Full text of Papers of Benjamin Strong, Jr. : Foreign Countries : Trip to Great Britain and France, Pt. 5, 1916

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Tho follo•,;ing na.rr·1tive of

P..

short visit to

~urope durir.g the Win er of 1916 is made simply to preserve n record of exp e riences of sufficient intereot to
justify keeping them in connection wi ·. o her dat1:1. relating to war conditior.c.
1 n e narrative ia dictated some Months after
returni ng from abroad, but is based upon elaborate r.oteo
made during the trip.

•

lor oome mord h , he conviction had been growing upon me hat
ne ime
d arrived when conditions wore
favorabl e for a preliminary discussion of b•nkins connecions abro d for 1ho Federal reserve banks and m decision
to make the rip 1us p· rtly for ~his purpose, but even
more to gi ve me an opportuni y to gather wh t information
I could on the ground ir. regard to financial conditions,
.'lnd particularly meH.ods ·1r1ic, ·,ere b inr ernplo ed, in Bngland nnd France to finance the huge war exp ndit~res.
I arr n n g e d wi t h , r • H • D • Burro 11 ,
one of r
old Banker~ ' rus Coe an
oys,
o accompany me an seer ary and s,or1,ly before sailir. nncertained rut r. John
f. •arri:::, of Harri::;,
ir.throp
1.1oopar,y, •as t.lso going
over 'lna ie joined forces in engae;ing
sui e or rooms
on the " rotte r darn" to s il ehryary ls •
" few days before sailing, J. P, ... organ us ed
me o luncheon with nirn and informed me, nuch to my surprioa, tri t he, P..lso, oxp c ed ➔ o sail on t11e str.e boat
accompuni ed b • ... rs. .'.o l' gnn.

S iling wP...
elayed until 6 o'clock, r'chruar1
· n , bnd on reaching tnu dock 11 abou 5 o'clock, I found
elabornt ar ra. n1,;ernon s r.n
en r,aae for examining 11
pns engors anc tr, ir pnasport.s.
" s eligh d to fi .d
on arrivins a
he dock h· t Gaptnin Symil'.g~ n, our ;•nval
Attache in London wao lso re ,rriir
by tne . nr.
boo.1. ·rer havin g my passports vis,d b t e Americ n passpor

•

2

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au th or i t i e a , I ran i n o • ' r • St et t i r i u s o f J • P • . 'o r g an &
Company,
no in ro uced me to General Rllersha of +hA
British Army, who wa re urnin wi n ,:r • . organ.
Talking .ith tnem delayed me in go ine aboard so thut I got
caught in the crush of passengers av•aitir,g final examination of their passports b the Englisn passpo rt officers
and I had to spend over two hours in t ~ e cro d mi er. ~as a
very ill-natured one.
Ne finally left in a sleet and
snow storm at about 8 o ' clock in tne evening.
I found a great collection of gifts from friends
and members of the f .,ily, as did ·.,r. Harris, tr1ere ~e ing
.no least.an 700 cigars ~ich Im naged to dispose of by
turning the~ over to Symington win the requect that he
present hem to ,.. r. eage, ii ,o is a t;rf t smoker, as being
ne gift of Symington.
Aft r agreeing to do so, ne broke
he bargain and told Ambassador 'age t a I h d sent them
to hirr..
;he trip across was unev111tful,(tne ·eaihur nc~
rough, but :--o,·e or less rt.in,) ,ougn never for a moment uninteres ing on account of t;ood cornµar.y.
Harri 0 , Synington
an Capt · n Shivareck,f ·no was with Symit:g en), ."oined us
at the s~rne dining table.
Four passengers horn I ha not me
Mere on board
:ith le Jers of in roduction to me, or.ea frjend of ·.r. Daniel G. Reid ' s , now living in London, by tne nane of Jarsh
and occup1ing Warwick Castle;
'.r. Henry Rulrnon e, secretary
to i r. Van de Vyvere, :·iniste r of Finance for !3eleium;
Mr . A. J. Frnnsella, secretary to l.'.r . Weshrr,a.'n, Pr sident
of the rlotterd<J.rnsche Bark of !1olland and
r. Henri Wertheimvan Heukelom, formerly of
ew York but no 1 living in Paris,
who was introduced by ~r . Frede ick Strauss and w~o is a relative oi the Seligman ' s •
.:y n rune not being on the passeneer li
, I sa
little of those l entle men b fore landin~ .
Among otner pas sengers on the boat me .r. J. i. Curtis ' sister dtn a party of friends irom Boston, who ;ore on tr,1,ir way to Paris to
take part in some .._.,ar relief ork; also , I iss Dev r·eaux i om
I had known in Englewood and who i· s returning to !<'ranee to
do Red Cross work.

•

'he "R otter a-," arrived r ... Falmouth la e in
he
after noon of .:<'ebruary 10 . in v r. bad ~ea he r and immedia ely on arrival a t end er p lled up alongs·de ne boat and
•ook r. an
rs. l~organ and Cener·.l :!llersha· ·•ii ➔ h his
aide, ,lr. hussell of the American Embassy in erlin and one

3

-•

one or t .o otner passe g ars connected ~ith the British Govern~ent. All the rest of he pas sengers were notified to
assemble in tne dining saloon at 5:30 t . e next morning with
all ~ersonal papers, letters of introd~ction, passports, etc.
Unaerstanding that the passeni:;ers would be exar,incd alphab etico.lly, I i gnorod tho notice and turned up 'lbout l alf past
ei 6 nt a n was locked in tne dininu s a loon until nearly t ~ee
o ' clock in the afternoon.
_an passen·ers were subjected
to the moet ri 6 id ~cru iny, at loast half a dozen and possibly
more, 1ere t<tken to thoir cabins, strippe and searcned nnd
had all of n, ir lu gg age eea.rched.
Ar,on_: others, vas a
Joung governess of Alsatian parentabe mo was tro.veli r g vi h
ihe t ;o children of r. vo.n Heukelom and who ms not only
searched but was finally no permitted to leave the boat. I
learned afterwards hat she was released only after re?renenations h a' been rn de through toe Home Office to tne American
Emba.ss:,r.
Durrelle in some 10.y aroused tho suspicion of he
officer and was required to stay in a cornfr un il I had
been examined.
''/hen my passpor s ·ere submitte d , ver y l i ttle atten i on as paid to hfl r.1 or my p pers, b·
he, ·e re
mo s+ p rt i c 1 :r t n at I should vouc h for Burr e 11.
Ve bot on c. tender h t
as to go s h ore about 4
o'clock and sat t ~ere it}out cover in a sleet storm for
ne· rl t ·o tours.
iinall Symington and I reached the dock,
m· de a da sh for the custom house, succeeded in locatin g our
hand-bags, gRve he vfficers a soverei gn to mark them at
once an left the reot of our luggage 'or Burrell and arris '
valet to bring on by a later train.
By t.is manoeuv~r we
managed to catch the fir t train for London wnich, howevbr,
did not pull out until 1 a.t e at night and finally r eached London, where it was s i l l rainin g , at 2 o ' cl o ck in the mornin ~ .
There were no cabs in the ntation but e finally locat ed a
"growler" and drove to the Ritz hotel tnroug. a cit that o. almost absolu~ely black un found at the hotel that tnoy ha
been good enou gh to sta up a aiting our arrival.
3urrel]
and 1 arris' valet arrived about 5 in the morning wi hour
trunks.
S<tturd·•y, Februa.r

12, 1916.

I exJected +o sleep until time for luncheon but
both ·r. Harris and I •ere u•1akened around 9 o ' c ock b· drums,
e c., outoide he ho el :ind on lookinv, out 11e diocovered that
in the courtyard of the Duke of Devonshire ' s house immedia1ely across Piccadilly, a squad of recrui s ,ere lined up for

-

- •.

