Page is clear headed, does not pretend to understand
the technique of the business, but his judgement is fair and

Vivian-SLaith at the Royal Exchange' with the


directors of an insurance company of which he is chairman.
Brown of Brown Brothers

- present being,



Company, Mr.

Lr. Kimberly, and two or three others whose names I

6id _iot catch.

The conversation was entirely about the war,

partiCularly the submarine matter. and the same interest in our
- politics was displayed


o be in the minds o: everyone

over here and soLie anxiety to see matters develop in th it favor.
.:1-ter lunch ca le(
talk with :j_r.


ith ti Tho_.1


at the Guaranty ?rust Com.)any and had a short

From there called upon Sir Christopher Nugent

I had a very lo g and interesting

tLlk about bills.

He showed me a batch of £150,0n0 just received from the rcuitable

Trust Cmananu--£50,000 of them were drn by the Ban.: of
Valifornia on one of uhe London BL



were, without encention, colaiercial bi ls, princinally cotton,

drawn on the very nest London banks.

Among other names I saw

Lloyds, Union of London (": Smiths Bank, Cylnn, Hills, Currie,



m. Brandt


Parr's Bank, London City r, Midland Bank, Hambro,

Sons, c=nd a number of other good nacres, almost all

of the London r nd Scotch banks including the Badi: of Iiver-nool.

He had purchased them at 52i

discount, and will -robably turn

them over at 5,, or a little lees with the endorsement of the

Union Discount Company.

Thoj were already endorsed by the

21(ait-ble Trust Coixoany, and a better lot of naner one could
iot wan.t.

lie sni

sid, h
fccl it



just as .lubineau of the Bancue de Prance

,o lel a finance bill was to


iuh Tour fingers to see if it was a comiterfit or

bil--there is no set rule, law,

s one -oul(



i_stinct, judgeilent

-bills that looked lire


finance bills

re only exchange bills, and go without difficulty :t the
Bank of England.

I was interested to note in the records

submitted to me, a few discounts, advances and overdrafts, at

and unite a few at

but the vast majority at

normal times the rates on this business would run from
to 4,, "::11,h

.he -Jur:

3: to akv.


In normal times, a very lar;Te -olume of the mills which

circulate in this market, are bills of brokers, bankers

are regarded as prime_

many of them :Jnerican bills

he.e,,,-nd he thought the market generally depended a good deal

noon their knowledge of the kid of business conducted by the
drawer and acceptor.

They would know, for instance, that a

concern like she Bankers Trust Company would not draw finance
bills--such bills as might be drawn by the Bankers Trust Company
being of course, without e]:ception, drawn for exchange in

order to cover their Position, meet the reouirements of the it
customers, etc., which was regarded as ouite legitimate so
long as not carried to excess.

almost all of the bills that

I examined were cram to order, endorsed by the drawer in
blank, payable to the Ecuitable Trust Company, and endorsed in
blank by the Ecuitable Trust Compa_ly office, they having a

London office and a signing officer here.

Sir Christopher

said that the volume of bills coming forward from .she United
St tes was now so small that he was not even sendii_g his daily
telegram to instiuutions that had formerly remitted bills to
the Union Discount Company.

very low money rate to the

He thought it was due -Lo the

steadier rate of exchange and the

conse,uent carrying of bills by American i-stitutions which
found it more Profitable to do so than to discount them.

spoke very hihly of the Bankers Trust Company and the way
its business was done, and. of Lr. *Kent personally--in fact,

everybody here knows him favorably.


iivd there I returned to the hotel and met

_ r.

William !ackenzie

of the _lliance Trust Company in Dundee, Scotland, at four o'cloc
:-.nd snent the afternoon with him, then taking dinner and snending

the evening

ith him.

He has done what apparently many others,

situated as the Alliance Trust Company is, have done.


of selling 121erican securities, has borrowed large sums in the

United States on their American securities and brourhL the money
over here, paying off the loans gradually out of income, liouidations, etc.

As the Alliance Trust Company funds are practically

all invested in America a_id in mortgage loans they would have
to liquidate and go out of business,

7e said that he, his Company and associaues, have brought over
£500,000 sterling in one way or a,Lother and prepared to bring
more it is proves necessary.

Late in the afternoon Sir Felix

Schuster called and invited me to t,ke dinner with him Tuesday
evening to meet a :Ir.

-,brams who is in charge of the finances of

the Indian Council, and who Sir Felix says is, in his opinion, today,
the greatest authority on currency in the Elmpire.


for me co s-oena some

promised to go there

_lore time in his bank and I have

nd look things over with him again.

the rest of the evening
dinner he left at about 10:30.

Sir Felix is



Tachenzie, and shortly after


Friday, -:arch 17th:
StoPped at 1:o_gan, Grenfell P Company nd Picked in the
mail and sent a cable/Mr. Jay that I was sailing on April :_first.

Hat a ch,t with Grenfell about Dutch exchange.

