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UNION (-,11

RA m,









ffice of Origin and Service Instructions.





Federal Reserve Brink,
Ter: York City

Ireavinfor- _earl

thi s


Notify Clo:--e Trust Comiany no

chance going _A-ritzorland.

Having read the conditions printed on the hack hereof, I request that the above telegram be forwarded by the Western Union Telegraph-Cable Syste
subject to the said conditions to which I agree.






New York.
Cable No. 13.

Telegram received dated 11th.

Kent says Hare Director of Sales for War Department expects to sell
Spain supplies exceeding in value total peseta credits of3155,000,C0 pesetas.
In view of such expectation Treasury Department may prefer extending credit
maturing August 29th and September 2d one more period particularly as conditions
here would not permit the counting and delivery of any gold which might be
required in Spain in addition to such exchange as may be available in time to
Will telegraph you more definitely Hare's progress in making
meet maturities.
Spanish sales on arrival at Paris Saturday morning.
Cable me particuYour seven received after dispatching my number 11.
Confidentially believe Treasury
lars of alternative proposition mentioned.
Department may cause unnecessary irritation by urging difficult terms in these
matters and should be fully informed.
Weighing by Nederlandeche Bank exceedingly careful.
leaving from one hundred and fifty to two hundred million marks Amsterdam and
ninety million marks Brussels shipping balance to London rapidly as possible.
Examination two hundred million marks Amsterdam will shortly be completed by
present method and have arranged satisfactory method preliminary examination
Suggest continue paying Grain Corporation
two hundred and forty million marks.
until ten lots completed and meantime will arrange method of payment for two
hundred and forty million marks when preliminary verification completed.



Note what you say which is satisfactory.

Will give necessary instructions regarding insurance.

Completing these arrangements will probably take longer than expected.
Everything moves slowly.

Am I needed back before early October.


rotel Ritz, :axis,
August 17, 1919.

Dear Governor Harding:

For your information, first, let me enclose a copy of a letter I am
writing Mr. fireman about the gold, which tells the whole story, sad I hope
will be entirely satisfactory to you and your associates.
This has been
a fescineting trip combinina matters of great interest and a saectoole
depressing in the extreme.
I have heen in London and saris, through tam Greater part of devastated France, some of Belgium, and to Brussels and Amsterdam, and to summarize one's impressions would necessitate writing a beak much longer than Mr.
Vanderlip's and I fear the danger of writing an incomplete account.

As well as possible I have been keeping a diary or journal, and from
this, when I return, I can give you as much of the story as it is possible
to reduce to this form.

I am going to ask you to show this letter to Mr. Leff ingwell and ask
him to show you in confidence a letter which I have just mailed to him.
have written him in resrcnse to his urgent request, as he is anxious to get
what information I can dive gim in connection with this ratter of forelen
credits, and thoueht I could make the letter do for both.

Avoiding reaetitioa of chat I have written him, I want to refer a
little bit to the curiency situation here.
')utside of Holland, I should
say that this situation of expanded currency and credit is one of the most
difficult things that Europe will have to deal with.
The underlying
principle is that a nation which has a favorable balance of exports, including visible and invisible transactions and credits, czn have any kind
Is naof s curtency system that it wants and maintain the gold standard.
tion which has a persistent adverse balance of trade, including visible and
invisible transactions, can neither establise nor maintain a sound banking
'The war has so reduced the productive
and currency system on a gold basis.
capacity of this part of tee world industrially that it will se many a long
year before a aound currency situation cvn be restored unless something very
radical is done, and we must Lear in mine that on balance western Furope has
The destruction has
always been and must always se an importer of food.
Steel mills, coal mines, textile
not been agricultural but industrial.
plants, sugar factories, foundries, all sorts of industrial establishments,
have been destroyed, looted, injured, dismantled or by one mamas or another
Besides that, inadequate suaplien of raw material and
put out of business.
no credit for their purchase, or adverse exchange rates making purchase
almost prohibitive, aresent serious obstacles to tine re-establishment of the
The most encouraging feature of the situation is the prompteconomic cycle.
Federal Reserve Bank of St. Louis

W.i.G.H.a 2.

ness with which the peasants have returned to their land and started cultivation.
The most discouraging Ls the extent of the indastrial damage and
the damaae to cities and towns.
This bears directly on the currency situation and I would like to illustrate what has happened here by the rather extreme position of Belgium.
When the war sto.aed the Belgian government
arranged with the Rational Bank of Belgium, 'alder complete guaranties as I
understand it, to retire the German currency, and for a limited period an
offer was made to exchange laelchsbank notes, notes o!' the Societe Generale
and dahlenkassenschein.
They made the fatal mistake of not closing their
frontiers to the importation of German currency.
The net result was te:.t at
the fixed rate of one franc 25 centimes per mark the hationel Bank has retired
and holds in its vaults six billion francs of this German currency with which
Belgium was flooded.
The equivalent is now in circulation in notes of the
Banque Rationale de Belgique.
mark is worth 51 centimes in Belaium.
can Belgium exaect to get repayment at one franc 25 centimes of over six
billion franca for these German marks from Germany, in the face, if
please, of reparation ayments which will stagger Germany for many years.
It is no small matter to flood a little con try like Belgium with considerebly over a billion dollars of paper money.
I personally saw this money
atacke up in the vaults of the National Bank.
To me it was a spectacle
of Bel cum's humiliation, particularly when it is realized that a east
amount of this money
spent in buying Belgian goods at preposterous
Tti that sense of course Belgium got an economic return, out after
all, reduced to its simplest expression, Belaium was forced to furnish Armany with a large amount of goods darina the occupation for which Germany
paid in aaper money which is now slmaly a loan without interest.

Every variety of currency expedient has been Indulged throughout
Euroae, except in such neutral countries as Holland where u der Dr. Vissere
ing's leadership they 'lave been most conservative anc are in a thoroughly
sound r.ositlon.

Trices are tremendous everywhere, but greatly out of line in different
places on accouat of the etchangeand of local conditions.
I tried by way
of illustration in purchasing identically the same king of wine In different
A bottle of wine tht cost twenty francs in ear's, say
twenty-two francs in Namur, t. enty francs in Brussels, and thirty gulden in
It is a fact that there is everything hart in the way of food for those
who can afford to pay the prices, and for those who cannot afford to :ay
there is, I suppose, a good deal of real narciship nd deprivation.
now the food situation is not at all bad because of the good crops and the
large amount of food which has been distributed by the various governments,
but I am somewhat fearful of what will happen after this crop is exhausted
unless we stand in the breach.
I was greatly impressed with tee attitude of the bank of England, the
Baneue Rationale de Belgique and the I:ederlandsche Bank.
They nave a very
1114h regard for the loaderal Reserve sastem and thik it is an achievement
of the first order in finance and banking and are most anxious to have a
close and friendly relationship with us.
I am sure that my visit as

17.-.G.11.- 3.

been well worth while if in that respect only, and when I return you my count
on my Eivimi, you a narrative of the trip that will be of the greatest interest.
VoA't you give my wariest regards to the members of the Board Fond aceept the same for your own good self.
Sincerely yours,

Eon. W. 1. G. Harding,

c/o Federal Reserve Board,
7ashington, n.

Hotel Ritz, Paris,
August 27, 1'19.

Dear Governor Harding:

I am only able to send you a line to congratulate you upon your
reply to the inquiry of Senator McLean as to the need for currency

It is a most admirable, wholesome and sound presentation

of the situation and should do a great deal of good.

It would also do u lot of good over here if this document could
be sent to the right people.

I wonder if you would beel willing, if it

is in form for circulation, to send some copies to the following:
);ir Brian Ookuyne, Governor of the Bank of England, London.
Monsieur Georges 7alluin, Governor of the Bank of France, Paris.
Monsieur Leon Van der Rest, Governor of the Banque Nationale
de Belgique, Brussels.
Dr. G. Vissering, President of the Nederlandsche Bank, Amsterdam.
Of course you know my hobby of retiring the greeribucke, but pos-

sibly that would be painting the lily.

There seems to be lots to do over here, but I au hoping to get away
by the middle of next month, and when I get home will make you something
of a report on what I learn over here.
With best regards,
Sincerely yours,

Hon. W. P. G. Harding,
0/0 Federal Reserve Board,
Washington, D. C.
Federal Reserve Bank of St. Louis

2itz Hotel, :,ondon,

September 11, 1919.

iy dear Governor harding:
3ince retarning to J.ondon, I have again been making my

headquarters at the Bank and have had some opportunity to discuss
the difficult question of renewal bills with the officers of the
Bank of rngland.

In genrral, their position has been consistently to discourage the creation of too many bills of this character in the
London market, but there 3s, of course, the exception brought
about by the necessities of the war, which has resulted in some
such bills being drawn.

in the early days of the war itussian

bills of that character were placed in the ,ondon market.


are now appearing, I an told by hr. Stephenson of the Union Discount Company, qudte a few shipbuilding bills, which, by custom,
have always beet drawn under renewal na-reements running for the

neriod of construction of a ship, and these are regularly taken
in the market and a e eligible at the Bank.

Further, the Government has arranged a scheme for

creita running for a maximum of three years and aggre, ating

twenty-sir or eight million sterling, to enable British exporters

to send goods into certain of the new countries of Central rurope.
I believe the Government assumes the risk of exchange and will
Federal Reserve Bank of St. Louis

'ouy the bills, which will not be taken by the Bank of


In discuasin7 the matter with Governor Cokayne, however,
I gather thnt he feels that our losition is exceational just now,
in that we have a great unused credit in America a:Id that the
Ixessing nee:i for its use in -urope might justify our adopting' a

rather more liberal po icy for the ti s being, provided we can
safeguard ourselves' nr aLnst the development of a permanently unsound practice.

The great difficulty which we shall fade this fall and

winter is to furnish absolutely necessary supplies, particularly
of food and to oone extent of raw mnterials, to rurope upon'Ionr.-

er than the customary sixty or Linety-day credit.

These goods

will go into consumption and the importer will receive payment in
the currency of his own country, and under normal oonditions he
would buy dollar exchange and remit in settlement of the bill at

.!e cannot now afford to take that risk and his in-

ability to do so is one of the obstacles in the way of the proMpt
movement of absolutely eN5ential supplies to the Continent.
There are various

of meeting the difficulties, none of which

are quite satisfactory, but posaibly in the long run the rnsiest

and soundest method would be to employ the facilities and creit
of the United States Grain Corporation for exports of food, of

the ar Finance Corporation for ex-orts of raw materials, and rely
upon the general investment market to furnish long; credit for et:mita] for the 7uropenn industries.

realize that this plan will not work if our extorters
are required 1):T these two corporations to asaume all 'of the risks

of credit or nay of the riel- of exchange.


also realize that

these two corporations caAnot very well conduct suoh an export


business without some enlargement of their rowers by not of Congress.
If, however, their powers could be onlnrge
Iose, why would it not be a good plan to authorise the

for this pureserve

Banks to take renewal bills drawn b; or aooepted by these two corporations only, in the expectation that later on, in the case of the
Finnnoe Corporation, iosups of debentures may be made for the
purpose of paying off the bills, and in the case of the Crain Corpo-

ration either the bills be retired bymome similar

.roceas or else

notually carried in the treasury of the Corporation?
By creating a distilict class of bills limited to,these
t-Jo corporations, we would protect the System and the market

against a permanently uneound practice, and create the machinery

for Wording the prompt relief that will be needed in Furope before the winter is over.

It is quite impossible by corres ondenoe to give anything
like a true pictUre of oonditions on the Continent.

It is a most

perplexing situation which 1 have tried quite inadequately to impail in a letter and cablegram addressed to Mr.
you doubtless have rend.


]he outs anding fact is that help wllt

be urgently required from America and, while I do not fear as
7erinus consequences of failure as have been predioted by some
-eo7le, nevertheless the amount of suffering and hardship which
will occur without this aesiatanoe, particularly in centres of pe!)u-

lation, will be moot serious and will always be the danger of some
political or social upheaval so long as those conditions continue.
I do not think we can afford during the next year 'o be
too punctilious or technical in mainLaining theoretically perfect
ideals in our methods and that in the long run our own interests


will be bejt served by promptly meeting; the situation.

1 am hoping to sail for home on the "Baltic" on the 19th
and hope to yet over to ;iashington at once to give you the best
-icture I can of


I have seen.

ith best regards to you and the other members of the
Donrd, I am,
3inoerPly yours,

Eon. a. P. C. !ardinc,
0/o Pe'eral ..teserve Board,

Washington, D.C.



itz jiotel, London,

September 12, 1919.

Dear Governor /larding:

The enclosed clipping from this morning's "Tin,es' con-

tains an interesting reference to the export credit concerning
which I wrote you the other day.

The time is approaching when, I presume, we must coneider the question of our rate -,)olicy.

it is a matter which I

am anxious to discuus with you on my return ouite fully before
making nny definite recommendations to our directors.


paying that, let me send you a few observations about the situation over here as bearing upon our rate )olioy.
Commencing, I believe, at the ti-.e that Lloyd George

was Chancellor and certainly gaining impetus under Sonar, it

seems to have been the policy of the -rItish Government to borrow

chenn money and in conse,uonee, as you know, the Treasury is now
borrowing in the shape of ways and means advances about 350

million sterling and on short Treasury bills an amount fluctunt.

Ing between 315J minion and one billion sterling.

are the pabulum of the London market;

and are paid off and new ones issue

These bills

they run for short dates
every week in huge amounts.

'3o long as this policy is continued

and the Government

has such a vast amount of short faper outstanding, a gener-1 in-

crease in the level of interest rates would impose a terrible

*laity upon the TreasUry.
Under these conditions, the Bank of England loses
control of the money market unless it is willing to adopt a
policy antagonistic to the Treasury.

Therefore, while the

Bank rate continues at 5, money is freely dealt in in the.
market at

and the whole money market situation is arti-

ficial in the extreme.

Aile the London rate continues so much below our
rate at New York it is natural that pressure for loans 4.,)0Y1

the London market is so much the greater.

Before I left New

York, a partner in a stock. exchane house told me that our
policy in New York had resulted in the rate on his time loans
being marked up to such a level that he. found it much cheaper
to borrow in London.

This present situation operates greatly to the disadvantage of both markets and retards the restoration of normal conditions.

New York should be carrying the great load

of financing, even to the extent, as we all realise, of carrying the current bills drawn throughout the world for financing

So long as this transfer is artificially impeded and

deferred it would be most difficult to facilitate a restoration of the exchanges.
Of course, I realise that the chief fault is in the

system here and will remain here so long; as these artificial

conditions are prolunged.

I an wondering, however, whether,

as a result of our discussions with the Bank of England, we may
lie be able to bring about an understanding as to rates between
the two markets that will overcome some of these difficulties.
I am sure the Bank of 7ngland would be most happy to co-o erate
but the difficulty would be with the British Government's financial policy.

Early ne::t week I hone to have a talk with the Chan-

cellor about it and in the meantime I believe our own policy
at hone-may well be guided a little bit by the international
rather than the domestic point of view.
Of course, the above is for yourself and your associ-

3incerel7 7ours,

P. G. Larding,
c/o Fbderal -.deserve Board,

Washington, D. C.


FQM 61



1 t `-












lu -ilry respecting this message can be attended to without the production of this paper.
_Ogle Company's offices, and not by applying directly to the sender.

Repetitions of doubtful 'Words should be obt


July 23, 1919.

New York

Cable Number Two stop
Leaving for Paris Sunday stop

Mine announcing arrival was Number
one stop

Please cable fully any new developments

regarding gold particularly regarding
our proposal for guaranty by Grain



Jay 23, 1919.

Cable Number Three sto7


your Cbale Number one received subAcuent

to dia-:atch of rry Nutaber two sto

Understand situation and am telegra*ing

Hoover Paris to ox-:ect 1.1e *Ilnday stop

Address cables Paris care American



Benjamin Strong, c/o ::orsan, Grenfell



ederul Reserve Bank of



ew York

through Treacury Delartment, Washington
Cable Number four
aragraPh One
Indian Council desires
reopen account with Federal Reserve Bunk with ,roceeds sales of ru:ees
which Federal Reserve Bank will .)ffer in the o,sn market as and when
instructed by Indian Council or its duly autorized rsresentative in
United States.
Intention at present is to offer thirty
Paragra.,1 Two
lakhs a week more or less as the market sea-s to require at a minimum
price to be fixed by Indian Council otherwise subject to bids under
established rules copies of . which have been mailed Basil Blackett
Indian Council would from time to time maks
Paragraph Three
application in regular order for permission to make shipments of gold
to India from balance
-aragra?h Four
:Unimum rate established will enable buyer to obtain ru nee
more favorably than through shipment gold themselves and all transactions
will be for cable transfer to be handled exactly as was .reviously done
froze the Indian account
Insurance on 6old shi,ments will be effected
.aragraph Five
by Indian Council under advice to you in each case
This arrangement will result in gold shiisients
Paragral Six
from -nited States to India beirk.; made by Indian Council instead of
American banking and .rivate interests which will ,rofit by any differentia.
In their favor in rate and further because time of .ayment of cable
transfers can be figured more closely than gold arrivals 4lich can only
be turned into ru,ess after la a of four or five weeks

Inaian Council intends withdrawing fixed rate
Paragra:41 Seven
now being paid for gold on arrival in Ca_cutta which was established temporarily at Kent's roluest to .rotect bmcorters from India from un,..noIm
fluctuations Isnding a more satisfactory arrangement
aragra)h Eight 7f you consider our authority to reo en the
account is beyond question can see no reason why it should not be done
7aragraPh Nine
busine:s cable promptly

See Blackett and if you tkl.yee to undertuPe

Paragraph Ten
Mission Paris

Confer with Strauss before replying via AL..erican

Paragria.1 Eleven

will arrange terms with Indian Council

Probably remain here all this week



Cable Number Five


vending unim;:ortant messa es

anything im ortant.stvp


Your number two received stop

without code to save labor ..nd will code

Two Have cabied Hederlandsche Bank to

cdh_inhe re_,:rting :111, York stop

Suggest you re, eat oaoles t,

cure iiiasion Paris to arrive not later than

iday afterware care

national Bank of Belgium until otherwise instructed stop
through Mission regardig 11.,yments


Benj..c_in Strong, Humero 12,

Am cabling


August 1, 191.