Sund1y,

February 13th.

'ihe trouble wi h u.y an .. rum seemed to be getting rnree
end as .r. J arris hBd n engage cnt
i
" i ids, I asked
r. Chandler Anderson, formerl Counselor to the State Department, to make me a visit in my sit-+ir.e room.
J,r • .nderson was in London repreacn ing fll of the meat packers but one
who ere negotiating for some njjuat~ .nt of clairs of Arrrour
and o ners ngRins1 the Bri .. ish Govbrnment arising out of cargoes of mrat havir.g been confiscated, en the u·ounds that tr,ey
were intended for ultiir.nt
enemy deetination.
Anderson told me confidentiall the whole story of his
negoti tions :nich ·:as most ir.t
tini;.
It seer.is th, t the
Bri · sh Government ha
ch vigilance in censoring
nll m<i"l and c ble communications na h hi fcun1 it nee ssary to h·1ve 11 corr.municaticns i r, hi A clien1 s carrieo on
througn th Embassy nd Stat
Dep tme
nd i
wuo practicnlly
im ossibl
o use
ho cables. rhe a~oun i volved a about
.,10 ,000,000 D.l'd c1a · :us which he did not r prenon and nich
were being ne~o1ia~ed by rr. Lloyd Griscorn, amoun ed to one or
two millions more.
'•he Commit ee d1h which he •as d ling exhi ited a
ver-y e ong de«ire to ef"ec ➔ an adjuA men 4 of
he cl ·ir.s bu
I ga hered hat
hey f .-lt un iillin,. to adjust · r.
cl4ims ti hout · lso concludin~ n arrn.ngement witn . r. Gr iscom and ho lntier's clier. s ere susp cted of havin~ Ger~nn
affiliatio r.s which made it difficult for th m to reach n conclusion.
"he CoMmittee alee displo.· cd
ei1ong desire to
announce a favorable adjus ment of
~e cleiffie, which 1/r. An derson felt would ver
~1ortly be concluded i n sucn u way as
to create favor abl
sontir:ie nt in h United State •
At a
ln er interview ~ith .r. Anderson, af~e r
he arrn.n emont had
been concluded and approved all nround,
e o id h·t effort
had been m- de to induce him o per5u de h · s c_lier s to accept
so:.. sort of governr:ien oblig tions .
lie had dEclir.ed suer.
an arrur~emcnt , bu was considerin · leaving ome part of tte
funds on deposit in England so a to avoi
disar r angement of
xchan e by tne transfer of sue. t-\ le.rg sum. lie finally told
me t:.e.t tne matter o d all been co clt:.deci und tr.a~ tne mo11e,
was to be deposited ir. London an gradually rithdrawn by his
clients in the uoual course of business so an not tc disturb
xchun e r~teo.
0

_r . An erson undoubte ly &crieved no a le oucccss in
a :ustir.g t.is cl::>.ir:i
ich (>.rtour.t, I believfi, is srconJ ir. im,ortnr.ce onl to
n " Alabama " clai1:: , end mi~ht havo giv n rise
to oeriouE dispu•e be reen r.e t,o co ntrics.

- •-

The rieather clearin g up, we ook o. ohort mlk through
Hyde Park nich wao cro~dcd.
~any of the b nches ere occupied by convalescent aoldiets wi•h iheir friends or nurses.
~he all ors a hospital uniform consisting of loose khaki
cont, blue tr ouser. und red cravat.
It was noiic able ·hnt
a great man' men paaoine; groups of nese sol 'iers ci her touched their nus or took them off and ladies fre uenily sopped
to chat with ~em.
Also, it was not uncom~or to sec one or
more of t hese convalesc~nts drivini about the Park or through
the streets of London in fine automobiles, gener~lly with n
lady, and at tiwes l saw them driving througn the Park on improvised siretcners ~ttached to motorc1cles.
Some of these
men ·,ere all bandaged up and a_lparently badl · wounded.
After lunche c n with An e r son, I
tor trip d r some of the men from tr,e
he condi ion of "Y face and spen
he
until time to keep an uppoin ment ith

declined to take a moEmb ssr on acc:oun of
aftornoon in my room
Dr. 7od<l.

(COPY)

Memorandum tor Mons. Pallain:

Secetion 14, of the Federal Reserve Act, a copy of which is attached,
confers upon Federal Reserve banks the power to transact certain business
in foreign countries.

Reference 1s made particularly to paragraph "E" on

page 16, :f'rom which it will be observed that with the consent ot the
Federal Reserve Board the Federal Reserve banks are authorized to open
and maintain banking accounts in foreign countries, appoint correspondents
and establish agencies "tor the purpose of ~urchasing, selling and collecting Bills of Exchange, and to buy and sell, with or without its endorsement, through such correspondents or agencies, Bills of Exchange arising
~~

actual commercial transactions which have not more than ninety

days to run and which bear the signature of two or more responsible parties"•

•

It is felt that in anticipation of the conclusion of the war (and
possibly prior thereto, if circumstances render it possible and necessary)
Federal Reserve banks should perfect plans for putting this section of
the law into effect.

This, it will be observed, would involve:

a ••••• Opening bank accounts in foreign countries;
b ••••• Appointing foreign correspondents in foreign countries, and it
necessary,
c ••••• Establishing agencies in foreign countries.
The law, however, does not provide for establishing branches of Federal

Reserve banks but rather indicates that this business shall be conducted
in foreign countries principally through the medium of bank correspondents
and that an "Agency" or "Agencies" establish in conformity with the

•

statute shall consist possibly of a personal representative with necessary
staff of clerks and assistants.

Such an agency, however, would not con-

duct a general banking business such as opening credits or receiving deposits.

2

It is theretore important to emphasize the language of the

ct which uses

the word "Agency" instead of "Branch"•
The motif for making the present investigation ot the feasibility

ot appointing correspondents and opening bank accounts is in orde~ to
anticipate occurrences which may possibly arise after the war, and which
might result in a derangement or the exchanges to the disadvantage of the
financial position both in the United States and in those countries with
which the United States has close commercial relations.
The experiences of the last eighteen months demonstrate that abnormal
exchange rates and violent flucuation of exchange are detrimental to the
interest of both countries affected.

Greater stability to the exchanges

during the period of readjustment following the conclusion of the war
(and it c1rcumstanoes permit, possibly prior thereto,} would be maintained

•

it some part of the resources of the Federal Reserve Banks were employed
in the purchase of commercial bills in foreign markets as authorized by
Section 14 of the statute above referredto.
The steps necessary tor the accomplishment of this programme,
according to the writer's view would be:
l ••••• In the case of France, to establish a close relationship with
the Banque de France tor the object of Illlltual exchange of
information.
2 ••••• The arrangement ot terms for the establishment of depoal.t, or
current account with the Banque de France.
3 ••••• The arrangement ot terms for the establishment of similar
accounts with certain important French banks and bankers to be

•

selected •
4 ••••• The establishment of arrangements with banks or bankers to be
selected, tor the purchase of bills such as Federal Reserve
Banks are authorized to buy.

3

5 ••••• The establishment of arrangements for procuring information
in respect of the credit and standing of the drawers, acceptors and
endorsers of any bills purchased.

Anticipating the development of even closer commercial and banking
relations between France and the United States than have heretofore existed, and of a larie commerce between these countries, and with the possibility of :ma.ny uncertain factors arising as a consequence of the war, it
has seemed desirable that plans for the accomplishment of the purposes
above sug ested should be perfected in the near future, and emphasis is laid
upon the desirability of close cooperation with the Banqu

de France.

is suggested that the Federal Reserve Bank of New York may also be of

service to the Banque de France in American affairs as the relationship

•

•

developed •

It

-.