He asked me to

t:ke the first opportunity to talk this matter over with


Montagu ilorman who was. dealing with this subject for the Bank
of :.1np1Lnd for the past three months.

Prom there I

ent to

the Union Discount Company and had lunch ,;ith Sir Christopher

Nugent, Sir I.ibert Balfour, and !Ir. 'Ain= n. Brand.

=:os*6 of

the luncheon was devoted to discussion of the bill business and
of the Tederal :=Zeserve Bank system; the -:robabilities of heavy

foreign travel by Americans after uhe war was over, and
California where Sir Robert Balfour (head of Balfour & 'Alliamson
Company) has large business interests.

the so-called

They all agreed that

Inland bill" now rose more out of the transact- between manufacturers,

.11oleslers, jobbers, etc., than

out of dealings with the retail tnde,---'Cho retail trade now
being co,l(ucted on a cash basis or on book accounts.


Christopher ilugent was interested to ascertain whether we could
deal with them in buying bills, and I e:_ol,ined that we could

but that feature of our business had not been developed, and
it was lncertain when

e would start.

\:ent with 1Tr. Brand

to Lhe London Joint Stock bank and had a visit with


In the course of dicussion of their business he explained that
the Inlaid bill while to some extent discounted

the drawer with the Joint Stock
Banks, in a vast number of

holders of bills, that is the drawers, negotiated them

he bill brokers and discount companies which ouoted

ly better rates than the Joint Stock Banks, carried them

on call or seven dys, and enabled the bill brokers

scount houses to make a slit ht turn or

shave" of

st, to discount houses freouently carrying them for a

say, and then selling them as two months paper or less
JA.nt Stock Banks or bill buyers.
I returned to see 11". Grenfell, and discussed at

r length the Dutch exchange problem which he said was an

_nt and Pressing nroblem, and that he would be glad to

t over at any time and particularly wishing that I would

s it with Montagu Homan.

He said that the accepting

had reduced their business very considerably--that

had been discrimination against them partly because many

m were of German origin, doing German business, and

because their credit had been somewhat affected by
of the volume of acceptance credits which they had

d prior to the war, and which were somewhat eJDarrassing

e war broke out.

This business had been taken over to

xtent by the big banks but he did not think it was sound

g banks of deposit to extend accentnce credits when it

ertain how the business would develop in the future.

nt Stock banks had undoubtedly made a drive against the

nce houses to get their business, and with some success

larly Holden.

nt the outset it was rather


understood that the acceptances of Morgazl, 2.othschilds and
1111Vin. would be generally handled by the market, the others

not so freely.

The Bank of England had not discriminated.


judged this was covered, as to the houses of German affiliations,
by th:. terms of the Government guarantee.

He said their firm

had rather reduced their acceptance business, and had never
discounted a bill.

That they were lenders,on call, to the

bill brokers on bills.

The bill brokers always being liable

for the advance and it bei-Ag generally understood that if the

lender so desired they would endorse the bills.

When the

bill brokers melted their portfolio at the bank, they :died. a

'letter of liability but did not endorse each bill althou'h they
could be reeuired to do so.

The Bank of England did.not go

into the market to buy bills in London in a large way at all-1

thLt aroused antagonism in the city, and as a matter of fact, in
normal times, the Bank of :Ingland was handicapped by its in-

ability to get

they might hold.

They, however, had separate branches where this nrovision did

not apply, and these branches in the Provi ces discounted
rather freely and were not even governed by the bank rate.
furnished the bank with a considerable amount of bills and a
The bank was ID:Ad by the Governgood portion of its revenue.

rvices which it Performed for the Government,

ing and issuing of notes, but that after all

n primarily for profit and did not care to

earned on the stock.

Ho :ever, the profits

re set aside in special reserves or by some



such method.

In all o: m:1 discussions of bank methods in London

ci narticularly my discussion :rith

Goer, indicLte thLt they

folio custom -nd precedent almost entirely, and as Sir Chlistonher :Tugent one afternoon expressed it,

rif they followed

strictly the law of the statute, there woulC be no occasion to
hire high .jc_i_eL

officials in these London banks, the object of

having; the highly paid oflicial who would exercise his judgment
to get :Jen in the service

to violate judgment when it was desirable and good business to
do so".

From Grenfell's office called on Captain Hall at the
2.kdralty and had tea with him.

His sister, two of Lord



ing the

(this be

r. Shive


_-_arch 20th:

Called at ]organ, Gradfell
lords with Grenfell.

Company for mail and had a

Thencalled upon T7r. Leaf of the London

County ", MestiAinster but he was out.
-Barclay "- Company and he was out.

Called on -r. Triton of

Called to sec

2:artil Holland

but he had not yet reached the city but I had a talk with his

:,:artin, arranging to meet

Holland later by a point-

Lunched at prince's and returned to the hotel.