11 cables sent

throucylt ::'tote Devartment

:e in our cotle be

r giesion

Benjimin strong,

direct and riot





We are leaving tomorrow, Thursday, morning, the 7th instant, for
Amsterdam by motor and if possible to finish up our business there and
leave by Tuesday I shall do so.
I shall attempt no re'jort on conditlomN, etc., abroad, as it would tike a staff ott stenographers and no
end of time to do the subject justice, so possess your soul in patience
until I reta.n, but do not be too downhearted about Europe.
Incidentally let ;(3 ex lain that it is slow work getting about here amd slow getting things done 4.1/1
e)uld spend three aonths or more without having
an idle moment and then feel that I hod only touched the surface.
With best regards to all at the office,
Yours sincerely,

Pierre J67, Esq.,
cjo Federal Reserve Rank,
I5 Naesau street, rc,;!

August 6, 1919.


Cable number ten

Can probably arrange with Nationel Bank of

Belgium to tae charge traneertation to London if Bank of England
unwilling sto

It will rejuire six or eight weeks to complete transfer

Find National Bank of Belgium would a:rreciate our leaving eighty

or ninety million marks on deposit earmae:ed for safekeeping in original


German coin which they 7;c.uld zare'l'ully verify examine and r(1%ert exact

weight stop
so otor)

Kent and I regard protection adequate and I recoalund doing

rtnal settleuent with Hoover would then require eetimate of

cost of transporting Auso:trit left here which care be readily done atop

See no neceestty couiting this lot
on my return stop

reserve which question earl be settled

Please toegra-Ph re -ly whether satisfactory promptly

both to Embassy at Brucaels and care Nederlandsche Bunk Ameterdam in our
cone using test word stop

Till not use test word in cables I send in

Embassy c)de



Amsterdam, August e, 1919.

Amsterdam, August 10, 1919.





Cable number twelve

Sorry have used your test words

Will hereafter

Referring to your number six

use mine

Price of rupees to our importers is now fixed by price paid for gold
by Indian government plus cost of shipping gold from United States to
India stop

Proposal is for us to offer rupees to our importers for account

Indian government at that rate or slightly less against shipments of gold
by or for account of Indian government stop

There can therefore be no

question of profit for Indian government involved and the British embargo
has no bearing on matter unless we should take the ground that the price

at which Indian government buys gold on arrival at any time is too low stop
If Federal Reserve Bank sells the rupees it or the Indian government ships
the gold stop

If Bank does not supply rupees it must then supply gold for

our banks to ship as at present stop

If price fixed b

is too high other banks would ship and not buy our rupees stop

As Indian

rupee is a silver coin the price paid by Indian government for gold will
likely fluctuate with sterling price of silver stop

I understand they are

now paying twelve rupees four annas six pies for gold but propose to
discontinue fixed rate and pay equivalent of sterling value of silver which
fluctuates with market price of silver stop

Should Indian government fix

unsatisfactory price we could discontinue arrangement stop

Under proposed

plan our importers would have advantage of immediate cable rate for rupees
instead of uncertain value pending sale of gold on arrival in India stop
Cannot see any object in our attempting to require Indian government to
maintain arbitrary price for gold irrespective of silver fluctuation which
might derange entire Indian currency situation and hamper our trade with
India stop not
Federal Reserve Bank of St. Louis

In any event so long as we expect to maintain gold market we

interested in what profit is made on gold exports by anyone and I

Hotel Ritz, Paris,

August 16, 1919.

My dear:aa Jay:
I think I should explain to you, and through you to my associates
in the Bank, but not to others, why I am making my trip to ConstantinI am
ople, concerning which I am cabling today as per confirmation.
also enclosing confirmation of cables Los. 12 and 13.
Immediately on reachiaa iaaris I fataa) that the members of the commission sent to Constantinople and. Turkey and Ammenia were sadly in need
of someone to go with the party to advise on the financial aspects of
the situation out there, concerning which our government is now about
to deoid, as to acoeptina t maudate.

It is coafidantielly advised to me that much of the whole situation
over here, including the attitude of Congress in regard to the ratiflGeneral
entlon of the Treaty, depends on what is done in the 7aet.
Harbord ail General Mcmoy, who are anina on thn Commission, have pressed
me no strongly es to the importance of the trip that I have really felt
obliged, to go, notwithstandina some little inconvenience possibly at the
My cable contemplates, however, that if you reply to Gibraltar
at once I can alter my plans and even, if necessary, levee the ship
If course I em going as a
at Tarento and return without going at all.
member of the Commission, but with the understanding that I will return
whenever I need to do so.
The arranaements about the gold aim all completed save Fame details which Mr. went is uadertaking to comalete, and I am sending all
necessary instructions to all the parties concerned.

Nr. Ient and I were both impressed with the businesslike manner it
which both the National Bank of Belgium and the Tiederlandsche Bank were
The fact La they know how to do it vetch better
handling the matter.
.1so, the willingness of the Bank of England
than we do in Yew York.
to telce entire charge is all that ee need, as they have moved a Large
quantity from both places and have men who know the ropes exactly.
The trip will not delay me as much as appears, an I shall shorten
my stay both in Paris and London on that account so as to save as much
General Harbord figures on being through about the
time as possible.



first of October.
I think it will take a lit le longer, but I need
not absolutely remain with him through the ahole trip, and if I return
after finishing out Constantinople and Tiflis I shall be back in Paris
by the middle or latter part of September at the latest, and even if
I should complete the whole trip I shall be back by about the first week
of October, or at the latest the middle of october, enabling me to
spend a few days in Paris to clean up with
hoover, a few days in
London to finish up there and than sail for home at the latest the middle of November.

This is an unexampled opportunity to get a line of the situation
in the 'ast, as I taalerstnd the Commission Ls going there with all
the power necessary and they expect to get at the real facts In the
_astern situation.

My chief hesitation in leaving is about you fellows ut the Bank
and I fear lest you may be disappointed in vacations ur possibly in
the competitive 7rogram.
a to the latter, uon't hesitate to kaiak*
a decision before my return, but, according to my view, matters can
easily be held without in any way embarrassing us because of the
amount of study reauired beforo final plans can be prepared.
I fear that Leffingwell will be put out a bit, but I am going to
send him a written report such ts he wanted from me, probably from Gibraltar where our ship will stop for one day, and I will have a few days
on the boat for work anyway.
I am glad to get some rest because we have been goiaa it pretty
I shall expect a cable from you with the greatest interest, and
in the meantiae my best regards to all at the bank.

aincerely yours,


k'aris, August 16th, 1919.

Federal Reserve Bank,
New York.

Number fourteen

At urgent request American Mission have

agreed le-ve tomorrre for Constantinople with special geveraseat missies
to that district stop

State Department will advise you regarding same

Only urgency of request lnflmenemod my ate eptaase stop


complete my part of work and be in Parts 1!side four weeks but preferable

if arrangements at office permit that I remain with party returningsbeet
October 1st stop

Estimate by pmompt return can swath

Bo/ember first longer trip by December first stop

Cable use at once both

care Steamship DeKalb Gibraltar and care of Stanav Constantinople advising
your views of returning as soon as possible or of conplettng trip stop
Gold situation arranged as follows


Bank of !,21t-lmid agrees to

make all s.rrangemmtto and handle transport both Brussels and Amsterdam

exactly RS they moved that, own from some plaoes.
London and will advise you details fully


Kent proceeding

Three Am arranging to move

saount from Brussels as suggested my cables as rapidly as insuranse and
transporttttlon onn be effected

Four lave arranged Nederlanden* Bank

to verify a natal of ten lots and continue reporting by present method

You should continue peptents until tee lets sepleted step Male

arranged that value of belongs shall be determine& remedy by weighing
inagesed small bags with aliveness for weight et toga UM' abseil* be
essasate within at least one half per oent stop

Nederlandeehe Nash

will report results by cable by same method as at present upon receipt
of Which you should sake payments to Grain Corporatism up
toe per cent as with first ten lots stop

to ninety

Five Am figuring movinc

amount of which value roughly estimated at Amsterdam at anoe and on
my return will make esoommandation for leaving some portion of aeouratel,y

estimated amount at Amsterdam for the present
Vergan &rental].



Continue mail ears

Last cable reoelved from you number eight stop

Please sable Bri, Neat in same code using his oheok words beginning

number ono ear. American Embassy London by ammo method as to me in all
matters regarding gold


If this trip seriously inconsenienses

Bank do not hesitate to advise stop

If satisfactory that I pawned

e ither wholly or in part cable address will be ease Admiral Bristol
whose cable address is Stoney Constentiaeple until ofterwilme advlsed

Believe no harmwill result in competition 0911110 but Lf you

prefer earlier decision do not hesitate owing to my Osmosis

Mr. Vaughan accompanies me stop
Woods Bole


Notify Miss Orlick sod Nether at


(ctA,A0 ev (--(7-k)
Paris, August 18, 1919.



CABLEGRAM (sent in code)
Marie, August 19, 1919.

New York
Number 15.

August 19th.

ioursnumbers y and 10 received.

Am replying separately regarding


Advise Chuob there will oe probably rive shipments ten million each

from druseeis and six or more of ten million each from Amsterdam both to London.

tndeavor to arrange insurance against all risks for ten million each

conveyance, cabling definitely rate named both to bank of England and to me

insurance shoula oe payable in dollars ana preferably all with

American insurers.

heferring .o your Number 10, paragraph 3, I confirm advicee from

hederiandsche Bank regarding instrucions ror accurately ascertaining value up
to two Lai:mired millions and roughly weitnia6 balance in page which 1 am satisflei

is sufficient.

Alio is arrangement descrima in my i.umber 14.

lou shouiu conlirm to Nederlandecne Bank oy cable as promptly ae


snail cable recommendation iatcr regarding amount to leave Amsterdam

after ascertaining amount of German rebate and amount possibly required for our
Treasury payment in Spain.

Sorry test word number 14 duplicated.

CABLEGRAM (sent in code)

Paris, August 19, 1919.

New York
Number 16.

August 19th.

neplying to your telegram Number 9

regarding rupees matter is wholly in control of our Treasury and if they
decline that ends it.

I am wholly out of sympathy with their decision which

will simply require gold :thipments by our bankers through Oanada and doubtless

make rupees more costly.




Number seventeen

August twenty one

Kent telegraphs from London our

representatives left for both Belgium and Rolland yesterday Wednesday to start
shipments and that he is cabling you regarding insurance stop
reply direct to him sending me confirmation stop

Suggest you

Also get particular. from

Treasury regarding arrangements to make peseta payment concerning which I am
cabling them


Hotel Ritz, purls,
August 21,


MY dear Mt. Rudd:
Could I trouble you to luuct up u good tyliicul collection of our

Liberty Loan posterg (not necesaarlly a complete set, but az good a
sazIle get us you cuu canmliently obtain) and ,send it with anc .A1 any

cards to ,Iongieur Edgard Rombout::, c/o La Banque Nationale de Belgique, Brussels.

ehanninz 7u4d,
d/o Federal Reherve Bunk,
15 Nags au :treat, low 'fork.


Hotel Ritz, Paris,
August 21, 1919.



Having given up my trip to Constantinople on account of telegram° received
from the Treasury about the peseta payment, I am struggling away to effect the
necessary arrangements, but it is slow work, and, without someone to look
after filing letters and attending to no end of matters of routine, Mr.
Vaughan and are pretty busy.
Letters are so delayed as compared with cables that I shall not attempt
very fully, particularly as we arc pressed for time.

writing yo'

While in Brussels one of the directors of the Banque Nationale de Belgique asked if
to have a monthly statement of the Bank sent
to him and he would reciprocate by nending us a copy of their monthly statement, which I promised to do.
Would you be good enough to arrange with the Federal Reserve Board to
have a copy of the Bulletin sent to Monsieur F. Hankur, cie League Nationale de
Belgique, Brussels, every month and put him on our mailing list for our regular reekly rtatement which is given to the press.
This suggests that I think it would be a good plan before very long to
get out a printed weekly statement, to be mailed to all member banks in our
"y boot to all at the office and to yourself.
Sincerely yours,

Pierre Jay, Esq.,
oje Federal Reserve Bank,
Nassau street, New York.



In addition to the Bulletin, will you also cause to be sent to
Mr. Hankur copy of the Federal 7l000rve Act, the last report of the Comptroller

if the Treasury and professor Kemmererle book, the ABC of the Federal Reserve
Federal Reserve Bank of St. Louis


(transmitted through Embassy)


Paris, August 23, 1219.

For Federal Reserve Bank
Number 11

August me 23.

Probably entire value of gold in Brussels and Amsterdam will be

expended by Germane for food stop

Am shi)ping three hundred and sixty

million marks from Amsterdam to Bank of England and recommend leaving
eighty million marks for present for safekeeping with Nederlandsche Bank

They will only charge for actual disbursements on understanding

we will refund compensation we have charged them for gold we hold for
their account or charge us exact equivalent amount to balance account
thereafter each earmarking for the other without charge stop


arrangements subject to Bank's approval which please telegraph promptly
if satisfactory


Your number twelve received badly mutilated am having repeated
Shipments of two hundred million marks from Brussels commence

Monday stop

If Treasury requires gold in Spain for peseta payments due

after September I should be advised probable amount at once in order to
reduce ehipments from Brussels which is most convenient for shipment to
Paris or 1,1adrid


Hotel Ritz, Paris,
August 26, 1919.

Dear Mr. Jay:

Thank you for yours of August 5, which has just reached me.
to have all the news.

I am glad

I shall reach home some time around the 1st of October and this will
enable me to sit in with you in the award and competition,, about Which
as you know I am very keen.
As to Mr. Hepburn's inquiry, the socal led Chamber of Commerce and
municipal currency put in circulation in the early days of the war in
France was almost entirely, if not quite entirely, secured in fact by
large denomination notes of the Bank of France, the paper being issued
to take the place of the small coinage, principally silver, Which immediately disappeared from circulation at the outbreak of the war.
One sees none of
am now advised that this has been entirely retired.
it in circulation in France, and in any event I believe it was not a net
addition to the paper money in circulation.

You may therefore state to Mr. Hepburn that, so far as I can ascertain, the paper money circulation in France is that of the Bank of France
and is regularly shown in the weekly statement of that institution publiehed in the Chronicle.
If Mr. Hepburn is securing information in regard to the currency in
Europe you might say to him that he is attempting to delve into a mystery, the depths and ramifications of *itch just now are beyond descrintion.
I refer of course to the currency issued by the various
countries east of Germany.
as hoping to leave Paris in about a week, returning; to London by
Amsterdam and catchin7 a boat sailing around themidclle or latter part
of September.

My best to all at the office and to yourself,

Pierre Jay, Esq.,
c/o Federal Reserve Bank,

New York.

Sincerely yours,


Hotel Ritz, Paris,
August 28, 1919.

Dear Mr. Jay:
for yours of the 8th, 11th and 13th, which have just
reached me.
I agree with you about the danger of agitating the symbol
system for checks at the present time.

In my lust letter I spoke of the retirement of tie communal note
issue in France, which I am infcrmed is about conjete.
I omitted,
however, to mention the fact that the French treasury made u special
issue of paper currency in denominations of 5,7 centimes, one and two
francs, for the payment of soldiers at the front, in order they might
not suffer the exchange losses involved in acceting the small denominations of conriunal notes.
These are still in circulation and, while
I have no figures as to the amount, I gather it is not very large in
the total.

I will try ana get them for Mr. He, burn.

I am trying to arrange to get away from here in a few days, returning to London via Amsterdam, and may arrange to see Tarburgon my way
The gold movement has started and I judge is working in good
I um just leaving to attend a meeting of the Reparations Commission to see what sort of a job they are doing.
My beat wishes to all at the office.
Sincerely yours,

Pierre Jay, Esq.,
c/o Federal Reserve Bank,
15 Nassau street, New York.


CABLEGRAM (forwarded through Embassy}
?axis, August 22, 19t9.

New York
Number nineteen.

Aqp:uot loth

Your number fourteen received atop

".metcrim. gold be chipped to London

Am instructing that all

Paragri.:711 ^f Rathbon,70s cable

'with you quote contemrlated leavinrr
all gold in Belgium


plan contemplAtee leaving ninety
million marks Belgium stop

Please ci..ble

promptly care Natinnal Bank of ?,41gium if
Bo,rd intends entire amount tLore
to be Shipped also stop
I do not agree with Boardlis
cocluiiions Lot
:I.:So insufficient time to ex7iain

situation fully by cable and get relies

Will diecuns exchange !-Jf gold
with Bank of England when I


No insurance will be placed over here and
rumors roachin8 Chubb
probaldy originated in inquiries
regarding insurance rates to Spain


Am endeavoring to leave for
Bruelela i..nd Amsterdam Tuesday
Ple.tje repeat to Brursele your cable
number twelve badly mutilated

26 ifiset 1.-e4

Paris, August




Address for cables Monday and Tuesday care Nederlandsche Bank
thereafter Morgan Grenfell




Hotel Ritz, Paris,
August ;;7,


Dear Mr. Jay:

I just have your interesting letter of the 15th with enclosures.