-

The memorandum was translated twice to • Pallain,
I endeavoring to explain the technical meanin of the various
phrases , and we then went over it paragraph by paragraph.
•
Pallain emphasized repeatedl y that our discussion was tentative
and confidential o.nd entirely subject to such disposition as mi~t
be made by the regents of the Bank of France, but the entire program seemed to meet his approval and that of his associates . He
in41ired most particularly and more than once whether we would
desire discounts, that possibility not, apparently, appealing to
him as feasible . I explained to him, however, that under present
conditions no such thought was in our minds, - the 'ederal Reserve
Bank, being a reserve institution, held the reserves of the commercial banks of the country and, except under most unusual conditions such as war, etc . , or great financial crises, it would not
contemplate endorsing and discounting bills . The general purposes
of our plan were elaborated in great detail, I explaining also
that the entire conversation was tentative, subject to the approval
of the directors and officers of our bank and of the ~ederal eserve
Board, upon my return to New York, and particularly emphasizing that
,mless unusual circumstances made it necessary, it was hit;hly improbable that any arrangements could be completed and put into operation until after the conclusion of the war, unless indeed the United
States should become a belligerent. To this they all assented, but
later on in our conversation • Pallain emphasized very stron ly
his view that the sooner an arran~ement of the kind suggested could
be brought about, the more advantageous it would be for the interests
of both countries . He also explained that whatever information they
might furnish us in regard to ban~s and banking conditions or bills
or credits, would be ,rithout responsibility to the Banque de France,
nor, on the other hand, would they hold us in an~, way financiall~ or
in aey other way, responsible for such info
tion as ,,e furnished
to them. I stated that it was quite improbable that arrangements of
similar character would be ma.de at the out~et, or for sometime, elsewhere than in London and Parie, although it was impossible just then
to state positively how our future plans would develop. I -particularly emphasized that if satisfactory arrangements could be ma.de,
they would be primari l y for the purpose of stabilizing exchange,
controlling gold shinments, etc .
• Pallain inquired whether this
meant that any money we might employ in Paris would remain there
indefinitely. I explained to him that deposits would be ma.de and
purchases of bills affected in those ms..rkets whero exchange rates
rendered it most desirable and profitable, and that there would accordingly be a certain al'IX)unt of arbitrage between the various
markets where our business was conducted . I also stated to him
very explicitly that while profit was some consideration, it was
quite subordinate to safety and that our policy would confine us
very definitely to the purchase only of bills of the very hi~hest
grade and Which were undoubted . He desired to lmow the character of
infon::iation we would find it necessary to accumulate . This I explained to him would include not only general conditions, but the
character, management and responsibility of financial institutions
and finns with which we conducted our business, as well as the character and res~onsibility of the drawers, acceptors und endorsers of

-.

-

bills which we mi 6ht buy. That the volume of our business would
not develop more rapidly than was made possible by the extent and
character of the information which we were able to accumulate and
which mu.st be authentic and complete. This led to my explaining
that the onerations and machinery of the London Bill market were
not only well known to us, but were of a character that made it
particularly easy for us to conduct the business we had in contemplation in London (referring to the operations of the acceptance
and discow1t houses and the bill brokers); that the situation in
Paris where no such market existed was so different that I felt
our O\vn interests would require a careful study of' this matter before we could undertake any extensive business. ~. ?allain intimated once or twice that there was considerable jealousy between
Paris and London and that they would welcome t e opportunity to do
as much business as possible with us. This interview \vas more than
interesting, in fact rather picturesque , and typically French . Kow
and then considerable excitement and interest developing, when everybody talked at once and when there was a 6ood deal of jesticulating,
but the
eat cordiality and enthusiasm which was displa;yed towards
my proposal convinced me that no difficulty would be experienced in
rr.akin 6 very satisfactory bani<ing arrangeme11ts with the Ban,c of }'ranee
when the time arrived .
After my interview with these gentlemen , they showed
me somewhat through the Bank of France , particularly that portion
of the building where the bank notes are printed and •/here I signed
the visitors' register . It was four o' cloc,c when 1 left the bank,
too late to IIE.ke further calls, and I met Captain S~,nington and
Captain Sayles by appointment and we dined to ether.
s I kept
only brief notes of so?lle of the conversations in Paris, not wishing
to run the risk of having them examined or taken from me, 1 found
it necessary to elaborate various conversations which I had in Paris
after returning to London and this seems an aopropriate place in
which to insert this memorandum of various detai la:
PRICES: Some slibht indication of the degree to
which the prices of nece sariea have advanced is given elsewhere in the diary. Food, coal, gasoline, etc., have shown
tremendous advance in prices partly due to lack of domestic production, partl y to lac~ of shipping facilities , but to a very
considerable extent due to laclc of transportation within li'rance
itself. At the time I was in Paris the railroad were tmable to
transport foodstuffs from the seaboard to Paris in sufficient
quantities to relieve the urgent demand there. I gathered that
this was due to some extent to the lack of adequate handling
facilities at the ports and high ocean freights particularly.
' L ESTATE AND • iTS: Considerable distress has
arisen by reason of the operation of the moratorium i n resnect
of rent payments. ~enants under this law can a9pear befor~ a
tribunal and show cause why they should be temporarily relieved
of some of their obligations for paying rent and frequently

-.

this relief is granted, and the result is that real estate
prices are absolutely ~aralyzed and real estate owners in considerable distres s.
large part of the investments of insurance companies and other investment companies and corporations
are in mortgages and real estate, and with rents not being :pa.id,
real estate ovmera are unable to pay interest . The whole scheme
seems to have been badly handled, and while possibly designed
originally for the relief of families where the men were at the
front, advantage is now being taken of it by all classes of rent
payers and the effect is thoroughly bad .
TAXES : l was informed at the Banque de France
that tax collections are about 60'~ of normal .
BILLS: Foreign drawn bills are now practically a
negligiblo quantity in the banks, and the volUIOO of inland
bills has been greatly reduced bel~~ normal, although the
discounts at the Banque de France show an increase of lOOj&
over the amount twelve months ago, which is a very good indication of increase in domestic business, as bills are drawn
for all varieties of conmerical transactions in France down
to amounts of 10 , 25 and 50 francs .

-

-

RETAIL BUSINESS: lj_lhe retail stores in the :ue
de la Paix, Avenue d' l ' Opera, etc . , m.ich may be regarded as
dealing in specialties, are doing only a nominal business.
While most of these stores are open, one sees very few customers. The stores that l visited, such as the rande · ison
de Blanc, Doucet, ~oger & Gallet, Mappin" 1ebb, Ltd . , and a
few others, were deserted; I believe l was the only customer
in them at the tim . On the other hand, the large department
stores li~e the
ison de Lafayette, etc . , are so crowded that
one can hardly pass throUc, the aisles . It all indicates
economy as these big stores all do a very large bargain counter
business and the better classes are now dealing with these establishments on account of their lower prices, in preference
to the higher class stores .
Fli CE: The officers of the Banque de ~ranee and
Baron de Rothschild gave me a good deal of interesting information generall y in regard to the finances of the country . I was
informed that the Banque de France bas an arrangement with the
Government by which the Banque is promised payment of its advances to the Government prior to the payment of any other Government indebtedness and out of the first general loans placed
by the Government for refunding and other purposes . Thia represents a prior claim running from 6, 000,000 , 000 to ·a,000 , 000 , 000
francs, that being the extent of the Government ' s borrowing from
the Banque de France . It was estimated that of the 13 , 500 , 000,000
francs of the Banque•s note issue, about b, 000 , 000 , 000 frame have
been hoarded or held in reserves of other banks . Baron de Rothschild thought that the Banque de France could easily support an
issue of from 25 , 000 , 000 , 000 to 30 , 000 , 000 , 000 francs, being
about double the present issue, or say a margin of 12, 000 , 000 , 000
to 15 , 000 , 000 , 000 francs for further use .

