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rob-fur-17 20ra: Xi5.1N :2:n route itris Tlebruary 20th: Visit F F Harjes Lendowsl:i Coii - 7. 3 ik ieruent itz PLalain, 1;anoue ,a, vow G-1- %es, Lloyds e s at Ch. s. 2hi]1 ni Stil .-Teurm-:xy 25th: , Visit II CA'L'k 1 1- :.Iinistre (Les 7.:innce - Harjes at ijrillon Hotel LA it 0\1-144 Rirfulgat -1.6e113::.ch '_aron Oe 2othschi'rls J " cr Phiild:is an _ii( irew ('- Suardt.,., 71.6ruary -6th: i;00 64A.4e4. 2:0 . . 1! q 1.- ' Vi2it C. 2.)L.11.in, 7,:unine de .rjrce 14.14-14^.4.. ot444441.4, _ ki-0-&c. c4.a...... Sunday, 7ebruary 27th: Visit Le IT 0.00 7;s0 . . 'jompooir - Inv:lidcs ...lusetun Visit Cal:tains Iogtn and Syzlington Diner Chas. nondy, .-Abruary 101.00 Visit Farjes :7: Co -7LL4.4.104.A., Slade, Ec:uitable Trust Co . 1",:c:ordz-LIT Club 1.101,f Baroh de 7erClize P.A.A--StAA,1/ Tue2day, February 29th: I '414'tk4-0-a4o 6 11 '- Visit Chas. Sercnnt; Dannue 1.o rncc Cre,it Lyo_._nais 1,..unch Heidelbach I CL4 V1L.it T.40 el\ I Lewandowski, CollAcir ri.jt Pa. lain at liltz Cg4.44.41.." C _ : 0:0 Tiit 2:15 1: 00 . 7i 6. cc . ) -iarjes, . Jr. icli _ r. ' t ev 'o T. . -r(1 iiu -arc an :O.L11 ,osseili, :Cr"' L er - Ja. :Yr- Tr e e, I .;icssaci or T- rp sday, Vi Llo VU r s A : .7a rjos 1:11_11011 :0Y . 2 it (-1 . . 7ir t GeOrCIP . -41 :30 :00 . Tea Charles Dinner Harjes, Hotel Cri, tQattut,9 :arch '3rd : :0" ierican E.,lbass7 Visit lir. Lunch Harjes 72-nckara, U.S.Consul i:euflize at Henrits raron Ehappe Diner Ir. Phillips, Cat. Logan and at Cafe (le Par i`lirazer, . ''r1- 4th: En route London Sunday, :"..arch 5th: L unch 8: Capt. i:15.- Lon, Lieut QuekeEyer and C11-1-1(1.er ,ii,derson . o1-16.y, ::arch 6th: irit Yairfax J. 2. llorgan 8:00 -id 1]. Dinner Ambassador Page C. Grenfell d March 7th: , Lunch - Hartley Withers 1:00 la 5:00 8:00 I. Tea . - Shiverick - Yotel ?Litz Dinner - Lord Fairfax, 27 Old Burlington Road Wednesday, Larch 8th: Visits Sir Edward Holden Lord Fairfax H. H. llambling H. C. Norman Hartley 71ithers 1:00 P.M. Lunch 5:01 Tea - . Dinner 8:00 Brown, Shipley & Co., Lord Churston J P Morgan, 12 Grosvenor Gdns Thursday, March 9th: . Visits Sir EdwardoHolden, Pease- Lloyds Bank James Simpson 2 :15 _ Siverick and Miss Devereux 4:30 _.;. Tea 8:30 Dinner - Lord Reading Friday, . :arch 10th: Visits Christopher Nugent Lord Fairfax and F C Violcott J. P. Morgan 1:30 P.M. Lunch F. C. Wolcott - Berkeley Hotel 5:00 Tea Ambassador Page Dinner Sir EdwardAHolden (London Clearing Bankers) Savoy Hotel 8:00 . Saturday, March llth: Visit 8:00 Sir Felix Schuster Dinner Capt. Symington, Lieut. Quekemyer and Shiveri, 0Sunday, March 12th: Tea Mr. and L,rs. Tritton :larch 13th: Visits Lunch - Vassar-Smith, . Sir Felix Schuster Dig ner 6:00 Sir Edwrd:Holden et al at Martins Bank Tea :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 h: Henry Bell, Lloyds Bank Alfred Shepherd, Hotel Savoy Vassar-Smith, Boodles Club, 28 St Jamess Street : Sdir Christo-oher Nugent Sir Felix Schuster Mnlbassador Vivian-S ,ith, d Dinner, ALliam Mackenzie, Hotel Ratz Captain Hall, .0,1iralty 0 lice 414mr, Christo-oher :lucent 11.. g. I 4watt- Captain Sy:aington e3 ailiverick Lontagu Horman Thorpe Lodge Carsten Hill Shanghai Bkg Corp. 19th: Service, Tea 1111:30 estIi-stor S iverick Carl ton Motel .M. Di- or Cf Azia Syinrto :110 Si_iverick Hondt-y, _:arch 20th: Visits 1:eLf, London County ^, _estAnster Wank :fr. Tritton, Barcl:_y Co!zoany . - Lunch 0 Dinner AQ6,444A1-. Ro-1.1Lnd Tea 0 Princes givelm* J:117. coVitamti) J. Grenfell y, ::arch 21st: Visits -T. Hear 0 Lunch Bank of 7InFand 0 Tea Straight and 1erkins Dinner Sir Yelix Schuster, 48 Cadogan 5 j.. . Bell, Lloyds day, Harch 22nd: Sir aobert Balfour Visits Alikm Christo.:her Uugent 0 L.. Lunch 0 Tea Sir Hery B Saith Dinner Cartrin STnington 0 . _r. Leaf, London County P. 7estfainster,41 Lothbury ay, :larch 23rd: Sir :elix Schuster Visit 00 I.. Lunch 0 . Sir J. I7ortescue nannery Sir B. Seyuour King Dinner , 1arch 24th: Lunch 0 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: 1110:30 .. Lord 2,eading, 32 Curzon Street Sir George Faish Captain Symington et al (Russian Military at-1,achesJ Visit TT 1:00 Lunch 8:00 Dinner Mr. and Astor Sunday, I:arch 26th: 9:00 Breakfast, Ambassador 1:00 Lunch 8:00 T.:I. Di,mer - Shiverick at Ciros age Montagu Norman MondEy, March 27th: Vicits Baring Brothers If Sir Felix Schuster Mr. Fe,rrar 11 Lord aevolstoke lr .fr. Henry Bell Mr. Skinner, U..Consul .1- 8:00 Dinner Sir :lobert Balfour, eform Club Tuesday, ?larch 28th: kt0.4 6i7r d ALM/ hat. d44, Lunch 4:00 1) 8:00 . Lord Jsoppme Bryce, 3 Buckingham Gate S Tea 1:30 Ch-ndlor 7otel Dinner Lontar7u ITor.lan sac,. 2,.C.Grenfell, Thorpe Lodge Campden Hill dednesday, I]arch 29th: Visit Martius Ban L 1:00 hunch :Ir. Laughlin anO Captain Sy_ington 6:00 /._ Tea Mr. Ch_adler Dinner G&.-0,E-4A-Sy-iing.oeyi-i-R4-4aghliFi-at-Naval-&-Nilitary gIab C:,2tain Symington, ShiVerick (°: Quekernyer 11:20 _.._ 8:00 L. . nderson. 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 France. 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. Dined 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, Shiverick 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 unliquidated. ' :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 possible. 