I do not understand rr. Strauss' reference to the large sum of
credit available through the Treasury Department, as I had understood
The fact is that the
that all credits had about been exhausted.
situation abroad is little understood at home, and I fear we are measure
ing it too much by considerations of our own security and profit in the
immediate present rather than of our greater interest in the long future.
This is indicated by your cable No. 1k just received, stating that our
directors believe that inasmuch as earmarking gold is not a source of
profit to the institution holding the same, all gold should be moved
This is not a
to the Bank of England as expeditiously as possible.
business to be measured on the basis of profit, but of the general good.
gy time is getting too short, however, to effect a radical change of
plans, and as the representatives of the Bank of Eng_and are now in
both Amsterdam and Drussels making Shipments, the only thing to do is
to carry out the wishes of the Board and move the gold, altho ,ugh later
Possibly had
I anticipate some of it may have to be moved back again.
there been time for you to receive my letter reporting on the situation
the Board would have taken a different view of it.
As to our
if we consider
to the minimum
In transit for

reserve position, I feel no concern about that, and even
the gold merely as an investment and run our reserve down
for a time that may be the wise plan, treating the gold as
the present.

Very long credits on renewal bills are beibg granted in London.
Whether the Bank of England buys them or not is a question that I must
investigate when I um in London, but I think it will be found that for
the present the Bank is not discriminating and has greatly liberalized
its policy.

I have been emAsavoring to formulate my impressions of the situatian
over here in writing.
It is most difficult to do it, and the enclosed
draft which is sent for your personal and confidential information is in
the nature of an intermediate statement pending a further visit in
Brussels, Amsterdam and London.
As the memorandum involves some criticisms of our own people (and even then not nearly as much as might be
justified from the point of view of the general good), it is just as well
for you to retain it as a personal communication.


There is one comfort I get out of the treble about moving the
gold, read in connection with your letter,- if the attitude of our
people in 'hishington is one of considerable indifference as to what
is done in revictualing Europe and starting business going, the
margin of security and stability in Europe may be reduced to a perilously narrow one, in which event I would be just as satisfied to
have the gold in London as elsewhere.
Possibly you might regard this
whole letter as confidential, as I do not want to send alarming reports hone and really feel no alarm so long as I have any confidence
that our people at hams will wake up to the need for helping out this

Since dictating the above I have had two or three talks with Frank
Polk about matters over here and he thinks it wise to send a paraphrase
of the enclosed report by cable to Leffingwell, and proposes himself to
cable Secretary Lansing asking him to ask the President to give it ooneidoration.

My best regards to all at the office.
Yours sincerely,

Pierre Jay, Esq.,
c/o Federal Reserve Bank,
15 Nassau street,
New York.

133 /V

P.E. Enclosed herewith please find confirmationo of my cablegrams Nos..
14 (two), 15, 16, 17, 1i. and 12.


ZT)-A-11 3


The following impressions and conclusions result from discussions
with various people connected with government and in private life, at
London, Paris, Brussels and Amsterdam.

They do not relate to bolshevist


The political and economic situation in Europe iatoo vast and complicated to be summarized graphically or to justify attempting to state
one comprehensive plan of restoration.

Many year: of hard work, produc-

tion and economy will be needed to bring rehabilitation and political

leadership and
by outstanding impression is that there is lack of

People in authority are exhausted, apprehensive and relaxed

the strain of war.

During the period of hostilities the common danger

made cooperation and unified leadership necessary.

When war ended and

the Peace Missions arrived the individual interests of each nation superenforcement
seded the common interest, greatly delayed the formulation and

of treaties and produced antagonisms and jealousies.

Even after unity

Precident,of action was lost, the Peace Missions,- and principally the
for a time exercised a certain control of the dolitical discord
treaty with
the nations, but this control was effective only so long As the

Germany was in preparation.
gradually disappearing.

With the treaty formulated, this control is

The result is seen in the disorders in Silesia,

Rumania, Hungary and elsewhere, and at one time in Serbia and Poland,
which have somewhat discredited the principles of the Peace Treaty

seriously interfered with the restoration of the political tranquility
essential to the resumption of production and trade.

It has been the


universal expectation that the influence of the League of Nations would

eventually control in these matters.

The League of Nations is not yet

functioning and the delay or refusal of ratification of the Treaty by the
United States Senate will result either in a barren league or one incapable just aow of harmonious action because of the jealousies and selfinterests of the European nations, minus the stabilizing influence of

The principal organizations which must be relied upon to deal with
the European problem are as follows:

The Peace Commissions and, under them, the subcommittee recently

appointed to take supervision of the execution of the treaties.
something like fifty


more or less permanent committees established in tee

Treaty with various executory functions.

The League of Nations organization.


The Reparations Commission and, under it, the remnants of the

Supruae Economic and Financial Council, which will act in an advisory capacity to the Reparations Commission.

The organization of the Oeaca Comaissions is gradually being withdrawn; the Reparations Commission has not yet been permanently established and so far has not secured 4 firm grasp upon the economic situation.
Botweon those organizations the responsibility for establishing etable
conditions must in some way be divided, and, in the aboenoe of properly
functioning organizations, the new nations of eastern Europe are struggling
in a quagmire of doubt and disorder and anxiously appealing for help to
Americans and the American government.

Likewise the people of western

Europe are appealing to their governments for paternalistic assistance
Out of an intolerable situation, when individual effort and hard work
Digitized forshould be directed

and organized to produce results far speedier than


through bureaucratic slow-moving machinery of government.

During this

fried a stabilizing iafluence has been the various Allied and American
relief administrations, with representatives scattered throughout Europe
organizing the distribution of food, opening up avenues of transport and
communication and using the power of control of food supplies to restrain
disoroer within and between the nor nations.

With the gradual withdrawal of the Peace Commissions and of the American Relief Administration, it will become essential that the committee aopointed to put the treaties into effect, the League of Nations unci the

Reparations Commission shall function promptly if political and economic
conditions are to be influenced toward more speedy recovery.

The action

of the Committee on Foreign Relations of the United States Senate in eliminating representation by the United States on all committees created by
the treaty with Germany, except the Reparations Cammiosion, will render
the work of those committees exceedingly difficult and greatly retard its

The condition of moot of Europe is neurotic, due to the long strain of
war, the relaxation following its conclusion, and probably to some extent
to underfeeding, particularly in the Central powers.

During hostilities

government control was necessary in all departments of life for military

Government control, if too greatly prolonged, will deprive the

individual of initiative and the stimulus to work and will retard recovery.
In general throughout Europe and particularly in France, a great wave of
extravagance has developed on the part of those who have profited by the
war; which is harmful in its moral effect and makes the cost of living
greater for the poor.

An army of heroes paid by the government suffers


seduced inclination to work, and the labor of German prisoners under
French suoervisian appears to be deficient and ineffective.

There are

altogether too many soldiers in uniform and there is too much loafing.
A striking exception to this condition is among the nr,ricultural class,

the peasantc of France and Belgium having returned to their land, particularli the women, and apparently being willing and able to work incessantly
to produce crops.

I understand this is eo in eastern Europe.

In a word,

conditions can be summed up by stating that the war has made many people
rich who are now extravagant beyond anything before known on the Continent.
Unwise government finance coupled with this extravagance has greatly Incise:160d tie coat of living to all and to the poor in greater proportion.

The burden falls heaviest upon wage earner° and those

fixed incomes.

ine social problem is to Bo readjust government finance, monetary conditions,

taxes and prices that the wee earners and people of anal fixed incomes
may be restored to tolerable living conditions.

It is from thea that dis-

order will arioe, If lank of food and heating, combined with idleness, make
their condition intolerable this winter.

All the belligerent governments of Europe have borrowed too much on

short paper, too much from their central banks, and, with the exceAion of
England, have not raises: sufficient taxes.

all issued too much

eLper money.

Including England, they have

Europe is flooded with a depreciated

currency, particularly in the East, and of so complicated a character that
the exchanges present ulmost insuperable obstacles to the conduct of trade.
Gold is completely out of circulation but silver is gradually reappearing.
The situation in France is not reassuring.

The government has issued, I

um told, ke,00,000,000 francs of short notes and has borrowed large sums

fLoe the Ban% of Frence, which now has outstending 36,000,000,00e francs
of currency.

Great Britain.

France is also heavily in debt to the United States and
The electieno approach in October, which will defer the

soundest meesure looking to recovery, nemely, heevier direct tuxes, until
early next year at the best.

The remedy for dieoraered finances and eur-

rency ieprocietion cun only be production, economy and taxution.

In my

epinion wholesale meesuree for the Immediate reduction of currency inflation would not be cafe just now because of the enormous readjustments en-

tailed and because to be euc:essful the reform should extend throughout
all of Europe.

For us to require payment of interest, not to mention

principal, of the foreign debt by France and Itulse, :er even England, may

be the cause of serious embarruesmeut if not default uudor preeent conditions.

I understand the bonds of the city of Furie due in November

could recently be sold at hardly better than 2:: in :lea York, indicating

the extent of distrust of French credit.


The most hopeful sign of recovery in Europe is the continued attachment of the peasants to the soil and the indefatigable energy with which
they seek to restore cultivation.

The devastated areas ure being grad-

ually recovered and will soon be entirely restored except in those places
where the soil has been so torn up that it becomes an engineering problem
beyond the physical powers of the peasant.

But these areas are not very

great, as the points of greatest military resistance generally developed
in strategic arena on hills, in woods and in cities or on lines of trensportation, where the farming areas are the :smallest.

In France and Bel-

gium the women and children are largely making the crops, frequently
without adequate drought animals and farming implements.

I au told that


the same is true in Italy and in eastern Europe.
frmed by eyewitnesses that

In the latter I was in-

hr.:lance fields of wheat are now being harvested

harvesting machinery and draught
by women with sickles in the absence of
this year's her But as a whole, it io generally believed that
vest In Europe will be not over 7)% of pro-war normal.



Duro2e depends upon the
The restoration of industrial production in

following factors, assuming that food is supplied;

Labor tranquility, supplies of raw material

cotton) and increased coal production.

Restoration of destroyed industrial plants in the
departments devastated by war, which have been almost

wholly denoliohed or looted by the Germans.


nine, cut of the 36 departments of France, formerly
produced 16 per cent. of the taxes paid by the

Su,vliea of coal are now seriously deficient and large
umounto of raw material and improved labor

not us bad in
are needed; the latter are probably
France as in England.

Some aid in restoring destroyed industries, where rethan in France;
covery, however, is further progressed

supplies of raw material and some increase in coal production.

Labor conditions in Belgium are apparently

not bad.

Supplies of raw material, animal fodder and coal.

Its lyt

Speaking only from hearsay, I gather that Italy

needs raw materials.


The East:

Here many industries have been destroyed, raw materials
are entirely exhausted and, while labor conditions are
not reported to be bud, truns:ertation ie hopelessly
confused and inadequate, while supplies of coal are so

deficient that many cities cannot be lighted nor factories operated.

The immediate pressing necessity is for coal, Lae shortage of which
is widespread throughout Europe, and for machinery and reconctruction of
the destroyed plants and for the raw materials with which to operate them.

Outside of coal, which cannot be imported from the United States in quantity, Europe looks to the United States to furnish the bulk of these requirements beyond *hat Germany Is required to give as reparation.

I believe there is ample railroad equipment to serve western Europe,
much of it, however, needing some repair.

Throughout all of :Trance

railroad roadbeds need much work to restore them to good operating condition.

The canals of northern France are many of them out of operation

entirely, some of them drained und completely blocked with sunken boats,

with locks destroyed, and needing much work to restore operations.
work, I um told, is being pushed.


The main wagon roads, as a rule, have

been partly, and in many cases wholly, repaired and are not in very bad

Telephone and telegraph lines have been greatly reduced in

number and efficiency because of the war and communication by telegraph,
tele:Ilene and mail is slow, inefficient and bad.

T understand that the

railroads in eastorn Europe are largely denuded of equipment and motive
power and are in bad condition.

All the railroads face difficulties of

operation through coal shortage, and train services are now being reduced



Upon this problem the attention of Europe and the United States must
Alkoentrate if serious suffering is to be avoided this winter, when a food
shortage may be coupled with inadequate heating.

Holland needs fodder for

cattle and from six to eight months su,,ply of foodstuffs from outside.

Estimates of Italy's reouirements vary tremendously, from a Usti of
20,cN7'0,00 (` plus

freight, making A00,000,000 from the United

States, being the official government estimate,- to M9,000,000, which is
Mr. Hoover's total estimate for Italy of the basic foods alone, namely,
grain, fats and meat and augur.
for the other nations.

Similar variations occur between estimates

Belgium's needs will not be heavy in total, and

probably for all requirements, food, materials, etc., from one to two hundred million dollars will suffice.

I shall not quote figures in detail,

but Mr. Hoover privately and publicly states that there are
people to be fed in Europe in excess of that domestic production will feed.
His estimate for Italy is about :1!" per ca ; :ita of food to be imported,

government's estimate (needed from the United States alone) being about $10
per capita, at which rates Mr. Hoover's estimate for all of Europe would

food imports of a value of a billion

a billion and a half dollars, if the

Italian figuree are reliable and represent en average.

Germany has just

submitted figures indicating that there is a great deficiency ill fats to
be made up, which miL:ht require an increace in these amounts, owing to
present high prices.

Eastern Europe will probably produce enough grain

for its own requirements and in places some surplus, but they are deficient
accentuain packinghouse l)roducts, and the difficulty in eastern Europe is

ted by complete inability to make foreign parseete, by uncertain national
frontiers, and by the political distrust of neighbors which makes trade
over the border in some cases difficult or even impossible.




The deoline in values of Turopean currencies measured by the quota-

tion for doll ere hue had a depressing effect uonn the people and upon the
credit of all the notions, 'Exit is deere:eping a realization of the neces-

sity to work and prodece.
in ;builders.


hda even reachod Holland, due to the decline

Ono reeult is tc mate the United States the dearest buying

market for Europe, *itch is natisfuctory ae it applies to luxuries and unfortunate ns it aepliee
mentn1 and private.

neceseitiee nad to eeietiree debts, both govern-

The answer ie restriction u2on unneceseery imports by

Europe, long credit for neceeeit:.ea awl relief from the iemediate payment of
the principal and interest of debts hold by our government.

Further relief

will be af::orded by extending credit f:ur use in other markets where nacos-

aitiea can be purchaeed cheaper and transported more promptly.

To contemplate requiring the Allied aations to pay' the interest, much

less the prineipei, of the preaont debt just now in unthinkable.
bankrupt Europe.

It might

The interest must be capitnlized so ae to relieve payment

for from three to five yeare, and amortization peymente should not commence
for from five to eight yenre.

The morel effect or this would be immense.

If, in addition, a uoheme of debt rendjuetnent could be ;Adopted by which

we would accent in port eettiement by England, Franee and Italy, some of
tne debts payable to them by Uio other Allied and by Geniuny, it vould
encourage and help restore confidence.

The Treaty contampletes reconstruction by Gen ten labor and materials
in the devaetuted regions, es well as peritente by credits or exchange.

The furnishing of large amounts of labor, material, machinery, etc., by


Germany without comoensation will greatly retard her recovery, and no forrsula seems to }lave yet been devised to regulate this work.

theories (stated in extreee) of treeting Germanys

There are two

Inc permitting her

to develop production and exports 30 as to enable her to make reparation
payeents both in cash and in labor and eateriels, and the other is for
the Allies to preempt the trade of the world so as to make the profits of
the trade, but in consequence to redsce Germany to insolvency and poverty.
Tradiag nations like England and the United States might selfishly regard
the latter as the wise policy.

..'ranee and Italy would probably prefer

Germen restoration and leree reparatIsei payments.

The theory upon which

reparation is exacted and the method by which it is conducted will largely
determine the economic future of Europe.

For the ineediate future the re-

quirements upon Germany should lareely be limited to the restoration of
destroyed industries so as to enable France and Belgium to resume production
The rebuilding of destroyed cities and residences should be deferred until
more pressing mutters are dealt vrith.


Germany owes amounts variously estimated at from 075,000,0e0 sterling
to 2,7460,00,700 marks, to the citizens of neutral countries of Europe,
who are concerned lest the reparations provisions of the Treaty render their
debts uncollectibie.

Many of them are in position to assist the feeding

and restoration of Europe, and an understanding brought about through the
Reparations Commiesion for a just treatment of this debt might throw the
economic weight of the neutrals into restoration work to an extent not now

The most


favorable condition now observable is the agricultural recovery


and the stability in general of the agricultural population.
he people who will resist the spread of bolshevism.

These are

They aro proerty

owners and producers and the value of their production readjusts to the
cost of living.

There are numerous evidences of a waning of the boishevint movement.
It becomes obvious that the threats of labor are not ultimately carriod out by erganizeu violence, but generally result in compramiee.
There is a growing appreciation of the necessity for financial and
monetary reform by all the nations of Europe.

There is a crowing conviction that Europe's recovery doenda upon
lecreaso of production and the prae'..iee of thrift.

Unemployment is actually decreazing and unemployment wagoe correspondingly.

In Belgium it has been more than cut in half, and in France

large numbers of tho army are being demobilized thin month.

We entered the war because of German aggression and the war was
brought to a conclusion largely by our participation and following the
formulu+ion by our President of the doctrine of self-determination along
natural and historic lines.

As a result, new nation° have been created

now governments have been formed for old nations,

based upon democrat,-

is or even socialistic principles, at the invitation or by the insistence
of the United States, and largely in conformity with the formula under
which the war was ended.

The danger, political and economic, to Europe,

and morally to the United States, is that we shall now desert Europe,- not
only our alliee, but even those new nations,- and leave the latter to their
fate literally before they are weaned.

When we entered the war we assumed

not only military but also financial, political and moral obligations to

Europe which cannot and must not be arbitrarily teneinated by the conclusion
For the United States to withdraw at the present time and under

Olof peace.