-.

-

onsieur ?allain said that the Banque bad already
shipped 20,000,000 pounds sterlin5 of its 0old to the Bank of
England, and under the existing arrangement had agreed to ship
12,000,000 pounds sterling in addition. The peasants had turned
in about 250,000,000 pounds sterling in response to the appeal
of last year, and Baron de Rothschild estimated that there was
still hoarded fran 90 , 000 ,000 to 100,000,000 pounds sterling;
this being the estimate of the Government and the Banque de
France . Pallain and Robineau told me that when the crisis
arose, the policy of the Banque de France was to rediacount
without limit, and I gathered from what they told me of the
scenes during the first few days, that it was Pallain, Robineau
and the Secretaire Generale who really saved the day for the
French banks generally, as they took in bills literally in
bales. ~he Banque still has a large amount of "frozen" bills,
figures for which appear in the annual reports. I asked
Robineau, the head of the discount department, to describe
how he would define or detect a finance bill -.vhich was ineligible for discount at the Banque. He picked up and fingered
a piece of paper, as one would a bank note to detect whether it
was a counterfeit or not, said that it was really a matter of
instinct and experience. The Banque alTIB.ys requires three obligations, of which two must be French and one always the acceptor. ~ey do not necessarily discriminate against finance
bills. The only bill which they absolutely decline to discount
is a bill drawn by a foreigner on a foreigner and domiciled in
France, even though the endorser is French. They consider that
such bills are drawn for the benefit entirely of foreign business, and simply domiciled in France for the purpose of getting
the lower rate of discount prevailing in that market. The
Banque de France discounts a tremendous volume of domestic bills,
largely to meet the convenience of French banks in collecting
the bills . Robineau said that in one day his department had
collected as many as 100,000 items in ?aria, involving the use
of over 1,000 messengers. I believe his regular staff in the
discount department, in addition to the messenger service, is
450 to 500 men. The officers of the Banque told me that they
felt that the bi g banks imposed upon the Banque de !•'ranee in
dumpin6 these collections upon them.
The Banque de France is undoubtedly the hub of
the whole financial system and both the other banks and the
public generally have unlimited confidence in it. ~he agents
of the banque, by reason of their position, have great influence and, as is the case with the Ban.c of' England, they
are largely drawn from the banking houses which in London are
considered to be merchant bankers. The so-called finance
banks have recently had a very black eye, rlth the exception
of the Credit Lyonnaia and the Comptoir ational d'~scompte.
The so-called Hautbanque, or private bankers, have been driven

-.

-

into the background by the operations of the finance banks,
but as a class they have managed their affairs more carefully
and conservatively than such institutions as the Societe
enerale, etc . ~he strongest of the so - called Hautbanques are
de Rothschild, Hoetinger, allet-Freres, Heine & Co . , Verne
& Co . , deNeuflize, and
should say that organ , Harjes & co .
in rating stand right alongside de Rothschild . A number of
tho private banking houses are under some suspicion of German
affiliations . I should say that this does not apply at all
to de othschild . '2b.ese private bankers are men of very great
caution, and, while they have occasionally handled some things
that did not turn out very well such, for instance, as the
Banque lo Union ?arisienne , etc . , they are on the whole regarded as bein 6 of very hi~h grade and in 5 ood condition . I
had a lonb tal4 ~ith Baron de Rothschild regardin6 ~old payments by the Banque de France . He thou6ht there was no question
in regard to their maintaining gold :payment as to any exterior
obligation, no matter '.'/'hat the outcome of the war. !i1he Banque
de France could, if necessary, give up over 300, 000 , 000 of
it gold but, of course, they did not want to do so until preasin~ necessity arose . Baron de Rothschild said that when he
and his associates were asked to draw the bills for the Creusot
credit, ne and the other bankers were quite unwillin6 to do so
unless they were protected by a pledge of g~ld . '.i1hey could
not get it directly from t , e Banque de France, onsieur
lain
b i ~ unwilling to ma.Ke a conmitment that would appear in his
statement, but that • Ribot gave them the Government's guarantee to furnish gold if exchange could not be had, and which
they considered to be just as good as the pledge of the Banque
de France .
There are certainl y some serious situations to
face in regard to the investments of the French people and,
to sooo extent, French banks in foreign securities such as
those of Brazil, ~urkey, nussia, Servia, Mexico, etc . There
is a. lot of doubtful and possibly worthless stuff in the nation
which will be or veriJ slow liquidation . The big banks like the
Credit Lyonnais , Comptoir National d ' Eacompte, etc ., are
carrying about 50fa cash reserves . The Government is now borrowi~ very lar e sums, the figures being given in a se-pa.rate
memorandum, on bills running 3, 6 and 12 months, the rates
being 4~ for 3 months and 5~ for 6 and 12 months . The amount
of this short debt is much too large and they are hoping to
quickl reduce it by a new loan which may embody tho srure
lottery features as now prevail in many of the municipal loans.
The French loans, however, seem to have been better handled
than the English, as they are all selling at a premium.
•
Ribot seems to be broad minded eno h to pay the ~oing rate
so as to keep a good narket for additional issues .

-.

OLI TI CAL HEELING : All discussion of the attitude
of the United States toward the war must be carefully analyzed
as one is liable to be deceived by the essential politeness of
Frencbmen and their desire to avoid giving offense. 'i'hey will
VTill great suavity assure you that they thoroughly understand
the difficulty of our position, that probably it would be injurious to their own interests to have us becom involved in
the war, that they were too dependent upon us for supplies,
etc . This, however, is not their real underlying feeling
they all believe that it would shorten the war to have us come
in, that we are takinb altogether too many affronts from ermany
and that if Germany should win this war we \VOUld face serious
trouble with her later. The man who discussed this with the
greatest frankness was onsieur Roselli of the Credit Lyonnais,
who is an Italian by birth, educated in bankin~ in London, and
does not labo r under the handicap of French politeness, etc.
When he explained that the French had some underlying feeling
against the United States, I asked him what he would do if he
were President of the United States and had the situation to
deal with . He intimated that he might follow the same course
that the President had, but he did not think in sayin 6 that,
that he expressed the views of the Frenchmen. That ea night
at a dinner which Mr . Harjes gave me there were present about
one dozen bankers, he (Roselli) went over the discussion we
had had with those present, speaking entirely in French and
which I could not follow . He wound up by asking the same question that I had as~ed him at lunch.
ith one accord and vehemently they replied that they would declare war against Gennany .
There seemed to be no doubt in the minds of any of them.
I discovered that there is a very strong feelin
of suspicion and uneasiness towards England and the English
management of affairs. l judge it is based upon their belief
that England is endeavoring to dominate the situation in financial matterst and a very strong feeling that France has little
to gain by the war and much to lose; that England will turn
the outcome of the war to her own advantage . There seems to be
a considerable and very active cabal directed against Joffre
by Cailloux, Clemenceau and their followers . This matter
took the form of a Committee of Investi 6-ation by the Chamber
of Deputies into Joffre's conduct of the war . I had opportunit~ to read their report ,hich was bitterly critical of
Joffre•s whole pro
e, and givin~ credit for what had been
done principally to Gallieni and Castelnau. Among other thin6 s
in the report was the statement that the total F'rench losses to
the date of the report, some months ago, amounted to 3, 200, 000
men. In this figure were, of course, included the wounded who
have since returned to the front. I have subsequently learned
that during the battle of Verdun a serious blunder was made bu
a French General in the early stage of the battle, who canpletely
0

-.