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 influence. 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. notes 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 4 . 1916 Visited with Chandler Anderson in the hotel, then we took a short walk through Hyde Park and later lunched together. This afternoon not feeling quite up to the mark, declined 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 Tr.:.st Company had been protected in various transactions with Germany which made them very suspicious of their business generally. The 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 41wmo.(a44 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 4111 Cunliffe struck me as being exceedingly bad taste and in many respects undignified and unjustified. a Or 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 Manager. I 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 Hotel. After lunch went to tie French Consul General and learned that passports would first, have to be vised by tne United States Consul General. where From there to the U.S. Consul my passport was visid and 1 had a very pleasant visit 2. 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 Page. 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 3. presiding. 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, at 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. 4. Friday Feb.18. fok 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 to the hotel and had a little visit with Andrew Graves of Lloyd's Bank. 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. 4 111( 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 contribution. 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. After 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, 2 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 DIAR Y. 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. At 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 week. 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, etc. Butter doz; (Coal PO. per ton; Lamb and veal from 5F:25c to 7F:$Oc; p-r 1/11 pound 1F:35c; Ham 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). Fine Tuesday Feb. 29th. lit 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 PefirsiC , 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 evy ovcDc 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 2 the American Correspondence, and the clerk in charge of the S 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 office. The supervision of their authority is very close. Somewhat greater discretion is given to managers of the branches in the Provinces. However, 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. To 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. 01 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 Provinces. 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 themselves. 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. The 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, they 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. Country,checks. 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: 1.- 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. 2.- 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. 3.- 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 received. d 4.- 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 11 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 needed. 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 banks. 9 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. 2 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. The 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 3 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. This, 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. would 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 5 me somewhat through the Banque de France, particularly that 4011 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 S. Tuesday, February 29th: _04 (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 ts. situation information we were able to obtain through our correspondents. 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. stood 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. Rothschild In a subsequent conversation with Baron de ?1edneeday 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 Nos.." te 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 d.is- 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. We 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. Ten 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. "yes and 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. Harjes 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 irectors. 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 eu a 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 as 10 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 http://fraser.stlouisfed.org/ 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 Harjes 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 in 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 cr( with UmplgVig dollar/ its. 