?resent conditions would be an act of cowardice and would make us a despised nation.

The whole situation abroad might be sumeed up by stating that the
firstrequirement to insure political end economic recovery is the ratification of the treaty of neace with Germany, which our Senate is now reNext, the creation of the League of Nations and the Reparations


Commission, hich our Senate is likewise retarding.
is that food

The next requirement

raw materials and machinery be furnished pramptly and upon

long credit in such form as to enable Europe to buy in the cheoelest markets.

For these requirements Europe now waits upon the United States.

Again, u generous treatment of the debt to the United States is ureently
needed so as to postpone immediate eeymentsof interest or principal, and
here the obligation likewise rests upon the United States.
It, would indeed be hazardous to predict developments next winter if
food is not supplied.

The murgin of safety between present conditions

and revolt and disorder is now too narrow and the margin will be further
reduced with cold weather.

While there is certainly danger that the mar-

gin will be insufficient, my present o2inion is that there should not be
the complete collaese and disorder which hue been freely predicted.


Europe faces a period of intense suffering, the hardships and duration of
which depend upon the degree to which the United States extends or refuses aid.

The United States hee an iueense prestige and vast material interests
at stake.

interest which we pooscse, domestic end foreign, will

be favorably or adversely affected accordiee to the extent to which we
 to the





London, September 9, 1043 1919.

New York


Number 20

September 9th

Received your Noe. 15 16 17 and 18




Have informed Bank of England your arrangements insurance
Also have instructed Bank of En,;land to ship total amounts from

both Amsterdam and Brussels
Difficulties shipping from Brussels to Madrid and inconvenience


Bank of England in case of later shipment to London necessitates this

Please arrange insurance additional ninety million marks

telegraphing me promptly on completion
5. Care used in handling these shipments justifier asking underwriters further increase to ten million dollars each shipment *dch
will greatly facilitate completion

Received from Nederlandeche Bank a copy of cable reporting result

of rough weighing gold.


Please telegraph your calculation value and amount

paid on account

Will make thorough investigation Argentine matter


Paragraph 4 my No. 19 as follows quote

Brussels and Amsterdam Tuesday

Endeavoring to leave for


Your No. 11 not been received

Please repeat it if important

Will sail Baltic September 19 unless I cable otherwise


Pa.- 2.

The Beek of En .land
cessity soee business of that kind has been done.
At the present
has not excluded these bills but does not favor team.
time the British government has urrsnged a plan by which British merchents may extend three -year creaite to customers in certain ef the new
&Astern countries up to a total of +128,000,000 sterling, the credits to
be in threeemenths bills with renewals, and the bills, I understand, are
to be purchased by the British government and the merchants guaranteed
The Bank of blend does not exeect to buy
ageinet lone of exchange.
I shell endeavor to get more details of this arraegemout.

The Bunk of England's position is that Englund can ne leneer afford to extend credits covering trade between other countries ead !suet
be satisfied to do less financing of that Character during the period
of releperation from the war, but on the other head Cokayne sees Chet
our situation le vastly different and he seems to think that with our
great strength enrI our interest in rebuilding Europe and startine trade
going we might well afford to adopt a more liberal, policy provided it
GOWa be carefully reetr!eteel end not beceeee a eereeeeut policy after
the need had passed.
I asked him, were he in our position, how he would reel about enlerelne the .owerc of the Federal Reserve Bank so that we lif;ht buy
remind bills or longer raper that are accepted by or drawn by only the
War Finance lerperetien end the Grain Oor,eretion ugaiast exporta of
raw metorialn end foodstuffs, so that the operation of longtime credits 'toad be ?Jetted to merdLendiso relief extended thruueh thoee oarporatione.
He seemed to think thet eneld be an exeeli.ent eolutien
of the difficulty.

The eore families I becoee with manors QVGI" here the more satisfied I am that we must not bind ourselves down with e lot of fixed arbitrary rules in these !utterer oat toeve ourselves e certain freedaa of

ection eed see how =Atom develel.

Ur. Kent (0)4 wetters returns possible ,JW. I up with a lot of correspondence
tho is ewey but end if tonleht oaten hope to finish up all
now in arrears.

With this I am onclonine confirmation of my cable No. 20, this day
sent the Eank.
I am ;leaning to sail by the Baltic on the 1eth unless unexectedly
delayed, but will cable you duly chun6e in plans.

pleasegive my best to all at the office.
Yours sincerely,

Pierre Jay, Esq.,
c/u Federal Reserve Bank,
15 Nassau street, New York.

(1 enciosure)





Possibly I told you that I h-d one talk with Governor Smith in regaxi
to the possible need of same legislation in New York state to liberalize
our state banking laws, and he mooed to be sympathetic with the idea,
suggesting that the best len would be for me to mast him with Senator
It is a question in my mind
Henry Sage and Mr. Sweet, of the Assembly.
whether the matter should be 1:40an up in some publio way or whether we
should rather explain the situation fully to the leaders in the state
legislature as well as to the Governor and get them to make the legislation which may be proposed a part of their regular legislative program
and put it through as such.
Lord Cunliffe toile Alo that while it has been more or less traditional with the Bank of England to restrict somewhat the operations of
foreign bunk agencies in the London market, in other words to take steps
as a bank for protecting the market, which had not been taken by law,
nevertheless the weight of London banking opinion favored permitting
the establishment of these branches in London without burdensome restriations so long as they were subjected to at least the some require
wants that British banks were , in making reports, etc.
He told me
that their experience with the gnaw bank agencies had been enlightening.
The Deutsche Bank had carried sufficient assets in London to
cover their liabilities in this market, but the Anglo-Austrian Bank had
done quite the reverse, and when the agency was taken over by the British
after the war started it was found to be a hollow shell, all the assets
practically having been reioved, and, while he did not say so, I inferred
that there wore some substantial losses in this market in cense:Ilene°.

There is very little British law regulating thew matters.
I think
you will find
there is on the subject in the Bankers' Almanac, which
can be purchased In New York, and possibly aoraothirk; in addition in the
Companies Acts, which can be obtained in any law library.
This is a
good illustration of the British method of doing business without a lot
of legal restrictions and regulations and depending upon common sense to
do the rest.
I hope the above answers the inquiry c ntained in your cables.

I an dining with Sir Felix Schuster tonight and oxect to get
some more general information from him, which will be reliable, as I
believe he is one of the best posted bankers in London.
With best regards to all at the office,
Yours sincerely,

Pierre Jay, &sq.,
0/0 Fedora, Reserve Bank,
15 Naseau street, New York.



Hotel Ritz, London,
September 10, 1919.

Dear Mr. Jay:

Referring ag_in to the Argentine mutter, the Bank of England has
been good enough to furnish me with 4 copy of a very private and confidential memorandum containing recommendations for legislation, which
In brief, and quite
fully confirms what I ,!rote you on this subject.
in confidence, the only restriction proposed by the raeuorandum to be
imposed upon branches of foreign banks desiring to do business in Grout
Britain is that they shall register, that they shall actually do business of banks, and that they shall publish regular re, orts in the preAs the rePower is retained to revoke the licence.
scribed form.
port has not been submitted by the committee, it is handed to me in
great confidence, but I shall bring it homeefor you to study.
isn't much more information to get, but I shall look over .vhat legislation there is on the subject before returning so -s to have about all
there is.

Very truly yours,

Pierre Jay, Esq.,
c/o Federal Reserve Bank,
15 Nassau street, New York.


London, September 12, 1919.

:o, 21

beptember 12

Referring to your

September 13


19 Bank of England will

advices every
Do you wish regular cable



calCO paragraph 3 have you
twelfths fine and value
of sovereigns as eleven
culated value
}'figure you
net weight as 100 per cent.
of bars at
r:e nine tenths
you assune entire amountto
report indicates

Referrin. to your

fine rold

Referrinp to your


14 paragraph 2 I am discussing

which I recommend, to deliver
witn -aink of Englan dplan,
shipment to India
instead of i;ewYork for

told in London

sales of rupees by Indian
against payment to us proceeds
This will avoid unnecessary
government in
-atter will probbe convenience both parties.
r-ovement end
of Into you by American representatives
ablybe submitted
Please telegraph promptly if
dian government.
meet ;;our

"3T R0i;G

London, September 15, 1919.



New York
No. 22

September 15

Referring to your No. 21 have advised Bank of England total

insurance 3184,325,000 and limit for any one conveyance $7,500,000

Do not recommend increasing balances in London and Paris at


Have arranged to exchange 12608,000 sovereigns held in Amsterdam

for like amount in London saving shipping.

Exact figures will be re-

ported later


Leave London Friday morning sailing in Baltic during the afterPlease advise family.

Please communicate direct Bank of Englad

thereafter regarding sold shipments.

Please arrange with Treasury to

facilitate landing if possible.



London, September 16, 1919.


New York
No. 23

September 16

Replying to your telegram unnumbered,

paragraph 3 of my No. 20 meant that shipping from Brussels to Madrid

for the purpose of peseta payments would be difficult and expensive.
Also if arrangements will be required to make such shipments later it

would cause great inconvenience to Bunk of England to recomence entire
procedure after first shipments had been completed



London, September 18, 1919.


New York
No. 24

September 18

Your Nos. 22 and 23 received


Will arrange Bank of England to cable advices desired


Greatly regret decision count gold as reserve and hope not

too late to change and carry it as gold in transit

If amount already transferred cannot be changed suggest holding

balance as transferred out of reserve

transferred to Mauretania sailing September 20

Please advise family and Treasury




London, July 24, Q0(10

For Leffingwell

Have received warm welcome stop Leaving for
Cable number T one
Paris Sunday and probably not returning London until middle August atop
The following is important stop Strong sentiment among responsible
people in City that present indefiniteness of terms of British Government
This is much accentuated by relent
debt to us Is a latent nenace stop
decline in sterling coincident with our discontinuance of further credits
atop The imminence of actual payments of interest on debt heretofore met
out of our Government advances gives rise to fear t.,at difficulties with
American exchange will increaze and this autumn is regarded as probable
critical time stop Llore relief would be afforded to i_reeent anxieties
here by some definition of terms of debt which would relieve this anxiety
than by anything else we could do stop
Whether justified
regarded as holding a club over a partner which we would not use but
which nevertheless c,uses uneasiness stop This feeling is aceentuated by
York miners strike which may cause cessation of coal, exports that formerly
reached seventy millions sterling stop
You may regard
time to :-rivately develop the program we discussed stop
Of course I have
made no suggestions here and will not atop Cable me suggestions of any
information you particularly desire sto

July 2 5, 1912

Dear Leffingwell:

Encbosed is confirmation of a cable which I sent you through Ambassador Davis, in the Embassy cods, and which may astonish you a bit; so
I am writing you an explanation.
After talking with the officers of the Bank of England and with
a very able, intelligent and thoroughly reliable newsaaper man named
Kiddey whom Norman invited to his house for dinner for the purpose,
and after talking yesterday with the Chancellor, I am convinced that
the immediate task now ahead of us which will help conditions over
here mare than anything else is to get some sort of a. definition of
tae terms of the debt of the Allies to the United States, and :articularly of the British debt.
I shall not attem,t to reaeat conversations in detail, but there is undoubtedly in existence hers a
latent underlying feeling that the Allies have made the great and
most vital sacrifices in the war, both of men and finance and in material damale suffered; that our sacrifices have been slight and our
arofits imvense, and that the existence of this great debt due on demand is a sword of Damocles hanging overtheir heads.

The -remiun on dollars, now increasing so rapidly, gives them a
feeling of great concern as to how they are to meet the interest ayaeats, particularly t2-is fall when they feel matters will :ore or
less reach a crisis, without raying so heavy aenalties as to be emlarrassing and humiliating, and to contemplate going into the market
to raise stoo,00n,oco in exchange, at present rates and under present
conditions, is retaly 4 cause of great anxiety.
I saw the ClaIncellor gesterday under the following circumstances:
Tuesday night Governor Cokayne had a meeting with him and told him I
was here, and he sent ward to e through Governor Cokayne that he hoped
I would be sure and see him before leaving for Paris and finally made
an apointaent for I, o'clock yesterday (Thursday, the 24th).
We had a
chat of about an ho.r :.old a quarter, much of thetime rem y discussing
matters of mutual interest such as our rogram and theirs, taxes, reconstruction, etc., etc.
I have made no suageetioas nor have I in
any way disclosed our views or feelings exceat to state that England
and the United States must in some way preserve good relations and
work together; that themeane must be found to overcome the difficulties in the way of getting investment money from America to help proper
reconstruction work, and that now that the treaty with Germany is formulated it might be well for these discussions to take place at Washington with thoroughly resaoneible people there for the purpose.

did point out how important it was that Great Britain should be well rep


Dented at the Embassy in Weshihgton when Reading's .lace is filled, end
how imeortant it was that we should both be well re; resented on the Reeerations Comeission.
As to the latter, he assured me that if the man
140to whoa the osition had been offered would &met it we wou d be thoroughly setisfied.
He eede no referee° to a definition of the terms of
their debt to us until about as I was leaving; it
u2 in response V)
my inquiry as to whether there were eny ;ending teazles between the flmAncial deertments of the two governments that were unadjusted and
ceusine difficulty.
This led him to remark that as to the debt he
thought it would be in:roper for the debtor to aeroach the creditor
with proposals.

You mey be sure of my discretion in discussing these matters with
him, or with anyone else, but I can see the need of prompt treatment of
thie :eater.
Possibly you will consider thet I have changed my views
because I reca,1 stating to you that I did not think it was our duty to
epproeoh the debtor.
In that I believe I was wrong.
I gather by ieelicution that there is o. fee.:ine here that we should
try end have soma ca ecelation of debt all around.
It was too indefinite
for !Le to su,gost any eerticulars, end it is hard to say how such a
celation could take elece without an actuel reduction in indebtedness duo
us, which-is not to be contaaelated, in my opinion.

7 em sending this letter in the Embassy pouch.
It is quite informal
and confidential, but I thought you would like to have a line on how
things are going.

Englend expected me to make my
ld friend Formun took me right
ce errival.
They have eede
est possible deoire that in
elend should be strenethened.
ave betreved so little of that
s their need at the moment.

up until I see Hoover in

doubtless soe much in dr...0

The difference is over
ernment sewas to leave played
workers have broken away
ather unreasonable demands.

the strike for political
of labor unions at a meethe strike be used to farce
withdrawal of troops from

The picture of the situation here, as I gather it from only a few
days visit, is really distressing elongside of our situation at Hasa,
10, and naturally one's syl:kathies are aroused.
I cannot believe, And
so far have received no evidence to justify the beAsf, that any such
condition exists as Vanderlip pictured on his return.
There is not time now to write you as full; an account of some of
these matters as I would like to, but when I reach Paris there will
be, and I will write you through the Ombassy at length.

With warmest regards to all in the Treasury, and ?urticularly
your good self,
Faithfully yours,

Hon. R. C. Leffingwell,
Treasury De:urtment,
Wushington, D. C.


qtHotel nit!,



Dear Leffingwell:
Had 3 4 small regiment of stenograi;hers with ;Ap and an am;,le

of time I could write you volumes of interest about things over-here and
many amusing stories and I had already pre_ared an unsatisfactory Cable
which I am not sending, ..artly because I have reason to be..ieve that
even cables in code are scrutinized and partly beeatuse no cable oould be
much better than misleading.
This will be a :most disjointed state-Ant X my impressions at the
moment, with a distinot warning that they are liable to chan-,e as I
travel about and jok u.; information and Lather new impressions here and

I did cable you through the Embassy at London about the debt, because I found such a very strong feeling of uneasiness, and with some
The Eng_ish
justification, that I felt you should know my impressions.
bad17ers and business men want to know where they stand financially with
America and whether they will be ex2eoted to add to their ?repent difficulties in exchange by being obliged to take out loge amounts of dollar
credits for interest in addition to taking care of maturities of loans
other than governmental, and, over it all, with no certainty but what we
might impose severe terms of payment of the principal which would imperil
their Iosition.
.'.orst of the really levelheaded able man that I met,
like Cokayne and Norman in the Bank of England, Sir Charles Addis and
the Chancelor,
Austin Chamberlain, do not expect forgiveness of the
lindersley, who is a director of the Bank, is the only man who
positively stated that AA)rica would vastly gain in grestige by forgiving
the debt of the Allies, and he admitted that the sentiment c.rang from
his heart and that ghile it would be sentimentally a good thing for America and add to our 2restige, it would be a bad thing. for Engiand and the
Normun frankly said, "Pay no attention to Kindersley; his
heart rules his head".
The Chancelor, with whom I s,ent an hour and a
half at his invitation, never mentioned the subject until I was about to
leave and then confined himself to the statement that he thought that
suggestions on the subject of the debt should originate with the creditor.
In general it is fair to say that Znglishmen whom you and I would
meet in our daily talks feel that EnLland, both rich and :Dor, should
work, economize and pey their debts, but English business Lien say that
the government is making it hard for them by clumsy treatment of the
labor situation and particular y by unemployment wages, which promote
Almost wIthout exce:tion they say that England will stagger
out of her dif iculties if they esca e serious labor troubles, and the
Chancelor frankly said that he thought the time was shortly coming when
they would have to have a real test of strength with strikers who were

R.C.L.- 2


He referred, I believe, to the efstriking for unreasonable deiands.
fort being :wade by the "Triple Alliance" of labor unions to employ
strikes to force the government to withdraw conscription troops from
the army and discontinue conscription service, as well as to force the
withdrawal of all British troo_Js from Russia, in other words to use
the strike weapon for political objects.
Englishmen are all concerned about American competition and the
air is filled with rumors of American ban': ore opening credits and

American manufacturers making contracts abroad in marets which
There is much discussion as to whether
England considers her own.
England should incur further foreign debt in order to extend credit in
turn to purchasers of England's manufactured products in foreign countries.