lost his head, became panic stricken and subsequently insane .
The Germans got through the French lines, captured 180 French
field guns, most of which had been nearly destroyed, and nearly
200 ma.chine guns . The disaster was so serious that the French
Government again contemplated moving all records to Bordeaux.
eneral Petaine at last succeeded in repairing the damage before it became a disaster. This has been completely surpressed
from the French public, but it is more or less the subject of
gos ip privately . ~he 6'Un8 lost included most of the bi 6 guns
that had been removed from the fortress of Verdun and remounted,
many of which, however, had been badly warn with use am destroyed by explodin~ the breeches before being abandoned . 1
was informed that when General Petain took charge at Verdun he
found that that part of the French army, which is very large,
which was north of the River euse :,ould have been absolutely
destroyed had the Germans broken through, as there were only
three bridges available for a retreat . The ~eneral in charge
of that section was immediately removed and eneral Petain
constructed no less than fifty bridges for use in case of an
emergency . He is today the popular hero in France. ,,'hen the
disaster above referred to occurred the Cail oux element
thought they would be strong enough to launch the r attack on
Joffre and a committee report was submitted to the Cabinet,
with the demand that Joffre be removed and the conduct of the
army be put under the direction of a committee of the Chamber .
Much to their chagrin the Cabinet voted down unanimously the
report \vith the exception of the one member who introduced it,
and for the time being at least the Cailloux cabal is dead.
'l'here is no doubt that the war losses in men in
France are far in excess of current estimates; that France has
reached and passed the apex of her strength and that much more
of the brunt of holding the \"/astern line will now rest upon
England, which has recently added forty miles to its own line
so as to release men of the French army for the Verdtm defense .
CROPS: General ly speaking, the estimates of lt'rench
crops are only from one- half to one - third of nonnal. They are
tremendously dependent upon the rest of the world for food
supplies, particularly meat and grain . The French peasant,
however, is most successful in raising chickens and the sU!)ply
of chickens seems to be inexhaustible, they having advanced
leas in price than many other foods .

-

LABOR: mhere is much uncertainty and uneasiness
as to what will ha!)pen to the industries of the country after
the war . The French depend, to an unuaunl degree, upon skilled
manual labor mich is developed by the apprentice system. Young
men who have been taken two years or more out of the shops where
they have been learnin5 the trades have lost an important period
of their education and nay not be content to return to that emn loyment. Physically, they are being t remendously improved by

-•

the service; that is, kept in the open air, living upon
simple food and away from the debilitatin0 cafe life.
==:.=:.:.....=;CRED=::.:I:..:T=S: All the bankers with whom I
talked were most anxious to see the American banks extend
credit more generously. This is treated with at more length
in another part of my diary. There would be no jealousy or
uneasiness if all commercial credits, for the present at any
rate, could be transferred to American banks. They are willing to ma.Ke any sacrifice, to give adequate security and are
really looking to American bankers for support and encouragement. They are na.turally suspicious and timid and negotiations are delayed and difficult on that account, but once
their confidence is established, the American banks could
get unlimited business in France and on their own terms.

J
STILL
: I have not dictated the substance
of my conversations with Mr. Stillman for various reasons.
Supplemental to conversation with
of merican Embassy in Paris.

• Fraser, Secretary

r. Fraser told me that I fOUld be interested in
a conversation he had with Howard Taylor who, a few months
before, had stopped in Paris on his way back to America from
Germany . Said that when Taylor was in Berlin some of the
lea.ding Berlin bankers had a private meeting vnth him and
told him that Germany was headed for fina.ncial destruction;
that the rest of the world would 5o down vnth them financially, and urged him upon reachin.; Paris to see Baron de
Neuflize and endeavor to persuade him to have a meeting of
the French bankers so as to start a movement amon6 bankers
to briue; about peace discussions. He ~ ve Fraser the impression that erman bankers were i n a great state of excitement
and distress over the German financial situation. Baron de
Neuflize was understood to have consulted sorr.e members of the
French Government, and, upon their instructions, is said to
have replied that if Germany wanted information as to what
the French demanded before discussing peace, he might say
that they demanded the return of the lives of 1,000,000
Frenchmen.

-.

The delay ir Dioppo ms so
on,: th t our ruin
did n~ re 1h P r'o un+il 7 o ' clock tn t evening. !r. Ellis,
"'Una ....i~ of
he Hitz Ho-'-el, tol u on arriving th·1t he on
had a"v' t · dozer. ucsts '-'nd we cou lct have our cnoice o:
room3,
There ,,.e e only twelve p\'.,lople ir
he dir.in r.-orn,
includinb ur, · arris an ~yeelf ·nd five of these wee En";~
,, o -i.,·c:-s.
f
r n sho t •alk, ,u re irod car : •
Prris, Fr · a/, Februa.r· 18 h,
val led a.t ,orgur., Ho· jos & Co pun, but mise d
.r • , r j o o v h
· a c; out of town.
I m I e some purchase 6 n t
1
the - aioon de Blanc wi' e €> l
as he only customer I could
se in the ~tor •
Al~o. purchnsed an w tr v ling bag t
~appin & ~ebb ' s to replace the one ruined on ~he boat, ar.d
there I was the o ly cu:t~ner i
the store.
I hau the s•~e
expGricrct, o:l Douce ' s irPr~ l ordered some cruva s. Later
in the mornin5. I drov to tre Emb f:> , t:..f' arr·•nged ·:.ith
Co.ptc.in'Sayl00, to meet Ambae!Jador Shrirpe, ·1i h v.horr I spent
about an hour.
He was most agreeable, r~counted the difficul ies of hi ,oai ion d ring the ,ur,
ut much o wy
surprise he hao his son join ~a in hiE o fice and ake notez
of E.vP : thini; hat wac; s id.

:r. Sharpe ~ar par iculq l? biter h~t mericnr.s
re iding in P~riu had een Mo outs,oken in the·r criticisns
o"
he Prc-:ni-:er. and s id i• : " oing ... uc .. h"rm.
From one
r
o tr· fling rem·.1rks, I ga nered h •1-' h<> And .mhas,.ador
rierrick ha hud sor
jif iculties
fore Herrick re urned
ho~e and 1 er Capt~ir S ;les confirm d his and said that
i er rick h9. not benave.d very
ell
o ·r. Sharpe.
0

Ca-o ain Su 1 lEs &nd I had lur.che n tog t' er o.
the C~fe d Paris ur.d af•
.~rd I prescnte
r. arr ' s let•c o: ir.troi1~t·o
o Ir. _hnckera, American Cons1....l 3en ral
a· Paris, v:iio va~ rr.oc
c rdiel and anxious to e• fl s
hand ne s from home..
He ac, tur d me nai
,.e f orr::s :;hi h I
ha filled out. d
he r.o el ne previo'..ls evrr:ir _:, givir.g a
nta emc:nt o ,. 1e oh :ect of m• visi , ')e c;onal descriptior,
and i ti nerar
;ere all hat I -. ould be re tti
d o furnish
th13 au horities un il it _ra•
i e o leave Paris.
He
stam d 'll) pa spo to, ho ever, iith the r ~ 111"1 ctc.rrp of tis
office as a matter o. protec ion.

-

Or re urning o the hotel, 'ound .ndrev. Graves
of Llo• d ' s Earik, nYJ.d Elter, Char ie Phillipe came ov r for
dir.ner.
,\f er din .. e.·, -.,raves. Priillip~, Harris and I
wen to see " Olympia 11 •
It
s ere 'lded pri ci o.l : ·:,i h soldir s :•ho seer,,e
o b o:.:' all colors c..nd na i"n li ies, but
i1 ,'ls a verJ poor c, o·Ji.