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 outcome. 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. 1.1_ 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. The 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 'e 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 Jofre's 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 business. 0 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. I . slept about half way across the channel, _nd it was rretty dark when I awoke. Shortly afterward all lights on the boat were extinguished and the trio was finished in darkness. o'clock. 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 annoyance. 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. The 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. In 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. L'Ir. 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. Grenfell Oil -, 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 "red Are angel to dine Tuesday night with Fairfax, and from Baright 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 week. 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. work 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 suggestion. 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 out. 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 1, w: -' and Monsieur Carton de Wiart who had recently arrived from New York. ift 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 funti nd writing letters.to 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.. Morgan, 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 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 as 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 institutions. tonight. 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 .66 \ I told Jack that my over before reaching any conclusion. 111 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 antagonistic want to undertake business arrangements that would be ilixt.xxtfixk what 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 R 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 demands. 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. with 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- 1 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 insistent The Eanager demurred and the lady became Imfdammant and rather old. 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, to . 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 o-.7. 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 L 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. :10 THE BANK RETURN. RISE IN. THE., PROPORTION. During the week ended March 8 gold on foreign account was £334,000, net influx of the a contraction of £202,000 and the as apparently £365,000 in the note circulation, was but in coin the net increase in the reserve went into active use, was proportion to current liabilities only £171,000 ; its rose j per cent. Public deposits increased by 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 :- Issug DEPAIIIIntNT. s. £73,545,975 Govt. Debt Other , neoities N Notes Ised su ,, t11,015.100 Gold Coln n: bullion. . Silver bullion 7.434,900 650% ,975 ' £73,645,975 £73,545,975 BANEnro DEPAIrratrirr. £14.553.000 , Govt. securities .. E32.838,644 ., o;its*Notes 3,659,954 Other securitiea , .690 93.80.163 . .,. .512 Gold and Silver corn 40,441,695 982,384 7321 888 ngs Banks. CommissionersL167.442.888 . of NaCana Capital .. Inc. or Dec. on Inc. or Dee. on last week. last year. 54 + £46,336 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 9, 80-4- 591+ - 33,829,854 170,887 - 2,606,5'. 6 202,220 - 1,192.02'0 3,798,5S 6 3140 31,333 - 34% OUSE FIGURER. + fa.rch 8 the total e of 251,500,000. Sum was For the g days less in an increase of 1916). 2,747,269,000, -- Metro. Country politan Cheque Clearing, Total. Clearing. BANK 08 FRANCE. 3.820.000 15.170.000 L51.148.000 3.445.000 Amount. 6.483,000 3.652.000 8.849.000 49.342.00( 3.489.000 6.683,000 45,480.00C 49.767 2,818,000 Notes in circulation 5.779.000 47.70.000 3.000 2.804,000Treasury account enrrimt 5.930,000 45.236.000 ! £ 585,985,960 + 7,580,520 506,200 1,859,960 Other accounts current, 49,423,760, - 1,083,080 20.029,000238.894,004288,675,000 Paris.. 745,760 . 28,431,440+ Do., Branches MetroCountry 156.160 200,757,7601+ politan Gold in hand Total. Cheque .. Silver In hand 14,421,64019,360 learing. Bills discounted (Paris and Clearing. Branches) 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 4.763.000 .. 244,000,000 + 8,000.000 185.000 Foreign bills 89,213.000 4.277.000 44.117.000 62,440 + 18,800 557.000 4,399.000 Proportion between 552.000 b.(184.000 35,837,000 bullion and circulation, 36.72 per cent 89.418.000cent.). (last week. 37.17 per Adjourned payments of drafts In Paris on account of 082.ovvIL31,149,000£237,175,091:1 moratorium, £32.322,360-decrease, £159,800 ; branches, £36,140,760-dccrcase, £96,280. BANK os SPAIN. 1 1 March 4. Gold in hand Silver in hand Foreign bills Pesetas. I 1 Increase. Decrease. Pesetas. Pesetas. - 924,704,210 10,084,027 757,353,912, 101,585,597 _ 4,854,570 5,455,791 . . 