There is also among business men a thorough distrust of the government in its proposed war policies, which they say are extravagant
Natand visionary and largely subservient to thelaboring classes.
urally a letter like this contains reports of disagreeable things.
my own impression from it all is that Englund, while having considerable labor troubles ahead and a tremendous curtailment at the moment
of her export trade, will nevertheless in the long run make the best
showing of any of these Euro,ean countries, possibly barring Belgium.
I do not believe they will need ',7iuch in the way of credit from us,
with the possible exception of some eecial treatment of cotton and a
They have immense
fairly generous treatment of their debt to us.
troubles ahead of them, the housing problem alone being most perplexing as they claim to have had a Shortage of adequate workmen's dwellings
of at least >^(7,,n00 before the war started, which has been increased
to 525,-,...n in the last five years, but on the whole I do not worry
about England.

The Continent, however, is a different story and it is quite impossible to begin to give you even such impressions as I have formed in the
four or five days I have been in Paris, talking principally with our own
oeople but to some extent with Englishmen and a few Frenchmen.
Undoubtedly the latent impression in England, which is only expressed by one's
closest fr:ends, is here very strong although people voice it rather
that the United States made vast fortunes out of the war
and very small sacrifices of men or treasure compared to Europe, and
that now in Europe's hour of real need the United States gives evidence
of an intention to abandon lurope to its fate.
This feeling is so strong that even the general exodus from the
special organization here when the President returned created a very
bad impression. -With our great wealth of resources still hardly touched,
they look at us with envy and I think that many Frenchmen, as doubtless
do others on the Continent, 'relieve that we should forgive their debts.
I have some ideas in my mind of a way to deal with this situation,
but am not yet ready to express them, certainly not in writing, which
always has n look of finality of opinion.

We have discussed the European situation geographically so frequently that I think I shall follow the course of our former discussions.
The real key to the political situation, I am sure is just what we

Agreed, namely, the new countries created between the Baltic and the

R.C.L.- 3


I gather in talking with Englishmen, with Mr. Hoover, Mr.
Black Sea.
Stettinius and, in fact, a good many capable people, that the difficulties
there are much more *ore largely political, governmental and social
Mr. Balfour said at the luncheon yesteraty that
rather than economic.
he was not sure whether there were 22 or 23 wars in progress in that part
of the country and the situation is so complicated with racial antagonisme and ambitions and with the interplay of all sorts of political conThe
siderations that I shall not attempt to describe it in detail.
main underlying fact is that probably by next year, and to some extent
this year, a large section of that country will have a surplus of food
products for export which could be delivered in exchritne for needed
manufactures were it not that race antagonisms, local fighting, interrupted transportation, completely disorganized currency and banking
and a discredited credit position have to a great extent reduced trade
to barter.
I can illustrate tlis by some stories that Mr. Hoover told
me of his trades.
In one Ca ©e he sent a cargo of miscellaneous goods -ploughs, stoves, cooking utensils, cloth, thread and needles which

cost him $500,000 aid which he purchased princially from the army, to
the Black Sea ports and actually sent it inland with his own people and
got in exchange $5,C00,000 worth of wheat wich he sold in western Europe.
In another instance he traded two half brokendown locomotives for
2,000,000 eggs, and in still another instance he arranged a trade between the German-Austrians and the Serbs, the latter furnishing 50,c00
tons of grain in exchange for a steel bridge maul CO,4000 kronen of
paper money which was s:ecially printed for the purpose and was probab4 of little value, but which immediately it.was shipped into Serbia
was prom;tly stamped and put into circulation.
These are just samples
of what is going on in that part of the country.
Mr. Hoover admitted
to me last night, in response to a series of questions, that if they
could once get political stability and stop fighting and settle down to
putting their houses in order their sur,,lus production of foodstuffs,
and, in the case of Roumania, of oil, would give them a good opportunity to develop buying power abroad.
They do, however, need some essential things promptly and would need long credit.
I gather in general
that Mr. Hoover has a very poor idea of the governments of most of those
countries except Finland which he says is strong and developing very well.
Pursuing our old line of diseussion, any general impression about the
Russian situation is that everyone, in a political sense, would like to
wish it on someone else and that there is no really constructive definite
policy about the Russians over here that would justify believing that
Russian trade or Russian needs in the way of foodstuffs, etc., or manufactured goods could be considered at this time.
When the bolshevists
get through with Russia both inside and out there may be nothing left of
her to do some businees with, but just now it is a pretty bad picture
and will need political and other kinds of disinfection.
One curious
thing about the currencies here seems to be that there was a good deal
of imitation stuff put in circulation all the way around, but that is a
long and complicated story.
Next as to Germany: I f:nd a good many people expressing the opinion that Germany is getting along pretty well in holding the population
together and under control, keeping their civil service going and making
plans for a reconstruction of industry, etc.
They have an appalling
debt and neutral creditors for about two and a h_lf billion marks who
are most anxious lest the reiaration clauses of the Treaty will
their debt uncollectible.
There is no dissent in any quarter to the

wwwwwwwsgligailfikiataimiiiissiara.ttolikarteed of fat at once. On every hand

R.C.L. - 4


the people is vastI hear statements made that the morale and energy of
admit tho.t it has affected their
The Germans themselves
ly imoaired.
and mentally.
nervous systems and their ability to work, both Physically
Some very ridiculous stories are about us to the effect of semiof good
starvation, but I am inclined to the opinion that a few months
feeding is about all they need, but that it will take a very large
The German herds of cattle have not been as
to make up the deficiency.
much reduced as one would imagine, according to their last census, but
they have not enough fodder for their cattle and the production of milk
Both some of our people
and butter fate has been tremendously reduced.
and the English as well have stated to oe that the Germans will start
trading to the east and that the exchange of commodities and German manufactured goods for foodstuffs gill doubtless help to stabilize matters
along Germany's eastern frontier, but Germany has had an immense reduction
in her coal areas-and in her actual coal prodOotion at home which affects
her manufactured output and, besides that, she is pretty wen_l denuded of
I ehould say that as Germany will be in the hands of the
raw materials.
League of Nations and the Renaretions Commission, if those bodies come
into existence in the near future, she will be specially dealt with in
the matter of Iroviding food and other necessary things and it will be
most difficult to arrange credits with her on a business basis; but help
has got to be extended and should be very soon for oolitican, if no
other, reasons.
As to France, I must say the crops look pretty we.:1 in the country
that we oassed through on the way to Paris and I can tell better still
after reaching Belgium next Monday, as I expect to make the trip by auto.
In Paris one suffers no luck of thing^ to eat, but the prices are tremendous, and I should say that in places of corresponding dharacter in
sere than one-hLlf as much as here.
New York a dinner 'meld cost not mu
,> France needs food, but even more thanTin the ne-r future coal, and even
I think most
more than that government economy and a sound tax system.
that we will, and believe thLtt we mould, forgive the
Frenchmen hope
debt and loan LAM vast sums in addition, but in general the attitude of
our people here would seam to be of a character to disabuse their minds
of that exoectation.
A good many people tell me that people here are
not working, buti see no such air of indifference here in Paris as one
encounters in England, although I had little chance to look about in
That is, however, the
England outside of the business section in London.
general feeling here in Paris where you have rightfully said so often
that discussions of political policies, territorial claims, boundaries,
etc., etc., have absorbed public attention to the exclusion of the really
more important question of getting people to work.
I should say that,
considering the government's weak financial pclicy, leek of cowl, the
enormous destruction in the north, loss of credit, high prices and probably some idleness or lassitude combine in presenting a very gloomy picture, I do not feel nealny as pessimistic as this bare reckoning of
troubles would eeem to justify.
zany people say, and probably correctly, that there is a ggeat untouched wealth in France, part of which should
be taxation and part employed to relieve the government's embarrassments and reduce the Inflated condition of the currency and a part
promptly directed to industrial development.
The burden of the debt of
the government will, I feel, give them a serious time, but there are all
sorts of schemes being considered over here for dealing with it, and I
pre:aime that after one or two finance ministers have made attempts, failed
and resigned, oublic opinion will probably orepare for a severe treatment

R.C.L. - 5


At any rate that
of the matter and some strong man will 6a::1 it through.
wou]al seem to be the most likely political devoTh-oent in that connection.
In the case of France our help is aindeUhtedly needed and deserved and
must be given freely to avert a period of great depression and poverty
I refer to that particularly because of the
'mong the poorer people.
absence of a sound system of direct taxation, the indirect taxation of
course being of little relief to the poor.
They all
I cannot say much about Italy and shall not go there.
The general impression seems to
tell me it is a very gloomy picture.
be that the people are aroused on the :subject of the territorial expansion on tho Adriatic to such an extent that economic que tions are overone encouraging feature of the Italian situation is that
the people are reoorted to be going back to work better than in other
They say that they immediately grassed the problem
parts of Europe.
of reconstruction in the devastated regions with considerable success
Those with whom I have
and are far ahead of France in that respect.
talked seem to feel that the Italian situation is probably the most
critical of any in Western Europe.

I saw some
Estimates are being prepared of what Lurooe needs.
figures the other day indicating that Italy figures an immediate need of
This was to a considerable extent for coal, where
about ',6`,010, ^ ^ ^.
the situation in Italy is undoubtedly most critical; even their public
service corporationsrunning from handto mouth with but a few days reserves, and this of course is made worse by the English coal strike and
The French estimate
practically no exports for the moment from England.
valies greatly, but is something over $7N),00C,004 and some figures are
Mese I believe are both from official sources and
a billion dollars.
Mr. Hoover says that e,,OCC,CCO,000
I think can be completely disregarded.
will le,Ce cure of the European situation and I think his figure can oe aieregarded.
The fact i2 that no one can oossibly state a figure, which, in
the case of food torinstanoe, can be altered by probably hundreds of millions according to the extent to which political unrest and incapacity to
trade develops between eastern and western Europe and the extent to which
the neutral countries like Holland will open credits for the sale of food
produuts, etc.
I have rather come to the conclusion that the immediate
pressingnecessitiesof7urope, somewhat in the order named, consist of
fats, that is pacoinghouee products, grains, cotton, copper, segar and
The last named everyone seems to agree cannot be furnished from
America without the withdrawal of shipping to such an extent as to menace
the transport of necessary food su- plies, and further that we haven't the
loading facilities at our ports to ship coal in anything like the quantity required.
There is, however, no doubt that -8 to the first five
named, some steps should he taken very promptly to get things moving and
open credits that are long enough to avoid subsequent akbarrasements when
ay day arrives.
I am not yet prepared to say that I have any particular
program in mind, although I am beginning to get :3.e ideas that I will
either bring hone with me, or, if I am de.eyed, will send-tentAtively and
with the usual reservation of the right to change my o inion, but there
is no doubt whatever that immediate aid is needed, that tho credits must
be fairly 'mg and that the amount required is very large.
If political
conditions in eastern Europe quiet down, the amount will be reduced; if
they do not, they will be much larger, but these flve articles should be on

R.C.L. - 6

their way over here before very long.
I cannot help feeling that d part or the problem con be dealt with on a
business basis and d part of it must be dealt with on on eleemosynary bests.
I em oleo o_nvinced that we will do better in the lono run uy settling ell
disouted questions and all o, en aceounte between Greet Britain and ourselves
The reasons for this I will exoluin
and than tackle the job in partnership.
when I return.


Just se en indicaticiaof what is going through my mind I would like to
let, will the United States government
ask you to consider a few points'
adopt an affirmotive constructive policy toward the restoration of Europe
and its productive copacity and will its policy justify our assuaing some
political responsibilities as to the new countries in *extern Europe as well
es economic recponoibilities for the whole of Eur04, or only the latter;
2d, will our eovernmenf give any direct aid out of its own treasury or will
it dive only affirmative euo.-,ort to efforts muds, by our citizens to restore
trade with Europe and extend credits, or will it not even do the latter
(if our government does neither I fear some parts of Europe will ntarve as
has bemo-prophesied); ;d, will our goverment authorize a generous adjustmeet of our prso2ent loon so thet immediate payments are not required for
interest and a very light burden of amortization adooted; 4th, will our government consent to a reedjustment of debt so that we may accept in pa -sent
of at least some part of the de'l.t of
ond rrence sore of the debt
which the other Allies nos owe to thee; 5th, will the United States consent
to have the finance eLnisters or at least equally responsible representatives
of the four principal nations come to Washington and negotiate the adjust-ment of the existing debt and errange a policy for the future, or at any
rate give it a clear picture on the ground of their needs; ()th, would our
government join hands with the British in a reconstruction policy?
That I am driving et in ealeino you to consider these points ie to improse upon you :chat 4401 became quite clear to me, and that is, that our
government must take an affirmative or a negative position on some of
these questions very Shortly.
Without any desire whatever to oebarrass,
went to illustrate my doubts about our own government'a attitude in some
of these mutters.
I was told by a responsible non in our army here that,
subject to ratification by the French Chamber, I believe, they had concluded a trade for the sale, of all the army plant in Franco to the French
government for obout Z4o0,000,0.
The terms of the trade, 30 far as I
heard them, impressed me as edeiroble, although I have no
kaowiedge of
wheat the property cost or is worth.
It adds 34 O,V0,000, however, to what
Fronce owes us, and I presume they will give a fairly longtime obligation
if the treusaction is concluded.

Now I learn (this is most confidential) that Mr. Hare has come to
Europe reoresentino the War Department, with a comuiseieu to sell something
like two and 4 half billion dollars of material owned by the Department
which has never been sent to France.
Sone of this stuff is orobebly food
and mote other things which are urgently needed, but if any such sole wore
mode over here just now I should think it would be little short of a calamity.
These people cannot afford to '*y more than their bare necessities for the
present until they develo. production.
With this I am enclosing a memorondum on that cubject ichich Mr. Hoover handed see which has had some vogue
in private circulation among government officers, and which, frunkly, impressed ee most favorably.
This -seeds to a little discussion of Mr.
Hoover, whom I have seen tdce for quite long discussions.
Last night



I hope I
I was at his house at dinner when we had a nice quiet talk.
He has undoubtedly done a magnificent
shall no de hie an injustice.
piece of work over here and I know of no one who could have accomplished
what ho has.
His relief organization camprises about 900 people scat,. tered all over Europeaad he has plunged at the job with en energy, that
On the other hand I cen see for eyeelf, and he frankly
is magnificent.
admits to ea, that he ilea taken soave very long °helloes if one considers
the money involved, bee I beiieve it is literallra fact thet 'ee more
than anyone else saved this part of the world from a breakdown immediately
after the armistice.
Now the trouble.wita Mr. Hoover is that he develops
a state of eind, particularly under resistance, which miallt be dangerous
His head is filled with a mass of
to the aevelopment of sound plans.
figures and statistic's, the reliability of which I am inclined to doubt.
Re oersaaelly et-tee, and I Lao no doubt thoroughly behaves ellen letting
off steam so to speak; that unless the United States steps in with some magnificent scheme of immediate aid, political and sociel disaster -sill break
out all over turope, bolehevism will spread, and thet a complete malepse
of credit, tanking machinery and transportation, with consequent curtailment of production will ensue.
He .1so seems to think that if we do not
market our own surplus production in Europe to meet this situetion promptly, we will helve e treakdoen in prices at home that will be equally disastrous to us.
On theother hand, when I came to questien him in detail
as I did last night, I do not think he was able to substantiate his beliefs.
I could give you a list of statementa which he made which were
meet enceuraeina as is varieus par te of Europe.
Furthermore; in five
minutes Lo took out his pencil and showed me that the total reeuired of
the five articles I have named amounted to t3,350,--7:0, and that I positively cannot believe and do not think it can be substantiated by our
own exaerience of hie eatimeten and of what Germany needed in the way of
One cannot hell but admire his energy end courage and his
ability to get things done under preneure.
It hes been simply amazing
over here and he is entitled to e vest amount of credit, but when it comes
tc coldblooded deliberate judgeent of what Europe needs, I think he exprocess in over strong terms an impression Which he gathers from a great
mace of misleadiag statistical eateriul gathered from sources 4lich in
many cesee are euite unreliable.
&rid yet with it ell he is theman that
hat done the trick and I have a much greetor respect for his ability than
I had before leernine of what he herd done and before sasetiaa him intimately.

In conclusion let me sly that aerie from uay materiel or other advantege that we Auy gain from stepping in or getting out of this situation,
I think we at hone :rust recognize that if we withdrew politidelly and take
no risks finantially in connection with the restoration of Europe, we are
going to be thoroughly despised abroad end will do ourselves needless
So ey hope is that sore method may be found by Which those things
which we can do will be done et once and the things which mUht, be most dif=
ficult to do wider our ;'resent elliticel conditions will at least be attemeted in part and 20:;sibly accomplished in pert.
I only wish you were
her yourself.

R.C.L.- 8.

Hotel Hits, Parts, ...west 17, 1919.

Since the first part of this letter was written we have traveled
oalgr the devastated regions of France, visited Brussels and Amsterdam and
Orturned to :aria, a trip of absorbing interest and developing a further
knowledge of this situation that cannot be obtained in any other way.
First, let me say as to
Hare's waft that Mr. Went has written
you fully, and I believe cabled you as well, and I elneeray tamstthat
it will be arranged thft these sales of aamy material will be *Wined to
those things which are essential and adequate time be given for_papseht,
and that as much as poesible a market be found where paament Ls easier
th.m it is ot present in either France or Belgium.