4

drill.
Ever. dny during our stay in London troops vere being drilled right outsi e of our windows, no mater what were
the weather conditions, and frequently they started from nere
ith neir troops :naking practice rn1.rches and currying full
equipment.
Shortly after breakfast, I rov s to the reasury
to c all on .r. Basil P. Blackett, ho gave me aver
iarm velcome 1.nd urged rne to call on him for anything inich would facilitate the object of my visit.
~he substance of my conversation with him "las as follovs:
Blackett stated tnat the Bank of England had paid
the Govern~ent for all guaranteed bills vhicn the Bank had
purchased under the terms of the Government's offer and that
at thai date nere was about £30,000,000 sterling unliqui ated.
7he account had, a one ti e, been somewhere from
£100,000,000 to £120,000,000 sterling and those remaining unliquidated were largr~ly bills that had arisen out of enem
transactions, thA acceptanceo of tne German bank agencies in
London, etc.
Later conversa ion with the Ban~ of England
disclosed payments were being m·de only ver1 gradu1lly - I
judged sor.1ewhere fro:n £50 1 000 o £150 1 000 every day or t1wo.
The B~nk of Englt d m~nuees the ~ccount for the Government.
Blackett also informed me tha
H, Government was running
ahead on it dollar exchange account, thr
changes really
havint been sligntly favorable and enablingsome accumulation
of dollars.
He stronJly favored snipping gold to Hollanu, or
ear-m•u-~ing gold for Dutch acco nt b t confiscating all securities co.in out of Holland whicn bore evidence of German
ownersn1.p or origin.
S1li that Lord Cunliffe wao opposed
to shipping or ea -m rkin · gold for Dutch account.
Blackett
felt strorgly thu+ he matter should b corrected.
He
thought ·e o ght to establish close relations wi h the Bank
of Engl nd, und that an arrangement for ear-~ar ing gold between the t 10 b nks should be concluded us soon as possible.
her~ were, ho ever, many serious problema ahead in the mutter of tne London money ~rket.
'or one thing, no was sure
that the relations between the Bank of England and tho London
Joint Stock .Barks woulcl re uire thorou ·h readjustment.
'!he
joint stock banks iere getting too big for the Bani< of Engl~nd
and their effort wao ra he to pull away from t~e 9ank's influence.
le tnougnt possibly tne w ole joint s+ock bank situation would require overhauling, possibly by letisl tion.
Said that Holden was dead in London - exceedirt~ly unpopular
1nd an obstructionist.
He also felt thai. tho Federal Reserve
Banks could perform gre·t service by holding sovereigns instead of having them melted do •n.

5

-•

-

ITe discussed the currency notes si uation at great
len~th. He seer.1ed soun · · . his ideas, tha1
:ie • should be retired after the ar.
f>aid hat tne currency notes had performed a great service in driving gold out of private circulation and in o the reserves of the joint stock ban'.<o.
Ho
estimated ttat £~0,000,000 sterling of the notes in circulation had taken the place of n like amount of gold no, held by
the join stock banks.
Figures later furnished oe by .!r. ':ritton of BHrcaly ~ Company in icate that ~28,000,000 ~o~lJ be a
correc figure.
Bl~ckett sta ed tha~ the adop io of tte Com u sory
Service Act had given great courage to tne nation, partic lo.rly t e Governme~t.
It hud solidified tho Cnbinet and in
every way strengthened he Gove nment ' s hand.
He depr cnted
the agitation about the strikes particularly t~o strike of he
~elsh coal rniners.
Said th t i t was due to the feeling of
the coal minors that ti oir employers '/ere :no.king rent profits
out of the ar and in vni~h h y uid not share, al ioug. UE a
mat ➔ er of fact, labor ·ao no
get ing a ve·y good share of he
ar profits,
.ha➔ tha diffic ilty ·ri h lnbor was its vo e to
curtail the deve op~en of skilled labor nov so l arge ly required.
he recent vot of the labor unio~R ac, in fact, a vote
of confidence in the Govornment and h g ly encoura in, to
every ody.
Speaking of he progress of tho war, Bl ackett suid
that he as convinced ~at the ~ar would be decided on the ~esern front, but that there vas a long nnd difficult task ahead
of the Allies, one h t entailed grea ◄ sacrifice of men and
money.
It as arranged tnat I should
returnin g from Fra.r.ce vhere ilarris and I
once from London, 1- nrris having business
us desiring to see ... r. Stillman iho 1ad
Canne •

see :r. Blacke
on
had agreed to go at
in Paris and ho h of
ritten us he was at

Luncned d h Harris and Captain S mington a the
;;,avo nnd immedia ely aft
luncneon .'!8 picked up l. r. Lo '!Irey,
vho was attached to the American Embassy in charge of examination nnd supervision of erman prisontrs and in e·ne
orman citizens.
'le mo ore to Al .. ersho1 wnere ve drove through
the Englisn raining camp and tnc encnrnpment mere many Jormn.n
prisoners nad been held, bu from hi r t: ey had been removed
to dryer nd mo,e su·tnble quarters.
Al ·ershot hn been exp an ed in" o a trer;;endous encampment miles in extent, cove ~ct in huge corru-ated iron
barracks and notwiths ancting
recent heavy movement of roopa
to Fr~nce, it still seemed fil led with sol~iers.
7he roads

6

-.

in and nbo~t th~ c~mp wero indoscribably bud.
he supply
trucks constantly carrying pro vi si one to the encampr.ient in
bad weather ha conv rted the roadc in o channels o. mud
which h~ been driven over the sidewalks and hedges until
the hedges vere literally bent under the weight of mud, ~nd
even n tnis respect tne destructive effects of the ~ar could
be seen right in orderly England.
On the way back to London, e stopped alongside
an enormous aeroplane plan which was surrounded by a corrugated fence about 15 feet high, but from a hill we were able
to observe the immense extent of }e pl~nt and watch nalf a
dozen men trying out new r.iuchincs~
~hree or four, or more,
were constantly in the air goii.g throu gh evolutions and in
many cases it could be observed by mishaps iL ltnding that
the machines were new and tilnt tie r.ien, ·d not used them before.
~hnt evening Harris, nd I dined with Lieutenant
Shivareck nd Lieutenant uekemeyer, .ilitary Attach6 nt the
Embassy.
Lr • H" r r i a n n d I wt: n i t o a h eat r e arr d 1 n t er v: er e
joined by Symington, Shivareck snd Quekemeyer t Ciro's for
ouppcr.

•

~he hea re was in eresting principally on account
of he percentage of soldi ers in t·1e audience ·.tnd a-'- least
t"o- hir..io of he men ere in uniform.
On tho ot!ler hand,
none of he men at Ciro ' s wore uni orms nnd I learned on in uiry 1.h· t the a.rmy regul·1 ions prohibited any office or "oldier appearing in uniform nt any of the ni~ht pl~cea of entertainment, tho matter being under he regula ion of the Provost
~•o.rahal of London, Lord Athlumne.,.
An• o 'ficer 'lppearing in
any niBnt restaurant in uniform is imr.1edia 1· arrested and
court-mf'.r • i riled.
',he wet in , on the tender at Falmouth resulted in
a cold which settled in my face and brou ht on a recurrence
of inflammation vhich I had to have trea ed at once.
~hat
afternoon, I looke· up a Dr. , unter Todd, who displ-yed the
ign v rance ~nd i ncapacity of most English doctvrs.
I h'ld o
tell him 1hat to do an suffered for so!.1e da"s froin a sore
face.
0

ontlRy, Februar

14th.