Holland called me up and later came over for tea.

spent a

couple of hours discussing operations of the Clearing louse, and
country check collections.
(see next fol]owi_

His story is about as Thllows:



Practically all banks in the United langdom appoint certain
of the clearing banks or bankers as their collection or clearing

The clearing banks consist of the following 16, with the

Bank of Lngland clearing in addition on the charge side only:
Barclay and Company Ltd.

54, Lombard Street,

The Capital and Counties
Bank Itd.,

39, Threadneedle St.,


llls, Currie


Lombard St., B.C.

Lloyds Bank Itd.,


Lombard St., B.

London County and Zestminster Bank Ltd.


Lothbury, E.



London and Southwestern
Bank Ltd.



170, Penchurch St., E.C.

London City
Bank Ltd.,

5, Threadneedle St.



London Joint Stock Bank Ltd. 5, Princes Street, E.C.
:Tartin's Pank Ltd.,

68 Lombard St., E. C.

National Bank Ltd.,

13, Old Broad St., B.C.

National Provincial Bank
112, Bishopsgate St., E.C.

of 7,ngland Ltd.

Parr's Bank Ltd.,

4, Bartholemew Lane, E.C.

Union of London and Smiths
Bank Ltd.

2, Princes Street,

Biggerstaff, W. and I.

(clear thru. Parr's Bank Ltd)

Child 7: CcY)12any,

Cocks, Biddnlph and Company,
making seventeen all told.




cyr: Enclnd)

Lartin's Bank Ltd)

So, it iica.71 be said that all checks

reaching London, no matter u-non what banks they flay be drawn, go
through one of the three deart::lents of the London Clearing :Eouse.

The clearins

begin at various hours, accorcUng to departzlent, the

earliest being the Saturday Uetropolitan clearing which opens at
and the latest being the 5:20
taiil days succeeding bank holidays.

c.earings are:


settlement, on

The three classes of
checks that are rayable




within a certain district and which may be roughly described
the old city of 'London,

line of the city.



-1-Lhour-h it cioes not follow exactly the

which is the


itan district of the city of London surrounding the ol(: city;

Country; which covers checks drawn on all banks in the
United Yingdom outside of the town and-±

(inclucd_ig, of course, branches of banks) vie checks being handled
on Scotland,

ales Lnd Ireland.
on the uooks of


0 a cleari


iy a transfer on -she Bank of ir2ngiT._nd on the day of clearing.


he iletrorolitan clearings are settled by

on the books

of the B-nk. of Engl_nd the day follo,:inp clearing, and the Country

clearing is settled by a trsnsfer on 17-e books of the Ban
:n-lnd on the t'lird day following the Cl_y of clearing.


ihen cleared are, of course, delivered to the remective

cleariic, 'Urn-7s Znich make payment _or the b.
or i


in the


the city or in the _etropolitan district Thick do not clear



settle lent is adjusted either the same day, the

fol-loii-F day or three days later, making allowance for checks that
are not good.

she Principle of the Clearing House operation is to dray
all checks which are drawn upon the sixteen banks, or their branches,
that are members of the Clearing House, and known as clearing
bankers, and to draw all checks --)yable by banks

or 'which these

sixteen banks have agreed to clear, for settlement throur.h the
.1,ondon Clec.rin,c_ House, and as described above. these settled
unon i,'?-Of P
Federal Reserve Bank of St. Louis

iMP 11,(nQ

nil r -1'1




t :12 de un,t in the old d-ys fli-my banks :..nd their


branches in the

rovinces :lade a chr,e :or handlinr- checks (rcwn

on them and renitting cover, likewise the London banks made a
sidle chc.::.r:e;

in fact, many of them still do.

The amoult is

trifling, rarC:7- over 6d nor item, but this chrw:e hms lamely
been abandoned 121:7 the -,rovincial brinks as one of the resuts of

the numerous consolidations of banks throughout the eapire, SO
that now, practically the only banks which mrke char-es on checks

he Scotch banks and soue of the Irish banks.

On these

checks the London banks lii:ewise fnake chL-rnes to their customers.

I euesuioned him -)articularly as to the float


',110 whether any

He sziC thLA in a few specie.). cases, Princi-)cily insur-

ance com)cnies, which by custom were riven im:iediate credit on
checks payable in the -orovinces, it was not customary for r: -

bank to FAve credit to its custaiers until the three day time had
elapsed, and of course no interest was allowed on items in transit.
It will be seen th't this method of clearing. which allows time
to get c return on every check handled b-T ,he Tondon Clearing

House, no matter in what part of the Kingdom paycble,

e:,:ce-lmt on

a few remote noints in Ireland, together with the scheme of
setulement by transfer on the books of the Paul: of 2ingl,mnd.

it im-nossible that any float be created at all.

r. Holland

likewise said that there were other clearing centres operating
like London, such as kanchester, Liverpool etc.---These, however,
o-oeratinn in a more limited territory.

"r. Holland rronoses to

collect a coiirolete set of all forms used, not only in London but

,-1r0 the country banks, in connection with their check items,and
-0 over them and explain them to me.

He has clready left

r the rules of the Clearing House, and its annual re7ort.

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