2,269,171 Discounts, &c. 616,909.009 Treasury acct., &c. 741,844,452, 67,507,754 Notes in circulation 2,147,503,400, 10,276,700 Current accts., dm. 707,237,374! 61,567,948 .. 31,773.1131 Dividends, &c. 10,380,055 52,468,1231 14,018,9341 Govt. securities .. The following rates of exchange were current pesters day at places abroad :- March 9. place. March 8. .. 281. 120.-281. 17e. 281. 10c.-281. 15c. Paris Amsterdam . 116. 24c.-1111. 29c. 110. 24c.-11t1 . 29c. Italy .. 311r. 95c.-321r. 05c. 311r. 924 c. -321r. 02}c. Madrid .. Lisbon Switzerland - Christiania .. Stockholm .. Copenhagen Petrograd .. Alexandria .. Bombay .. Calcutta .. Madras llong-kong . Shanghai .. Singapore .. - Increase or Decrease. March 9. 24p. 95.-25p. 05 3412d.-3514d. 241. 90c.-25f. 00c. 16kr. 73-16kr. 80 16kr. 70-16kr. 80 16kr. 75-16kr. 82 150r.-151r. 97119Pi. la 4110.-3ted. ls. 4110d._316,5. la 4i1ed-316d. la. llted. 2s. 7788 . 2s. 4532(1.-9321. 34.763s-84.7676 New York .. 14.79-84.80 Montreal .. *Buenos Aires 90 days http://fraser.stlouisfed.org/ 491552d. Valparaiso Federal Reserve Bank of St.85;611. Louis 90 ylays 25p. 00-25p. 05 3411(1.-3514d. 24f. 95c.-25f. 050, 161a. 75-r6kr. 85 16kr. 73-161u. 83 16kr. 75-16kr. 83 150r.-151r. Is. 977101. 4116(1 --3164. 15. 4110.-310- ls. 4110.---3166. Is. 1114d. 2s. 778d. 2s. 45328 -532d. 84.7612-$4.77 84.7912-T4.80 491332d. &sled . 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 program. 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. He 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 Sons- 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 and 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 II° moment. This generally had the effect of brinetng recaltrant /114 acceptors to the mark as the bank desired. ake 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 dei 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 negotiations. 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. 0 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. 6 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. l prom there I returned to 1:organ, Grenfell say goodbye to Jack Lorgan. 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 11 them. 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 about. 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- 40 stood. `. 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. 7olcott's 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 I 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, . Leaf, Bank of England Deputy Chairman, London County & Westminster Bank, Ltd. Sir Edward HoldelBart., Chairman London Cit:7 Midland Bank, C.I.E. 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 1111/1 Gover..lor, Union of London and Saith's Shanghai Banking Cor ora %.1 3a_kers dinner continued: Lodc,on 2. . Whalley, Deputy Chairman, Parr `s Bank Ltd., Tulloch, G. C. Cassels, Heilry Bell, Hanchester (P: Liverpool District Banking Co., Ltd., Bank of ITontreal, Gen':ral-ilanager Lloyd's Bank Ltd., Chan., Sir John lurcell, National Bank Sir J. 1.ortescue Flannery, Bart., 11.2., Walter S. Coutts J. Beaumont Pease, 1:artin-Holl-nd, South Western Bk. London Joint Stock Bank, Ltd. Burns, Chaplin London Ltd., ' Company Deputy Chairman Lloyd's Bank Ltd., Hon. Sec'y., Ball.,,:ers' Clearing House, nd Martin's Bank Ltd., J. P. T. H. . Deacon, .Litehead, 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 411 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 England. 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. That 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 that 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. PO 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 OPP 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 MN I 14040 during periods of uncertainty in financial matters. The new banking la14 reouired no explanation as I had found thatthe 400 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 war. 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. elk 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 Tha it 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 Do 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 had, I hoped, the s.le high ideals of honor and integrity. That they must not be deceived with reg.ril 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. 411 have ten on a new Chairman, a Canadian, who is yuitc energetic and endeavoring to bring the business of the bank up to larger 11/ figures. 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. YOKOHOLL SPECIE BAIT: 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 banks. They are very secretive about their methods. The 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. They 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. They 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 411 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 a renewals. 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 5, 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 . ',1 It requires about 40 rha- to do this work Lich covered a :orcc of 750 oeople. 