Galled fir st at tte office of ~organ, Grenfell & Co.
e.nd had a short visit wi h Jack i organ and .r. Grenfell. ·.ve
had uite a discussion ~bout possible banking arrangements
in London for the reserve banks and I finally told ·r •., organ and ~r. Grenfell tnat wile my mind was otill entirel
open to eug er- ions ns to both tne charact r of our arrangem nte ard tne chrracter of the inatituti o s which we should
appoint as correspondents, I was graduall coming to the conviction tha~ it iould be unwise, and possibly unsafe, for us
to deal with any but the Bank of England.
The_1 bo h agreed
tha this woul probe.bl· prove to be the case, bu wee quite
uncertair (par iculArly :.r. Grenfell), as to the rilliri;ness
of the Bank of England to enter into the kind of arr~ngement
wr.ich I s atod would p robabl l:>e necessary.
After exploinin~ thot I had planned to go to Paris almost i~metliutely, tney under ook to find opportunity durirg
my absence to sound Lord Cunliffe, Gov rnor of the Bank of
r;n 6 land, as to his possible atti udo and to pr p e the way
for some sort of nego il'.l.ti or •
Foun a cable from the office indicatin g tt~t veryhing 'UH uiet and al
received a let er from ,iillinm ackenzie, ~anagirg Dir ctor of tne Alliance .rust Compan of
Dundee, rta+inl that he would br in London· arch 7th and
hopod to see me.
Called on -r. Camhie at the London Agency of the Canadian Bank of ~ommPrce and pr aented letiers to him nd to, is
assiei ant m1:1nager from Ir . air.s of i.111'! Federal Reserve rlank
of Si>n Frn.nciAco.
Bo .h otnted hat whiJ e t:ne appreciated
tha trJ re ,as notning tney could do for me officially in London, ar.y information I dosired from thom was entirely a my
di epo sal.
I spen ab ut an hour and o.: al· wiih Sir J::dwe.rd Holden
the London City und 'idlnnd Ban!<.
lie said he was far from
well; that t e st ruin of the war as well as the many duties
imposed upon hi and o1.he bank ro by tno gove,rnment had pi-oven
olmo t tori mucr, for him.
lie also toL, me tnat the London
C eurin B n~~rs ' vomrnittee proposed to giv me a dinner at my
convenience und I arranged it~ him to fix a da e after m return from rrance.
He said i
would be he first time in the
history of tne organization ha thef had ever had dirrer toge her as a body.
ut

C lled on -r. Bell, -anager of Lloyds
o.nk and volonel
llunsicker of Herb rt Stearn & Cor.i~ any, but
he· wore boti: out
of town.

/0

-.

I afterwards drove to the Arnericon Embassy taking a
c hance of seeing Ambassador Page wno happened o be engaged,
and then lu ncr1ed with Cn,i) !in Symington and Lieutenant ~uekemeyer at tho Carlton i otel.
rlnving d cided to go to Paris on the 16th and having
been ~arnea trnt there ould be a good deal of red tape about
passports, I called at the office of tr.e Frencn Consul General
and learne d tr.at it woulc.1 first be necessary to nave past>ports
vis6d by the United States Consul General.
From he re,
culle
on ~r. Skinner at tne Consulate, pzesented a let1er of introduction from .'.r. Carr, Head of the Coneula Bureau in :ashington,
and had aver pleasant visit with hiffi.
Ho told me of tne
man difficulties he as ncoun erin in perfo r ~i ne his duties
in connection wi ,1 our s ippin g bus.1.ness.
'he dive sion of
cargoes, the confisc tion of American good s and ro tnous~n
and one difficulti es arising d' a resul of the w&.r nad c ·amped his office 1i1r, work n d he as corstan 1 in 110 wa er 1ith
the British authorities.
·r. S~inner impr seed me most favorably as being effic ien and knowin 6 his business.
lie gave me a card to Captain
Savy in charr,e of i.he French Passport ~ureau arid sut.; 5 estect hat
it might facili n e having my passports visod if I gave the orderly 1:.1 the doo r a a illin,:Various delays in ma.king hese
calls consu~ed he entire afternoon.
~hat evening I dined with Lieu Pnant Shivurock, Lio uten :int 'l!uek me1er, Captnin Symington, ..' r. Cur is' s st r, ' iss
9evereuux n
the f urgis' o, ith on or t :vo o hers at the
Carl ton Hotel.
he ladi s were all prepa.1·in 6 to go o fr ance
ihd hR · arr anged o associote tnetselveG with some institutio n
ther
mich was engaged i n adn 1 ca.re of babies l:!?ld 'Ol
children \1,os motners :ere obli ·ed o oi·k 11 aay, o ing to t ne
absence 01
neir nusb nd at tno fr cn .
After dinner, ~e ent
do :n to the ball room and mtcned the dancin 5 •
It ms crowded and apparentl most of
hem r,
·ere En 6 lish o 11.cers wno
·1ere on 1 ave, but none of t 1em •t,re in uniform, rnil( r os of
tnose no were dir.ir.g up stairs in ne main diniz,g room to the
ext nt of poesibl t·,o - nird of all he men in the room, ·ere
o f f i c or s i n uni f o rm •

-.

Thursday, February 24th.
e arrived in Paris from Cannes at 8 A• • and all
breakfasted together.
r. Harris was at the hotel awaiting us.
After breakfast · r. 100.ouard Vidoudez of the Banque Suisse et Francaise, 20, Rue La Fayette, called. I had met him in Chicago sane
months before and he was anxious to continue a discussion of the
Brown Bank of France credit arrangements, as well as the possibility
of a further extension of these transactions. I called his attention to the increasing difficulty which would be experienced in New
York because the number of institutions which vere drawin 5 and accepting bills of this character was so small as to place a limit on
the volume, and strongly recommended endeavoring to promote the
opening of banking credits by French banks, under which American
exporters would draw bills on American banks which could be guaranteed by their French correspondents. He saw difficulties in this
matter but thoueht it well worth pushing. After he left l called
at llorgan, Harjes & Company for mail but found that r. Harjes was
still at the front, engaged in movin~ his ambulance tmit to the
region of Verdun. From there called on r. Lommdowski of the
Comptoir, with whom I had a very interesting talk for about three
quarters of an hour. He spoke very enthusiastically of the improvement which had taken place in banking conditions in Paris. .s a
result of the protection of the oratorium said that they had all
been able to liquid.ate a good deal of slow stuff and fortify their
reserves most inroressively, showed me the figures of their comptroller,
which disclosed a reserve percentage of cash and deposits with the
Ba.?LC of France exceeding fifty per cent of the liabilities and he
thoUt;ht most of the other good French banks ere in equally liquid
condition. The ea.mo situation seemed to prevail in Paris as in
London i n respect to all bills. The enormous evolution of industry
in the direction of munitions manufacturing and other army supplies,
for which the overnment paid cash, bad denuded the market of commercial bills, in place of which the borrowings of the Government had
been enormously expended on short notes. He said that not ithstanding
the huge expansion of the note issue of the Bank of £ranee , the confidence of the people of France in its solidity ras greater than ever.
He also explained the reasons for the suspension of the Paris Clearing
house, details of which are ~iven later i n this diary.
Stopped at the rande
ison de Blanc to order band.kerchiefs for presents and then lunched with r. Phillips at the itz.
Phillips confirmed the statement made by Lewandowski - that one of the
most serious features of the situation in ~ranee was the operation of
the oratorium o, rents. Almost everyone, even though able to pay
rent, was taking advantage of it to be relieved of their rent obli tions, and it was paralyzing real estate values, imposing terrible
distress on land owners and having a serious effect on institutions
which held mortgages and on provate holders of mort ges because of
inability to collect interest. It seems that all the specialty stores
on the Rue de la Paix Avenue de l'Opera, etc., are really unable to