I want to give you a brief further review of the situation as Mr.
',Cent and I see it, Which miy in some respects modify what I have already
The crops throughout 11 of rrunce (ozceat the immediate devastated
region), Belgium and Holland are magnificent.
The wheat, and to soma extent,
t`,e oats, are ln course of haavesting, but n very large amoult of this work
is being done by the moment both in France and Belgium.
You would be impressed as I was at seeing the women working in the fields as long as daylight lnsted, up to 9 o'clock at nicht.
Certainly the 'omen of France
deserve every prelim that can be given them for their magnificent response to the need of this terrible situation.
Ur. Hoover was u der the impression that
supply of cattle.
This I find is not the case.
In the early part of the
soar they did, but cattle are f. part of the crop rotation in Holland.
the war broke out they much increased their hers and introduced a good many
Later imported fodder could not be obtained, the herds had to be

reduced and the hogs practically all slaughtered, so WA Holland is ixaetloally without hogs now and the herds only slightly above normal.
a part of the war fodder was so deficient that animals were producing only
15 per cent. of the normal supply of milk.
They have now been restored to
condition and the herds look in magnificent shape, but they will still need
to import fodder and they hume not a large amount of cattle for export. and
practically no hogs.
Belgium in normal times has only produced about one-third of the food
re. uiromants of the zation, France slightly sore than that proportion, and
Holland somewhat more.
lutside of Reiland the food production has been
impaired by the war and all three con tries will need to import foodstuffs:
1111000 red Belgium fats, Holland grain and fodder.
The amount of grain
required for Prance and Belgium cannot possibly be determined now with any
accuracy, but Ln general a large anouat will be needed.
one depressing alaht in all three countries is the large number of men
still in uniform.
Vie French are dincharcinc their men as are the Belgians,
as rapidly they claim as aossible, but I doubt if they are doing It anywhere
rapidly onouah.
"'very to n ae visited in the devastated area was filled

R.C.L. - 9.

with soldiers, some of them working on reparation, and in one city I noticed French soldiers, German prisoners, efrican troops, Chinese, Japanese
In general, it is rwl impression that there are altogether
and Pritish.
.112o many men in uniform at the present time, and that Milo La uniform they
Mel not inclined to hard work as they would be if restored to civilian

ITy picture of the sltuntlon, ehich can only be briefly summed up here,
Drew a alt through the war area Aele enough to cover
is about as follows:
Through the
the whole !lead occupied by the Germans throughout the war.
center of this belt draw a line representing actual battle areas, Lncludine
t. Mthiel, Rheims, the whole tersuch places as Verdun, Chateau Thlerry,
ritory of the 3omme, the Chemin des Dames district, and so on north through
',.Here resistance was strong and battles were fought
Lens and into Flanders.
es one leaves this center line he finds the
the devastation is complete.
cultivation encroaching in some cases right Into the ground hhich has seen
The evidence of
torn apart by shells and trachea but already restored.
restoration of the soil Lsilibst encouraging thing I saw, but there are nevertheless vast belts where the grouel Is so torn up thr.t it will take another
year or two to get it back in cultivation and the effort to work over such
land filled with shell craters six and eiselt feet deep Is too great for the
peasant owner and mast be undertaken by oreenizeh labor atd engineering; but
the most delressine epectecle in this area of destruction is the condition
Most of the small towns are flat end the
of cities, towns and industries.
large cities destroyed or so damaged as to 1ln useless for a long tip as
I think we must have driven by automobile through
centers of population.
miles of the ground over which fighting occurred, rnd in northern France
I saw smoke coming out of only two chlmneys and two other plants in
They were two cement plants and two brickyards.
Everything else
few plants were being rewas dead in Prance, so far as we could see.
we see evidence in
paired, but many of them are utterly beyond repair.
many places where there had been no fighting,of a destructive character
but where. nevertheless, plants were completely destroyed by bombs or fire
Sugar mills, foundries, etc., were ruite
or th© contents had been removed.
In Lens, the center of a valuable coal area, I believe not one
pound of cota is beinu erodueed.
Liany of Vies° cities and towns of from

a few thousand to malo inhabitsnts in the ease of'heims, have a small
scattered population of hardy natives who have returned to repair their
homes --in the ease of Rheims =bout 8,110--tho balance being the soldiers
olearinr up the rubbish.
:30 you may consider that Lhroughout this area of Prance the losses
have been tremendous.
The agricultural recovery will be fairly prompt,
but the industriel recovery nnd the recovery of civil losses very Glow
:n 2eleium the period of occupation eermitted a great deal of
rep air work to be done, and I wan delighted to see what had been accomplished.
The Belgians we saw assured us that the industrial recovery
was now making good Impose.
I should say the aerlculturel recovery is
To complete the picture I should say that while the
well Isiah complete.
industrial t nd civil losses in the devastate) area aro shocking and almost
irrecoverable, outside of that in both France and Belgium therd is great
The formers have made a great deal of money; many
evidence of prosperity.
war profits have been realized, and the real problem is the actual area of
devastetion bud the restoration of their industries.

That 7,uroee needs is production f goods of all kinds and as much
To bring this about credits must in some way be
as possible for export.
arranged to feed the people for this winter, to give them raw materials

for their plants, and to get their plants in operation again.


the greatest difficult/ea that has been reported" to us many
At present rates it Ls possible for the French
and Belgians to bgy machinery and other rerNirmeents in Germany very
much cheaper than in America, Ind they are most insistent that the provision limiting the application of the proceeds of loans to purohases in
-merle:: is most burdensome and impossible to comply with.
Simply to illustrate this, the/ Prime rinister, Monsieur Delacroix, told
me tivt of the efn,110,1D- credit arranged for Belgium 1!14,001003 *ay
had been drawn and I think only three or four million actually used, that
the credit Ls a great expense to them and without benefit because it Ls
not long enough and cannot be expended outside of America.
They want a
loan of W0011,101 at once, find they have handed me the enclosed memorandum of what they would like.
They spy their reouirements are covered
into September MU thereafter the government alone must buy 5,000,10"1 a
month in the United States and they should be in positIon to buy foodstuffs
in Argentine and machinery in Germany and England.

lames Ls the exchange.

I spoke above of the possibility of susygesting some program.
should think that this must be very sketchy and a policy rather 'than a
program, but ay present thought is something like this;
Capitalize the interest on loans made by our government to the
Allies for a period of three to five years, preferably five.

Graduate the amortization so the -t the earlier amortization payments arc? mall Fnd brarease with the later payments.

!Tork out some plan to furnish Rngland with cotton on long credits,
say three years, and certainly two.
I believe no other credit will be
needed there.
nsure thr,t Belgium gets a credit right away of '1' 001000,
with the provision that some part of it Tay be spent outside of the
United States.

Recuire the Iermaah to state their mini's= require:eats.
are all Itlgaring now on isaxlmum reiuirements.
first, it seems to me,

somewhere from $26000n OOP to r'5T),11n,llo applied carefully to things
absolutely required would give an assurance that would mats subseouent
business much easier.
Arrange some cooperation with Folland, I should say preferably
between their bankers and ours, for credits for fodder and for some credits to buy grain eLt:ar in the Milted Ctates or Ln the Argentine.
need not be very long credits, as Yollands colonL 1 extorts should enable her to pay promptly.

i oan say nothing of Italy, not having visited there.

With some reluctance and only because I know it is in your mind I
suggest still another important matter.
I think we should arrange with
Fmgland and France to accept in settlement of some ::art of their debt the

- 11

obligations now owing to them by other governments.
t know the difficulty
of working out any such plan, but It will go a very long way toward reilk,ring peace of mind. confidence in the future and the willingness to get
It will indicate a sympathetic attitude by our country
Ir; to aork.
watch will be of inestimable value, as just now the thing we are dealin4
as we have frequently said, the whole
with is only In part material.
situation here is neurasthenic; they are worn out with anxiety and work;
they are worried about labor; the production of coal Ls so short as to be
a menace, and en a word a large part of Europe needs more than anything
else to be sent to a hospitel for a rest cure.


one most important item of the program is to ensure that such
That matter
credits as are extended shall not be vested on luxuries.
we cannot. control by restricting our exports, and it should be Insisted
talet these governments effect the control by an embargo on inverts.
say this with great emphasis, because I know that in both France and Belglum there is extravagance Leyord anything heretof re kmestaby those
classes which have profited by the TIM.
In two garages in Brussels the

most who drove us was told that they could buy at more 46 now Willem
Inc of them had Just purchased a
cars, for which they had customers.
secondhand Cadillac worth 23049 francs.
In other words, this is another case vaero the rich have grown richer out of the war, and that
very fact, incluaina thnir extravagances, results an the poor being poorer, ane the poor to wham I refer are the industrial classes rather than
Those are the people to look after and to look out
the agriculturalfor.
If, directly or indirectly., those who have made fortunes out of the
war are permitted to hay at will, those who have lost money in the war
cannot get bank to work.
In connection with this whole program I think our government must
assume a definite and constructive attitude in regard to the situation in
the new countries of central eastern Europe.
Not havOng been there I cannot speak esneat by hearsay, principally of people In London and aerial, but
I as sure conditions will not be restored for a long time unless some sort
of fraternal intervention is effected rather promptly, and it is nadoubtedly a fact that they are willing :aid ready to trust us and probably no one
Tow, as a practical means of deeling with thee° matters, I have already sugeeeted Ina previous letter a conferenoe of finance ministers at
aashington to restore the center of financial gravity where It belongs, wad
where a program *en be developed to cover the who e situation and not a
piecemeal treatment of it.
If Davison makes arogress with his plan I hope
it will be On general in conformity with the above suggestions.
I um mitts/led Vat thy: amount of moaly whiell can be spent promptly Ls limited, as
we have frequoatla iliscussed, but T ass equally satisfied that the mount to
be furnished for foodstuffs must be furnished arouptly this fall.
A further
practical suggestion that I have had math Ln mind and discussed with Dr.
Vissering is to have a meeting of the heads of the state hanks very arivately, unofficially
Cokaaue, of the Bank of aagland, and
Vissering, of the Nederlandsobe Bank, are both men of great ability, and an
exchanas of views at such a meeting without any expectation of making a pro-


R.C.L.- 1r_

gram would be of great value.

ossibly I can arrange it before returning.

In concluding this part of my letter let me repeat thr-t no ore can
APhderstand the situation without coming over here.
It is not as desperate
as has been represented, but it is serious and prompt action, iarticularly
in tho matter of food, is now needed -- particularly Iromptness--end for
that result I ..elleve our government mast take a pretty affirmative position.
'once the wheels are started I am sure recovery will be more prompt than any
has been willing to forecast.

Another consideration with me is the general attitude over here towards America.
We are not popular and unless we do something nowwe are
goLm to be regarded as selfish, even inhumes, in abandoning !urope to her
fate after the war is won.
sow, as to my trip to the Beat.
7:eople here have urged me very
strongly to go with General Harbord to uenstantinople and Tiflis and possibly a little further.
The men be the State Department can tell yoa
all tbout the objects of the trip.
I have been led to do It, first to
meet their emergency, which was very urgent for they needed a practical
banker with them, and, second, to give are Some opportunity to complete the
picture of the sltuetlon.
This CoMmleston will have an u exampled opportunity to get information, Aed I believe it means thxt to miss the ohm*,
mild be to throw away an important benefit from may visit.
We will learn
a good deal there !'bout central eastern Europe.
It will detain me until
alone- tows rd the first of Ictober, or, if a cable from the Bonk mantes it
seem possible, I shall stay a little longer.
You must not feel concerned
bout my leaving.
I am proposin,,- to write you again from the steamer, supplementing this letter and filling in the gaps after I have read it over
and studied lt.
For your information please ask Governor Harding to let
you see a copy of sa, letter to 'Ur. Treman about the !Availing of the gold
matter, which I believe is in very good shape.
I cabled pbout the possibility of a renewal of the September maturity, :is Hr. rare mitht be able,
within the period of another renewal, to make some sales in ::;paln which
would obviate the necessity of buying lesetas, which just now seems unfortunate.

Papilla that this letter will be helpful :Ind that I may be able to give
you still further help on my return, with best regards,

Sincerely yours,

'fan. Russell C. Ieffingwell,
.ssistant Secretary of the Treasury,
'nelAngton, '. C.


Paris, .ugust 18. 1919.


Treasury Department, Washington, D.


AM writing you as fully as possible my impressions of matters
here which cannot be adequately covered by cable stop

Am far from being

as pessimistic as some of our friends brut tare net suggestions
sending be carifully considered stop

Cable me through

letter anything you wish particularly covered




P.ris, August 18, 1919.

Following for Treasury from Benjamin Strong
gold shipment to Spain just received stop

T three

Cable regarding

As previously advised time

insufficient to arrare shipments certainly to meet first two maturities

Believe Lest plan is to aIrow anipmeate to 'condor_ to proceed as

now arranged and ask Bank of Spain to accept gold sarr.larhod in L: radon stop

Could arrange to earmark equivalent in Ametordaui

if Bank of Spain willing stop

Am asking Ken-'6


promptly than el3ewhere

ddreos care kacrican Embassy

London to get figures on shipment from London and will cable data covering one
two three and five soon at pocsibie stop

Ai.. also inveetij;atImL insurance stop

Please cable Puris whether insurance shall be covered New York or here



Paris, AuE:ust 1P,



Trasur7 Department



T five

have abandoned

prop tly replieo your cabin s regarding p

CABLEGRAM sent in Embassy Code
For Leffingwell from Strong

T six

August 19
Replying your cable

regarding peseta payment Bank of France states
They have agreed with French Treasury to furnish up to ten million


dollars in napoleons but are only willing to furnish further amounts in bare

There will likely be come mall abrasion loos unless we succeed in


getting all new minted coin

They will furnish figures for items one two and three tomorrow


They must allow ten days for arrival of gold in Madrid after shipment

is ordered but will take entire charge of shipment stop
Will cable figures coming from London as soon as received stop
Assuming it would require ut least equal time for shipping from Brussels b
Paris I endeavored to persuade Pallain to temporarily aece2t gold earmarked in
Brussels which he is cost reluctant to do because involving showing increase of
gold held abroad in weekly statement stop
Have also asked American Express Company to furnish figures for items one
two and three including insurance but communication elow to Brussels and
Amsterdam and cannot expect reply for few days atop
If shipment is arranged here by Express Company insurance must be placed
in English companies payable in sterling and I doubt possibility of obtaining
insurance payable in pesetas stop

It should be understood that much time is required to handle pack and
arrange for safeguarding such shinments and I regard it as unsafe to count
upon concluding transaction in time for August and Seetember maturities unles
Bank of Stein would accept gold earmarked in Amsterdam Brussels or possibly
London sten

Have arranged to see Collier of Treasury tomorrow Wednesday afternoon
to see

if he can expedite matter


For Leffingwell from Strong

T seven

August 20th

Bank of France advisee following
They are unable to obtain accurately present railroad rates in Holland


Belgium and Spain but cost of transportation is smallest part of expense

Insurance is largest cost and rates are so variable it is impossible to


state accurately in advance of actual shipment
Based upon experience of previous shipments to Spain very roughly



estimate expense of shipping ten million dollars would not exceed following

From Brussels to Paris fifty thousand francs


From Amsterdam to Paris seventy thousand francs


From Paris to Madrid lArenthesis which does not include transportation

in Spain to be arranged by Bank of Spain parenthesis one hundred and twenty five
thousand francs

They will take entire charge of shipment when order is received from

Ministry of Finance but must allow about ten days to arrive at Madrid stop
figures yet from American Express Company atop


Am inquiring National Bank of

Belgium if in case of need they can take entire charge of shipping amount German
marks required to Bank of France and probable time required and cost involved stop

It is important that I should know promptly whether insurance is to be

secured here and payable in what currencies in case of loss and whether shipments
are made at risk of Federal Reserve Bank and if Bank agree° or at risk of


For Leffingwell from Strong

T eight

Your two cables 18th received stop
French in every way desirable stop

August 20th
Believe suggestions to British and

Unquestionably next most important matter

is arranging credits for food shipments this fall stop

France Belgium and

Germany undoubtedly face consider_ble shortage after present crop and meat
supplies are consumed stop

Regarding rupees I entirely agree matter must be

handled by Treasury and have so advised Bank stop

Had fully considered Spanish

situation in this connection but regard Indian conditions us justifyin


direct gold shipments so long as price fixed by Indian government for rupees is
satisfactory as already stated in my cables to Bank stop
negotiating satisfactory arrangements stop

Hope you succeed in

Please send copy to Bank


R.O.L.- 2.



to both Brussels and Amsterdam to start the gold shipments on Wednesday.
I helm inforned him fully about the peseta situation and between us we will
do the best we can to handle matters, even if I am obliged to bulldoze
Pallain into accepting Bold in Brussels taneorarily in elace of gold he
must ship, but they do not like it because it shows more gold held abroad
and the Beek of Frew:3e stateaent just now le scrutinized very critically.
This water will have gone over the de a by cable befere my letter
reaches you, so I shall not go into detail except to enclose confirmations
of my cables already sent.
Th.. rupee matter I an eatiafied caaaot be _argued out either by cable
or letter, but the picture preaented to me is quite different from what I
gather you and Streusa see as indicated in your cables.

Ever since the Pitman Act was sassed the Indian government has been
ceiling rupees in our market, es I understand, considerably above exact gold
perity, and naturally as the price of silver advancao tee price of rueees
advances and the value of gold in relation to the .rice of rupees is reduced.
Therefore our gold shipments buy fewer rupees, and I cannot see how
that situation can be changed unless the Indian government is willing to
sell rupees to our imeortere at a rate below the cost of eeking rupees by
buying silver.
In other words, no long as we continue to buy goods in India those
goods become correspondingly more expensive to us, and if made too expensive India's export trade to the United states rouid decrease.
Naturally oir market is protected azainst shipments of cold by Enelish
importers of jute desiring to buy ruecee in our market, because of the
premium on dollars at present rates for sterling.
7f the Indian government, on the other hand, marks down the price which
they are willing to pay for gold in India to a point welch we would regard as
unreasonable, then the arrangement concerning which I cabled should be discontinued.