11111P V 40,) of the employees of this bank are in the war service. tilipt anticipate will be increased to 50, , 7ais 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 flaonr 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 care 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 IIMIL 3:10 o'clock until 5:00 o'clock with him, having tea. also. CWiffe impressed me most favorably, to make one. Lord 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 books. . c ,-..nti lo know why I had not let him of my cominr, over. heir now in adv ,nce I thou .ht he was reproaching me, L-fiC :hen 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 Al next fall, would. be a favorable oportunity to start our e realized,however, the extent to which Present grikations. 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. But, 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. I 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 A 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. But, the paper would be unaoubted and carried. He sL. difficulties in the ay 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 would 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, I am most favorably impressed with his attitude, :;Mich was ::1ost friendly, f:n.C., 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 4Ia 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 in !king 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. R 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 banks. 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, Er. Mr. H. Er. ". Palmer, 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, Camb., Mr. C. -. Reeve, Daily Telegraph, (Barrister at La., Inner Temcle) Er. E. T. Powell, LL.B. and B.Sc., Lond., (Barrister at Law, Inner Temple) :Ir. S. B. Murray, Financial News, London City Midla Benham 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. He thi_iks that the United St ,es should interpose no objection to baners taking an active Part in this form of Govern lent finance. 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. Sir 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 . From 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 market. 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. In 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 sometimes effective 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. He 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. 411 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 the.exchange situation worse. a lip thought there wa: He 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. Cunliffe. 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 banks. 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. 0 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 111 a 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 Enp.land, 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 401 New York. He was not sure, however, that generally speaking a lower level of interest in London would be a good thing. 'Mere 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., and sitting at my right Sir Frederic:: Jackson of Frederick.fluth Company, also Jir. Guinness of Ladenburg, Thalman Company, 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. ,ould 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 or 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 directors. 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. 1:31= OF EMIL, .aISTRLLIA ITot as large as the Hong Hong CT-TTEA: 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 offered. suggestion of German influence in the management which was promptly remedied. I recall Sir Charles L.ddis telling me that while at first the war interrupted their business, he thought it was now within 90, 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 the consuming power of the people there was unlimited. We should nay some regard to the disparity of size. COLOHI_L BLIIK: 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. For 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, account. Considered 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 maturity. 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 7.M and dissatisfaction with some reflection on the credit of the This is not always true of bills drawn on the city, 4110.wer. 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 bills. 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. periods. 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 company. 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. The great volume of the small bills appearing in the portfolio of a bank like Lloyds are sent in by branch managers from their various branches. They have a very comprehensive system of checking these bills and credits, which is ingenious and seems to be effective. Each branch runs a register of each customer's account, carried in a small cheaply made book, in vertical columns. One 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 recover. 