I distinguish between the situation in India and the situation in Spain
by the feet that in India the depreciation on gold and the premium on rupees
is brought about by the rise in silver, whereas the situation in S:Ain is a
purel.j arbitrary one, the Seanieh government or the Bank of Spain simply reducing the price at which they will buy gold, for the sake of profit or possibly to curtail their exports.
I would regret very :such if I emberresved your discussions with Blackett
in the sliehtest degree, but I do think that7sorie of these matters we must
recognize the tremendous difficulties and pressure which now rest on the
British government and do our best to strengthen them by every reasonable
means in our power.
The situation over here is a moot difficult one, and -possibly I am influenced by the exceedingly generous response which is made to every request
which I have made for aid in hendling our business.

Now, regarding my cable about discussions with the British and French
ernments on the subject of their debt, we at home, busy as we have been,
etheless do not understand the tremendous preoccupation of all the
Federal Reserve Bank of St. Louis


English government people with domestic affairs, and I do no from criticism ourselves in the matter of reeresentatio
today we are without a minister in either Holland or Belgium
cipal parties have left the Mission organization in Paris, a
organization which has done the lionle share or the stork in
throughout Euroee is now pulling out.


Just between ourselvee I never felt so sorry for anyone
did for Frank Polk yesterday when I took a short eutomobiSe
found him quite worn out sad realized, although he was not c
he is overburdened, largely because he is und0Yorganieed.

After I had written and cabled you Stettinius returned
don and I asked him whom he had seen over there and what he
teld me he had talked with the Chancellor, among others, and
Cheacellor but bankers with rho= he talked, all of thee refs:
ace of the American debt.
They feel, as I wrote you, thet
sword of Damocles hanging over their heads, and you have med
constructive move in *Lakin: atees which will at any rate put
that matter.

One thing that has imeressee me here very much, ee we_i
not so much in Belgium, is that they have no plen, no defini
leadership for dealing with economic matters.
job--and thank Heaven I am not--I would devoie my energy tow
Allied governments to declare a moratorium on ail political,
torial and military discussions and require the whole organi
at once on economic and financial problems.
They are all e
and most difficult discussions of these boundary natters, tr
jealous, bellicose eeoele in Eastern Europe quiet, when the
zations should be devoting every energy toward the restorati
transportation and finance.

I cannot believe that it is our feult, but they neverth
upon us as the rich partner and seem to ex Beet us to take e
their difficulties and do the major part of the financing as

The contrary view of the boundary question is of course
sence of a league of Nations organization which is really fu
the Peace Mission organization does not, weal with natters, e
interests are involved will and must of neoeesity look after
ests solely.

A great (teal of emphasis has been laid upon tee necessi
its in America, when I havehad discussions with various peop
it would be wise to grant d certain amount of free credits,
amount is reesonably limited so as to protect us from an undu
gold to the smaller neutral countries where facilities for g
u; on additional told reserves do not exist, like the South A
Scandinavia, etc., etc.

At present rates of exchereo our markets are more exens
other uerhets, and of course you realize, es I do, that this
versal of the arbitrage position which gave us so much conce
But in general a reasonable amount of free credit would
and eoulti enable cone of these countries to buy in Germany,

R.C.L.- 4.

need to do, and of course tlatt would help the German recovery by so much.

We must not also overlook the fact that we really have not established a
free gold market unless we are willing as 'aell to have a free credit market.

I was told the other day the terms of the Paine, Weber & Co. loan in Belgium, which did not materialize.
It struck me us being extortionate.
I wrote Governor Fardinl a letter about the Belgian currency situation
which I hone you will read, but notwithstanding that curiously stupid blunder
of which the 3elgians were guilty, I cannot he:_) but feel that Belgium is well
ahead of France in getting on her feet again, and in some resiaects is considerably better off than England.
In fact, my personal belief is that a Belgian loan is probably good, barring of course the complete breakdown in
-i.uroae which some people still prophesy.

Let me ear in general that conditions here are really imaroving slightly
slowly ucco:diug to my best judgment, but the danger is that this may be
temporary and cannot be maintained after this
2ral. Pooveric meat eupplies are exhausted and after the winter conditions of life, particularly
being without coal for heating, become annoying and possibly clistressin,;.

most important recommendation to you Is to cone over here.
I would
give anything if you were here now.
In fact, when Frank Polk and I were discussing matters yesterday he said he had beer on the acint a number of times
of cabling you urging you to come, and I was obliged to confee's to him that I
had had a cable in my mind of that sort for some time.
Enough for now.
If I ever get cleaned up with mail and telegrams I will
write you a carefully preaaren review and something more definite in the way
of a suggestion than was done in my last letter.

With beet regards to all in the building,
Sincerely yours,

Hon. R. C. Leffingwell,
Assistant Secretary of the Treasury,
Washington, D. C.


Hotel Ritz, Paris,
August 5^, 1919.

'15, dear Russell:

Up to now I have been sending you some letters in the nature of running comments and impressions, which I have been careful to warn you
were not in any way conclusions, but the time has come when I should
send you s:,mething more in the nature of u definite opinion.
This cannot be done satisfactorily in the limited t_me I have and
without more assistance, but I have dictated the enclosed memorandum giving what I believe epitomizes the more important features of the situation.
In this memorandum I have not emphasized what is possibly the most important of all considerations.
The prestige and influence of the United States
government and of our people in Europe today is to great that it may be
am:loyed In bringing about stable political conditions and economic recovery reasonably promptly, provided we are willing to assume the leadership and give prompt help.
In my opinion treaties would be signed promptly, disputes and discords
would either disappear or be subjected to control and the organizations to
deal with financial and business rehabilitation would ,,romptly be created
and begin to function It the United States would take the leadership and
furnish needed assistance.

Every reort reaching us here indicates that the attitude of the Senate and pocsibly a growing public opinion at home leans toward withdrawing from the European situation and allowing Europa to flounder.
I can
only believe that we do not realize our power, and am unwilling to bebieve that once we realized it we would be unwilling to exercise it.
We cannot wait to have finance ministers, ambassadors and others
cone to Washington begging for help.
We must take an affirmative and constructive attitude and invite them to come, and we must likewise, where
influence can be exerted, direct it toward furnishing help.
This afternoon I read the memorandum to Mr. Polk.
His principal comment was that I had not sufficiently emphasized the possibilities of restoration in Europe through the exercise of our influence backed by financial and material aid.
Objection and discord in formulating plans will
disappear in the face of this attitude by us.
At his suggestion I am sending; you a cable paraphrasing the memorandum and he is proposing to send a cable to Kril Lansing urging that it
be considered by the President.


Of course I realize the many difficulties which exist at home.
I am not willing now to say us ix. Vanderlip did that if we do not
give aid Europe is going to collapse, nor have I modified greatly my belle
frequently expressed to you, that there is much exaggeration in the statement of figures of European requirements.
That has not been exaggerated,
however, is the need for prompt help, even though it be but a fraction of
what is estimated by some recent visitors to Europe.
In conclusion, let !-Ae say that you may rely with complete assurance
that in no res:ect is the memorandum enclosed an exaggeration, but it is
rather a moderation of all points and reresentations which have been
made to me by many responsible people.

In a recent letter from Jay, referring to money leaving the United
States in the hands of emigrants, he makes the following statement:
In h conversation which we had with Mr. Albert Strauss this
week he indicated that a considerable art of our exports were
being financed in effect in this manner.
He stated that the
absence of actual requests from foreign governments for credit on
this side was quite r,2markable in view of the fact that the
Treasury Department had such a large sum available and that the
War Finance Corporation was able to be of assistance."
This indicates a somewhat passive attitude on our part, and I believe a much more affirmative and aggressive attitude is justified.
I hope this memorandum may be of some assistance to you.

Sincerely yours,

Hon. Russell C. Leffingwell,
Assistant Secretary of the Treasury;
Washington, D. C.


Paris, August 3-, 1919.

CABLEGRAM (through Smbassy in code)


For Leffingwell from Strong

4 9

August 30

After careful consideration and submitting to Polk um sending following
paraphrase of memoandum mailed you today

In general both political and economic situation is so vast and

complicated that one comprehensive plan of restoration is impossible for
an undertaking requiring years of hard work _roduction and economy


There is lack of leadership and plan as people in

authority are exhausted apprehensive and relaxed atop

With the

termination of hostilities and canon danger cooperation and leadershi_
are superseded by individual and conflicting interests greatly delaying
the completion and enforcement of treaties

During the President's

presence a certain control was exercised through our influence which is
gradually disappearing now that the German treaty is formulated


result is the disorder in Silesia Rumania Hungary and elsewhere which
discredit at the principles of the treaty

Delay by our Senate in

ratification will surely retard return of quiet and result in either a
barren league or one incapable of harmonious action with our stabilizing
influence absent

This also delays the formation of the committees and

commissions .Mich must be promptly organized to deal with both political
and economic problems and in the absence of properly functioning organizations the new nations of Eastern Europe are struggling in doubt disorder

and anxiety and appealing to us for help

The gradual withdrawal of our

mission and relief organizations will remove u needed stabilizing
Influence both for political progress and in organizing food distribution
and improving transport and communication



Labor and Social Conditions

War strain and relaxation combined

with underfeeding have left the people neurotic and sensitive

There is


danger of

too much

paternalistic government control of all activities

reducing initiative and delaying recovery with reduced inclination to
The hopeful exception is the agricultural class which has returned


to hard work and production throughout Europe but the extravagance of
those enriched by the war combined with unwise government finance currency
expansion and like evils has seriously increased the living cost for wage
earners and those of fixed income who must be ensured tolerable living
conditions this winter

Financial and Monetary Conditions

Excessive short borrowing

government loans from central banks and currency issues and with the
exception of England insufficient taxes have caused such currency
depreciation and exchange disorder particularly in eastern Euro-e that
trade is difficult and frequently impossible but no wholesale measures
for immediate currency deflation would be safe because of enormous
readjustments entailed unless general throughout Continent

Some scheme

of gradual treatment of this matter must be devised to avoid even
greater trade difficulties

Recovery is continued and satisfactory and another

year will see probably all but the most seriously destroyed areas of

France restoreu to cultivation
more than seventy five


Western Europe this year will not produce

r cent of pre-war crop and needs fertilizers

Varying greatly in the different countries the

immediate necessities are labor tranquility, greatly increased production
of coal, restoration of industrial plants in France Belgium and southeastern Europe and lerpc large supplies of raw material

can IKaYtwaly

These supplies

be distributed over period of time and immediate shipments


I believe are much less than some reports indicate

Transportation and Communication

There is ample railroad

equipment in western Europe but roadbeds badly need improvement
Canal transportation in northern France slowly improving but not yet

Wagon roads generally in good shape

lines and mail service slow inefficient and bad

Telephone and telegraph
A large part of eastern

Europe requires equipment and motive power and renewal of river
transportation now interrupted by political conditions


This is the serious and pressing problem Alich can only be

solved by credits in the United States

Holland needs fodder

and six to eight months supplies of foodstuffs for 4hich she should have
no difficulty in arranging payment

Estimates for Italy vary from three

hundred and fifty to six hundred million dollars

For other countries

figures vary so greatly as to preclude attempting detailed estimates
Based upon a combination of opinions partly official partly from Hoover's
organization I should estimate that the United States should furnish from
one billion to a billion and a. half in fats and meat grain sugar and

fodder to do no more than alleviate intense strain this winter


German official statement of requirements indicates a great deficiency in
fats but I believe their food figures are exaggerated

Foreign Trade

I can not see any prospect of early resumption of

large exports from Europe and believe following measures are essential to
ensure avoiding too great impairment of European buying power

Imports must be restricted by direct embargo or credit control to

bare necessities

Political tranquility restored in eastern producing sections to

ensure exports of surplus grain
America must allow reasonable
Federal Reserve Bank ofin Louis
buying; St. cheaer markets than ours

freedom for use of our credits in


Restrictions upon trade with Germany imposed b, treaty must be


partly modified or suspended during period of recovery
Inland transportation in eastern and central Europe must be



Plans should be made now for gradually progressive reduction of

inflated currencies

The recent sharp decline in exchange has had

Foreign Exchange

a depressing effect upon people and government credit but is developing
a realization of necessity to work and produce

As United States is now

dearest buying market the importance of long credits together with relief
from immediate payments of existing debts and restrictions upon unnecessary
imports is greater than ever


'ebt to America

My previous recomaendations on this subject are

The moral effect of some early announcement of arrangements for

deferring interest payments would be most helpful

Reparation by Germany

The theory of the treaty if ruthlessly

applied will so retard German recovery as to hamper recatery throughout

It is essential that the Reparations Commission should be promptly

appointed develop its organization and formulate the r,Jparation procedure

along some line which will ensure prompt restoration of destroyed industrie
and defer unnecessary exactions during the early period of restoration


The uneasiness of neutral countries concerning Germany'a

debts which are now subordinated to reparation requirements of the treaty
could be removed by an understanding with neutrals which would encourage
them to throw their economic weijlt into the work of restoration and
furnishing food

Favorable Factors

brought considerable

During the summer improved food conditions have

improvement in the general situation principally the



Restoration of agricultural activity and the stability of the

agricultural population who will present a strong resistance to the spread
bolshevism and who have the advantage of adjustment of price of their
production to advanced cost of living

There are numerous evidences of waning of the bolshevist movement


It is increasingly obvious that the efforts of labor do not

ultimately result in organized violence

There is growing aippreciatioe of the nececeity for financial and

monetary reform

There is growing conviction that recovery depends upon increased

production and thrift

Unemployment and unemployment wages are gradually decreasing

having been reduced one half in Belgium and being further reduced in France
this month

I believe our position is now as follows

Once we were forced into

the war we brought it to a conclusion upon the basis that governments
would be established upon nrinciples of self determination along natural
and historic lines as formulated by our president

In consequence new

nations have been created and new governments formed for old nations based
upon these principles by our invitation and Insistence The danger political

and economic to Europe and tkakUmits morally to the United States is that
we shall desert Europe and leave these new Kett governments to their fate
On entering the war we assumed not only military but financial political
and moral obligations to Europe Ahich cannot be terminated by the
conclusion of peace under present conditions without prolonging disorder ad
and suffering


It would be an act of cowardice for which we would be

The whole situation may be summarized by stating that our

ratification of the Treaty is essential to prompt political and economic

recovery to be followed at once by the creation of the League of Nations
and other organizations required to direct this process

While food raw

materials machinery and reconstruction work must be furnished speedily
there is ample time to prepare for the winter's strain if we recognize
our responsibilities at home

All of Europe is now waiting upon the

United States and our attitude toward recognition of our obligations


influence and prestige promptly applied supported by material evidence
of our attitude such as a generous treatment of debt and early extension
of 'media needed credit will have an immediate quieting effect and vastly
aid recovery

It would be hazardous to _a-edict developmente next winter

if food is not supplied

The margin of safety between present conditions

and revolt and disorder is narrow enough and will be further reduced with
cold weather

While my present opinion is that there will not be the

complete collapse and disorder which is predicted for this winter Europe
nevertheless faces a period of intense suffering the hardships and durutin n
of which depend upon the degree to which the United States extends or
refuses aid


If feasible the following program would probably meet the situation
Limit the use of any available government credit for necessary food

supplies to centers of population of middle Europe if required by emergency
or by failure of other plans

Enlarge powers of Grain Corporation to sell on reasonably long

oredit and if possible include other food products particularly meat and

War Finance Corporation principally to furnish credit for raw material

needed for essential industries

Banking and investment credits directed particularly to furnishing

Industrial capital

If through these sources one and a half to two billion dollars could
be furnished in the next six or eight months it would give us all needed


influence to insist upon settlement of many pendin, disputes sand I believe
the peril of the winter situation would be largely removed

Would greatly appreciate cable to London giving as full information

as possible regarding situation at home


Rotel Ritz, Taxis,
August 16, 1919.


My dear Frank:
t the urgency of Gereri1 Farbord and Goneral licCoy. I have reluctantly consented to accompany them to Constantinople as you have
doubtless been advised, and regret that I shall have no opportunity
to see you before leaving.
Iffy plan is to merely spend the necessary tine in Constantinople
and possibly co as n'r as Tiflis if thrt seems desirable, returning
at once to Paris.

In my return I am anxious to have a chat rith you about various
matters, particularly the result of my trip, which, for me, has
thrown a great deal of light unon the financial situation here in
Europe fr.ld c')nvinced me of the need for sone action of ci con-

structive nature in the near future.

ltr kindest

regards rand hopinf7 that you are not overworking, I am,

qincerely yours,

Hon. Freak L. Polk,
Hotel de Crillon,

BS /9


Ritz Hotel, :,ondon,

3eptrmber 12, 1919.


dear Frank:

I have seoure:i my passage on the "Baltic", sailing on

the 19th, but at Earl Grey's request I an trying to shift over to
the "Mauretania", sailing on the 20th.

In either event it will

be impossible for me to return to Paris before sailing.
I hope you do not mind my writing you frankly of my
conviction that our organization in Paris must be strenrthened at
once if you are to be relieved of a strain which will be to much

for your health and simply result in impairing the chances of
cess of your work.


It really rave me a great shock to realize

the ertent of the (=dun, and I hope something may be done at nn
early date to rdmedy it.
:fishing you every success in your mission, I am,

3incerely yours,

ion. Fran

L. Polk,

Cril.on ::otel,

Paris, 2rance.






So far there is no news of interest to send you, but before :saving on Sunday I shall hope to send you a little resume.
The Bank of England h.,11 an organization of its employees somelike ours, wid Saturday is their field day.
That sAfternnon
they ex,ect to have six thousand :eo to at Roehampton, and they
have been good enought to invite me to go.

My first cable was se-lt immediately on arrival without access to
the code book, or anything of that sort, and my second cable,dispatched today, WaS not send in code, as it is a laborious ;_rocess to
code messages unless they require that sort of treatment.
YYu may
therefore exect to open messeges from me unless they are of a nature
obviously requiring the use of the code, and I suggest that the ea..°
course be i..ursaed by the Bank with comiunications of leas importance
where concealment or rivacy is not required.

You will be glad to know, I am surer that the trip bide fair to
set me up so far as feeling well is concerned, and I may return as
fat as I was two years ago.
Please give my beat regards to all of the Ban
your good self.

and the saLe to

Yours sincerely,

A. H. Treman, Esq.,
c/o Federal Reserve IlAnk,
Nassau street, New York.


7. S.
Codfteietion of my cables Nos.
and may be used for filo co ice.

rid 3 are enclosed herewith


Mote_ Ritz, Paris,
July 31, 1919.

Dear Mr. Treman:

Your letters of July 1,th and 16th reached me in Paris in due
course; and I am glad to have all the word from the office.
It was
a shock to learn of Mr. Beyer's operation, and T. ho2e everything has
been arranged so that imy
er_onal affairs have attention while he
is away.

; -'ossibly Miss Bleecker is looking after that.

The arrangement about the competition strikes me as satisfactory and I i_resume we must also acce,,t the decision of the directors
in the matter of titles.
The arrangement about Mr. Hopfls title is
all right.
As you doubtless realize, there is a tremendous amount of lost
motion over here and making progress is slow work, but I am putting
in time meeting various peo7le and getting some sort of a line on the
situation, all of which is most interesting.
Conditions are moot confused.
There is a great deal of anxiety
but I have yet to believe that reports such as Mr. Vanderlip brought
home are justified by the facts.
It will be quite impossible just
now to write you fully, but I shall try to get a letter off when I
reach Belgium or Holland, where I shall have more leisure..

Mr. Kent, Mr. Vaughan and I are leaving Paris on Saturday in
an army automobile with a French officer expecting to spend a cou:le
of days looking over the battlefields on the way to Brussels, from
there to Amsterdam and back again, covering another part of France
on our return to Paris.
Confirmations of cables numbers 5 and 6 are enclosed herewith.
Please give my best to all the boys in the office.
Sincerely yours,
R. H. Treman, Esq.,
c/o Federal Reserve Bank,
15 Nassau street, New York.



R.R.T.- a.


the finest buildings shattered and torn 4ith shells beyond description.
Of course the main streets of some of theta places have been cleaned up,
The cathedral is
but in some places the walls are still dangerous.
At :laces where resistance had been most
indeed a beautiful sight.
severe the destruction was most complete and in many places the litter
of battle was still about, where you could pick up helmets, -ieces of
Mhrapnel, machine ,,un and rifle bullets and all sorts of stuff from the
In some parts of the front the roadsides are bordered with
immense piles of barbed wire; in other places the trenches, broken and
crumbling, spread in all directions with miles of wire in front of than.
At Verdun one can stand on Fort Douaumont, now a mass of chi,Ted concrete and rock, and look for miles in any direction where the shell
craters are continuous, one overlying the other, much to be sure now
overgrown with grass, but three years ago without a vestige of vegetation.
At one point the top of a mountain was shot right off, say for
15- feet, and there no foliage has returned.
In some places tanks are
resting in the fields, great piles of ammunition are alongside the
road, and around Verdun one is warned not to leave the paths on account of the danger.
I noticed in a trench in which I stepped, outside of Rheims, a bomb as big as your head, unexploded, which I presume
a good kick on the cap might have started; but one cannot begin to dic'ate a picture of that part of France.
In general, the crops in France outside of the immediate devastated
region look excellent.
There is a maer:ed absence of male labor in the
fields and 4 mar'..ed superabundance of French soldiers in the cities and
There are many German prisoners at work, but their work seams
to be indifferent and I noticed many of them lying or sitting on the
ground sunning when they should be toiling.
France has indeed received
Her finances _resent a most difficult problem; her
a shocking blow.
industries have been sadly injured by the war production and her pur
There is a huge shortage of coaax
chasing power abroad serious impaired.
and many people say a pros2ective shortage of food this winter or early
On the other hand at no point, even in the devastated rej.on
next year.
like Chateau Thierry, where we had lunch, does one find an absence of
good, wholesome, substantial food, bread of a brownish color but quite good,
and in most places butter.
I shall not attempt to give my impressions of the situation, but,
notwithstanding the shocking losses they have sustained, I have confidence
that with skill and care we will see the situation gradually improve.
As it is no devastated region
Belgium presents an air of pros_erity.
through which we passed compared with the French and ouch damage as we
The crops are magnificent, but besaw has been considerably re.aired.
hind it all is the fact that Belgium must have food from abroad as she has
Most of her industries which
not enough grain to sujply her lopulation.
competed with Germany have been deliberately wrecked by the Germans; Belgian currency is bad_y inf_ated in consequence of the German occupation
and they have .msbably not less than 400,000 workmen receiving chomage.
In general, however, I would predict for Belgium a prompt recovery and
For a year or two assistance will be needed from
resumption of ex_orts.
outside, but aside from that none.
The situation as to gold held here I hope will work out satisfactorthe National Bank and after much

I was most cordially received at

AimAllamirmr. T&441.1.1rW ytwahmommory........ firm& TaN
hays end
Federal Reserve Bank of St. Louis



Bruck's Doelen hotel, Amsterdam,

August 9, 1919.

Deer Ur. Treeen:

I have your letters of the 18, 22, 23 and 25 of July and hove
read them all with the greatest interest, else the enclosures
showing what has been going on.
It occurs to me to euggest that you ask Mr. Crane to send
cable confirmations in code, although the registered letters
just received have none of them been opened by the censor and
my suggestion may be 411 unnecessary precaution.
A code confirmation is just as useful, however, es an oeen confirmation
and may afford some little protection.
This is ray first day in Amsterdam and most of it has been
s,.ent in general discussion with Dr. Viseering and twc of his
Again I must ask you to be pat .exit, us I spent all
day with Dr. Viosering and must go to The Hague tomorrow morning to see about paseeorts, etc., ens this evening dt, received
a call from Mr. Ter Meulen, head of the Nederlendsche Oversees
Trust, who has just teis minute loft, 10:3e p. m.
Peesibly, when I
get back to Paris I will be able to catch up with mil and write
you some of our doings.

Please jive ell at the office my best regards, end,purticulerYy,
wonit you send word to Mr. Beyer that I am deeply regretful cf hie
illnep:s and wish hi

a very, speedy recovery.

Sincerely yours,

R. H. Tree en, Esq.,

c/o Federal Reserve Bank,
15 neaceu street, 'dew York.



Enclosed are confirmations of my cables Nos. 10 and 11 res2ect-


Ir. Kent and I were both impressed with the
heneral Imeressionsi
busenesslike, orderly eepearance of the Bank and with the apparent care
We were oath much reexhibited in connection with this whole matter.
assured, not only as to the Bank and its menegement and the surroundings
and the order Ln Which the gold was carefully stacked, labeled, etc., but
t they had no eoubt whatever
also by the assurances which they gave as
that it was ell as represented.

7.7 :1171 Aikl

The mein building of the eank Lu s t; deal Continental
structure- not os large as the banana. Lationale de Beigicue, but nevertheThe menrgreent of the Bank is,
less n very secure appearing structure.
seleneid MAI),
Dr. Visserinr is
as eau know, one of the bent in :uroee.
of great ability, and he was rerfectiy delighted to see us and save us
We learned that some months ago, shortie after the
everything we wanted.
Tar ended, eeecial measures had been taken to protect the eenk neeinst
::hey have 13" special selected soldier
enytheep in the nature of disorder.
guards on the premises, many of their employees are reservists, the aeeroaelles to the Bunk are seceded by special wire fences; they have a wireless on ton of the building for communication with the Oovernment, and
the drawbridge approaches to the olock, wnieh is entirely surrounded by
:Lae are %leo in ccurse of
canals, can be raised on a momeet's notiee.
builaing a most modern and, for Lurope, a most secure new vault in the
The vehlts are good- court of the sank, plktne for which they showed us.
probably better than those in Brussels or the ones in the Bank of england.
Dr. Visserine and two of his aeuoulatos assured me thet all the measures
taken for safeguerdine the Bahk were really exoess of precaution;
there is not the eliehteee eeoeehiiite of disorder La ilellend now end
It ie eowever
whatever Feasibility had existed had rapidly passed away.
a fact that Amsterdam and No-land had boon the working ground for a lot
of bolnheviet propaganda Which the Government is seeking to stamp out as
We examined the valuts end methods wed found the
reelely as eossible.
The work was done with exmen at work verifying tee Gth lot of gold.
ceeding care and here mein I was impressed with the thorough, businesslike
They all said that there was no -uestion
way in which tee work was done.
whatever in their minds as to the gold being as re resented.
They have mad as many as
')f course ?Tolland has had uueehloyeent.
401,0'10 men on the Jovernment payroll, erobeble most of teem still mobilized in tho army, but unemployment is rapidly decreasine 1,1 }7o1land also.
The orocess now bedew purat.od Lu to ou t and examine
every coin, to weigh the coin carefully, to calculate the intrinsic value
k considerable force of men is at
and report as per our instructions.
They eppeer to be familiar with the work
work co:intently on this job.
The contents of each bag when completed Ls transand are doing it well.
ferred to a nee bee In ehich is put the gold coin with the Reichsbank or
mint Jebel of the sermon government, and this bac is sealed with the 17.ederI arranged with them to continue this accurate
landsche Ranks c!. seal.

count until ten lots are completed, inking ele,100,100 marks in mad
figures, which amourt will for the present be set aside and held for safe-

The belan e of 240,100.1 marks
keeping in the tdderlandsche Bank.
they propose to verify by weighing the small bags without breekine the
seals, but removing them from the large sacks in which they are now
rcked, calculatlne the weight of the small bags, which are of ulform
size, and then report the approximate value of the 240,01)0,000 marks
This, I feel elate sure, will be sufficient, but is a pre.10 so verified.
ceution I am hevine, the bars taken out and carefully examined separately.
'Alen the 24e,0e0,0e-) marks are no verified, teet emouet will first be
ehippee to London.
The Bonk of En land has kindly undertaken to take entire
They have likouive
charge of ehieeine this F.lof,; from hmsterdem to London.
recently completed a shipment of aleir oven fromemsterdem end know exactThey sent their on men to oversee the eort and the
ly hoe to do it.
shIll not glee the deI
peckine end boxing LB on in approved fashion.
tails of the method of guarding the senoment, ellion struck Me. Kent and
The liederlandsche Bank is handling a large erount
myself as being adequate.
of gold, not only for Ube but or °Leer central been*, and ! have no hesitation ehetever in leaving the shipping errangenerts to be woreed Out between
them and the Rank of Lngland.
7:y idea in leaving 210,010,010 Barka at the mozent le in part to
eatify what was obviously hr. Viseering'e desire-- -that we should leave
some of the coin witn them--and else in order ie t out of this omou.t
re eleht return to the (ermsns the eouity which they still have in this
gold, rhich mey emu t to tweuty or twenty-five million dollers, thus
I itrelno Vat efter the
anvine trio shipments and e lot of boteer.
settlement is mule witn the Germeee end after shipping all to Lodan
the t SMONA desirable 1 shall aot recommend leaving any more in nollend
In -ne event both in -mstoreee end
than we are leaving in belgiene
Prssels the arrangement wile uo subject to cleuees at eny time.

The same arrangement will be necessary here as with
ho will of course be yliaed upon to pay ell
the netioral Perk of beleium.
olerks in connection eIth tne maveannt of the
ex .eneea, including labor
I was much erberressed in
go.d and the actuel ex:eete of verification.

disepssirn the euestlon of the custody fee because of the fee which we had
charred the Bank of the fletherlands, but finally it as arranged that we
should act for them without eharge and they for us without charge of commission, with the understenulne te:t ee will either refud to the Nederlandsche Bank the cemelesions me have alreade charred or thnt then will
ma;rr ur one cher e of the eeulvalent of tiet enount so teet ee start
afrerh with the account free.

Genernl Impreunion: both rr. lent and I tarred a very high
opinion of Dr. Vissering and his associates, of theirebillty and businessHe is most amxious,
like methods and of their Anowledge of world affairs.
as they are at the Beneee Nationale, to establish and maintain close and
friendly relations with the 7ederal reserve Bank, and my impressions of
the institution end of the managimeent are all favor' ble as I 'in expected
they mould be.

R.A.T.- 4.




Vy arrangement with the meek of England is not only for them to take
care of the shipment of the gold, but such gold as is moved to London to
have melted and put into bars, which could eive us the accurate value.
the other hand, this magi be an unnecessary expense and uewise, because
some of the gold we can probably use at the legal tender value rather than
If the ears are as I
the bullion value, for instance, the sovereigns.
The German bars I will
believe english bars these need not be remelted.
A final
erobally have remelted, also the Austrian kroner and the roubles.
decision as to this will await my reture to Loneoe aud may deeeed somewhat
The Beak of enelaed would have considexe
upon tee veult seace aveilable.
ebl- difficulte in finding the ditto required, but teal,: will be relieved
tc the extent that to leave eleele0010 markt', ar thereabouts, in Amsterdam and

Both in Lend= at


he bank of england and at Brussels ana Amster-

lamele ir'vo eaten mot with such uniformly generous treat:. :eat is workine out

these arranger:ants that I feel we shaule lake it a seecial point to reoteroante t) tee falltnt extent eolaible eta:levee oeeortuoLty arises.
Janesen, of tee rat-Loral Beek of Belgium, and possibly Dr. ;'istenet return Lair courtesies
Bering, are hoping to visit :sew York, ehee
have eatortained us at la:cheau and dinner, introwithout eetl.
eecel us to important bankers Led officers o: she government, and in general given us every opportanity to obtain infeematiou end to become acqueintea with the local situation.
The onle mutter ,enieh wile cause sere delee tiAL:1 die:loulty it ar-


if Chubs e Sou can by any means inrangement le effecting iesurseee.
crease the emouet to be handled in one lot as high as a0,010,000, or
40010,1e0 mares, tne amts:; :t &Upped eace tiee by the eankof en gland,
To aceompllsh this I think
it will greatly facilLtete the trensactlen.
I would not hesitate to accept t. reasonable emoue. of British insurance
er. Yett leaves eerie today fcr
payable ln collars in case of loss.
Loneon to concluee the eetalls of the whole matter and he will oommu-icate with YOU about the Leaurance.


I hope the above will tell the story as of this date to your satisfacteeny thanks for your letters which reach me rather irregularly and
me a lot of interesting news.

Uth best regards to all at the Bank,
eincerely yours,




c/o Federal .eserve Bank,
15Lassau street, eew York.

London, September 114.

1 -19.

My dear Mr. Traman:

Thank you for yours of August 29th, which just reaches me and contains much interesting information.
Mr. Strauss has frequently discussed with mil a proposition for publishing the Stock Exchange loan figures.
I am opposed to doing it, and
certainly we cannot give those figures which we now hold under pledge of
secrecy for any such purpose without the assent of the Stool- Exchange

This is one of those matters where there are quite proorly various
points of view, but I want to point out that when I proposed to Mr. Strauss
that we tihould make the proposed Sub-Treasury legislation the opportunity
for legislation in regard to greenbacks he at once replied that he feared
the development of all sorts of unsound monetary legislation if we undertook to deal with that matter.
The same argument applies to pub_ishing these figures.
While there
is an advantage to Le gained in giving the public more certain knowledge
of the amount of credit absorbed in a Stock Exchange speculation, that advantage in my opinion is much more than offset by the invitation which it
extends to Congress to indulge in all sorts of restrictive and regulatory legislation about nutters which should not be the subject of legislation.
I am sure that it has an element of danger in it and that we
liquid regret having it done.
Can't Mr. Strauss be persuaded to let this
subject alone until I return.
We have troubles enough ahead of ua anyway, without inviting nea ones.
The Stook Exchange authorities pet us
more than half way in our requirements, which were hardly short of exactions, during the war, And as these reports will certainly be discontinued later I think it e.oAld be much wiser not to attemIt to embark upon
a program Anich cannot be snide permanent.
Of course, I believe in cone
tinuing the reports, but I do not believe in publithini,.; the totals.
Secretary Glass' announcement that no further ealc of certificates
will be nude is moot gratifying, and his announcement of the proposed reduction in rate will be squally satisfactory if it is accompanied by the
other necessary decision, which is, to offer later in the year an attractive longtime note at a rate which will make it u certain success and
take the Government out of the short -money market.
Then the Bank will
be released ram this government-borrowing bondage and able to deal with
money rates on sound lines.
I pray for the day to come.

R.H.T.- 2

The chart has just arrived and Ida looking forward with keen anticipation to giving it u thorough study, which just now I haven't the time
to do, so will write coments a little later.
Many thanks for all the interestin_ things contained in your letter.


Sincerely yours,

R. H. Tramaa, Esq.,
c/o Federal. Reserve Bank,
15 Nassau street, New Tor'..


Please fina enclosed confirmation of cablegram No. 21, this day
sent the Bunk.

London, September 15, 1919.

Dear Mr. Treman:

Many thanks for your nice letter of September 2d, doubtless the
last I shall receive before pailin6 for home.

I am most interested in

all the news you send, in the circulars, Charts, etc., a study of which
must be deferred until I am more at leisure.
I am enclosing confirmations of my cablegram
Best regards to all at the Bank.

R. H. Tremor', Esq.,

c/o Federal Reserve Bank,
15 Nassau street, New York.


(2 encls.)


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102