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. I/ 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. One 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 the 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. He 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 fluctuations. 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 business. _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 I/ 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 them. _fter leaving Sherherd, I Played squash with CL.--)tain Symington. 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. Hi 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 L _t eight oTc_Lock I went to Boodle's Club to dine with Vassar-Smith LAssociates. 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 .d.th 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. It [ Thursday, 'larch 16th: Shiverick called shortly after breakfast time, and 1111P 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 tm.,ense would do could get these arrangements made with the amount of foo6 if we ,:.11 French i.1(1 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 straightforward. and Vivian-SLaith at the Royal Exchange' with the Lunched directors of an insurance company of which he is chairman. Brown of Brown Brothers - present being, Hambrough, Those 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 seems 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. p ith ti Tho_.1 Wyse. 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 oPiLnce ;nem 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, Barclay Co. 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 _dot, t , just as .lubineau of the Bancue de Prance ,o lel a finance bill was to o iuh Tour fingers to see if it was a comiterfit or bil--there is no set rule, law, s one -oul( oicy, o cOVOYA i_stinct, judgeilent -bills that looked lire nd 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 5L 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 In normal times, a very lar;Te -olume of the mills which Ilk etc. 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. He 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. Insteac 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. anxious 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 . Spent Tachenzie, and shortly after ,11111 Friday, -:arch 17th: StoPped at 1:o_gan, Grenfell P Company nd Picked in the to 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 r. 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. F the so-called They all agreed that Inland bill" now rose more out of the transact- io.is 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. Sir 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 Gory. In the course of dicussion of their business he explained that the Inlaid bill while to some extent discounted 1) 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 generally 11111.1111111111 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. I 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 -11011 They 1 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 - Derby's ing the (this be r. Shive 1-_onda1, _-_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 partner ment. :,: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: Page) LONDON 1.2.ING HOUSE OPERATIONS AND COI= CHECK COLLECTIONS. Practically all banks in the United langdom appoint certain of the clearing banks or bankers as their collection or clearing agents. 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., Glyn, llls, Currie 67, Lombard St., B.C. Lloyds Bank Itd., 72, Lombard St., B. London County and Zestminster Bank Ltd. 41, Lothbury, E. C. Co., London and Southwestern Bank Ltd. C. C. 170, Penchurch St., E.C. London City TJ_diand Bank Ltd., 5, Threadneedle St. , 7..0. 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) TT Child 7: CcY)12any, Cocks, Biddnlph and Company, making seventeen all told. TT TT Bc=n1. 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 ccraprisin 1 . within a certain district and which may be roughly described the old city of 'London, line of the city. 2 s -1-Lhour-h it cioes not follow exactly the T:etropolitan; which is the etrorol- itan district of the city of London surrounding the ol(: city; Country; which covers checks drawn on all banks in the metrorol'tPn United Yingdom outside of the town and-± Cistricts 3 (inclucd_ig, of course, branches of banks) vie checks being handled on Scotland, ales Lnd Ireland. on the uooks of The 0 a cleari settled iy a transfer on -she Bank of ir2ngiT._nd on the day of clearing. trnsfer. 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. chcc.: These ihen cleared are, of course, delivered to the remective cleariic, 'Urn-7s Znich make payment _or the b. or i of in the rovinces the city or in the _etropolitan district Thick do not clear directly, 41-1 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 :.re settled http://fraser.stlouisfed.org/ unon i,'?-Of P Federal Reserve Bank of St. Louis iMP 11,(nQ nil r -1'1 _ J 4 t :12 de un,t in the old d-ys fli-my banks :..nd their -r. 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 are 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 e:Listed. . ',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.