-•

meet rent obligations because business is practically dead, but
many others who could pay did not.
After lunch called at the .Bank of I•'rance, where I found
that • Sergent was still confined to his home with a bad cold. They
expected my arrival, however, and l was at once taken to • Pallain 's
office, who received me with the greatest cordiality am immediately
after shaking hands presented me with a magnificent silver medal, on
which my name had been engraved. This he did with a speech of welcome
in French , which was interpreted by his clerk and which indicated that
the Bank of :&'ranee welcomed my visit to Paris as evidence of a cordial
feelin~ towards France and towards the .dank of France by those ,'Ibo
were managing the new Federal 4eserve System. He also indicated the
satisfaction they felt at the splendid developmont in .American banking.
The medal was one of those struck off some years ago to corrmemorate
the 100th anniversary of the establishment of the Bank of France by
the Emperor Napoleon. I had a very interesti~ taLc with • Pallian
along general lines, entirely without specific reference to the business which took me to Paris, but ma.de an appointment to meet him
a in on Saturday at 2 o'clock with a memorandum of my program. To
the extent that we discussed bankin6 relations, he evidenced the
keenest interest and appreciation and expressed his desire to do anything in his power to promote ~hat I had in mind. He offered to show
me thro h the bank before I left Paris.
From there I returned to ~organ, Harjes ~ Company, where
I found r. Harjes, who expressed great satisfaction that I had come
to Paris, asked me to make use of his services and advice in m.y way
possible, and after a few minutes r. J:.rnest llallet of the banking
firm of
llet-Freres, who had served on the An o-French Commission,
called and expressed his pleasure at seeing me in Paris. I arranged
to see r. Harje before luncheon the f ollowing day and discuss my
plans more in detail. From there I called at the Paris office of
Lloyd's bank, 1here I had a visit with r. 1.:rra.ves and their Paris
na.ger, r. Toulmin.
r. Toulmin said that Lloyd's bank was making
great progress in its Paris development, having opened two or three
other branches in the City, and expected that in a few years they
would occupy an influential position there. He said that a good deal
of their business was with merican concerns. They found ~rofitab le
employment of their funds in French Treasury notes, but the supply
of comnercial bills was very limited.
I returned to the hotel to keep an appointment with 11r.
Stillman and that evening r. Stillman,
• Christiansen, tr . Harrie
and I had dinner and spent the evening together at the hotel •

•

-.

Friday, l"ebruary 25th.
In accordance with an appointment previously made,
called at the inietry of Finance at 10:30 A• • to see Monsieur
Ribot. He greeted me most cordially and I was greatly impressed
with his appearance and manner. He is a tall man, white hair,
white side-whiskers, with much the appearance of the late John
Biglow. What impressed me particularly was the absence of any appearance of hurry or bustle about his office. The part of the
building which he occupied apparently had few if a~ clerKs in it
and • Ribot when 1 ~ent in was alone in an inmense office, rlth
two or three commissioners outside to carry messages, etc.
he
whole building seemed to be filled elsewhere with a crowd of
clerks and people running in am out on business and most of the
pages and attendants s eemed to be soldiers who had lost anns or
been otherwise crippled.
He was most anxious to discuss in general the Atmrican
financial situation and the possibility of arranging various credits
and borrowing money. Th.is we discussed at great length and I pointed
out to him the various difficulties to be encountered in arra.ngin0
banking credits along syndicate lines, as in the case of the Brown
and Bonbright arrangements, urgin 0 that steps be taken, if possible,
to induce
erican exporters to draw bills . He thorou.;hly a9proved
of this plan and said that he ~ould discuss it mth his associates
and with the bankers. Subsequently 1 learned from r. Stetitinus
of J.
organ~ Co. that he later told 'onsieur Ribot that as long
as the English and French purchases in the United States were as
urgent as at that time, it rould be impossible to arrange other than
cash terms.
• Ribot told me that it would be their policy to conserve the gold in the Bank of r'rance as much as possible, but in
those matters he relied almost entirely upon onsieur Pallain, in
whom he had the greatest confidence. I was with him bout an hour
nd when I left he insisted that I should advise him a day or two
before I left for London,
vi:ng
rticulars of the train I proposed
to take, so that he could faoili tate m:,• trip, ihich he would be most
glad to do.

•

Fro~ Ribot's office I called on ·r. Harjes, with whom I
discussed in considerable detail a plan for drawing bills, which he
said he would discuss with Pallain and Ribot . From there we went to
the Hotel Crillon for lunch. _,eturned to the hotel to keep an appointment with r . Stillman and at three o'clock rent to the American
bassy with Captain Symington and spent about an hour with r. Sharp,
who gave me a good deal of interestin6 information in regard to the
American international situation. I was a.mused to see him call in his
son ilmlediately that I
nt into his office, the latter taking notes
of our conversation during the entire interview.
• Sharo said that
he had encountered many difficulties in connection with his duties,
notwithstanding the extreme politeness of the ranch people and vernment officials. The embarrassment of friendship at the same time
that it was necessary to preserve neutrality was his greatest difficulty, but he tho ~ht progress was being made in developing a better

•.

r

•

tmderatanding of the attitude of our administration.
few remarks that he dropped indicated that he and his official family
felt that r. Herriok, his predecessor, had not shown him as muah
consideration as he should have done. He asked me to reserve one
night for dinner at his house the followi
week.
From the Embassy I called on .Ur. Alfred Heidelbach,
19, Avenue d'Iena and arranged to lunch at his house the following
Tuesday.
r. Heidelbach spent about half an hour in rather insistent questioning about war matters, about the situation at home
and particularly about the Reserve System, but was most agreeable.
I had learned thro"Ut;h friends that his German name and affiliations
had subj acted him to great suspicion. In the early days of the war
he had been forced out of the Presidency of the American Chamber of
Comnerce which is somewhat under Government supervision, an at one
time it was thought he would have to leave Paris . He managed to
straighten things out, however, particularly on account of having
been engaged in the construction of a very handscme home, which was
not quite finished when I called. From Mr. Heidelbach's I picked
up Mr. Harjes at his office and went with him to call on Baron and
Baroness de Rothschild. Baron Rothschild's house is an immense affair,
filled with objects of great value, pictures, etc . , is just off the
Rue du Rivoli •
The greater part of it had been converted into a
hospital and was filled with wounded soldiers. Baron Rothschild was
not well, in fact impressed me as bein6 physically exceedingly frail,
but he and his wife were both charming and most hospitable to us.
He inquired most particularly in regard to our new banking system
and I explained to him in genera outline only the object of my duties
to establish relationships with the Ban.,c of France. This he thought
should be done at once. Our conversation in detail on a later call
will cover all of this
ound. I arranged to lunch with Mr. Harjes
and Baron othschild some day the following ~eek, but we were unable
to keep the appointment on account of Baron Rothschild's illness .
I returned to the hotel and said goodbye to r . Stillman, who seemed
reluctant to leave Paris and l think he would have enjoyed a week
there talkinb over old time and discussin the war situation. On
the whole, r. Stillman impressed ma as tat.ing a very gloomy outlook
of the future, both as to European finance and possibly as to the
outcome of the war. Afterwards Mr • .Phillips, r. raves and I dined
together at the Cafe de Paris •

(COPY)

...
P.aris, France, Februaey 26, 1916.

J)ear Monsieur Pal.lain:
With this letter I hand you a memorandum in

respect ot the matters we discussed, and which is not more in
detail owing to the short time at my disposal to prepare it.
It there are any points in this memorandum
not entirely clear to you, I would be grateful tor an opportunity

•

•

to discuss them with you •
Very truly yours,

••

-

Saturday, February 26th.
In the course of my conversation with onsieur Pallain
it became impressed upon me that it would be quite inadvisable to
proceed very far with interviews with other bankers in regard to
our banking arrangements in Paris until after the Banque de France
had conaidored our plans and indicated \7hat views '170uld be entertained by the bank and particularly whether they rnuld themselves
desire to establish relationships with us. •• Pallain, while labori n~ under breat difficulties because we could not spea~ each other's
language, impressed me as being very keen to find a way by ·lhich we
could do business with his institution direct. I, therefore, deferred calling on other bal'li.{8rs, pendin further discussions with
him.
ema.ined at the hotel with <.:aptain Symill6tOn durin 6 the morning
and immediately after lunch kept an appointment with • Pallain at
the Banque de 1''rance at two o I clock. 'he Secretaire l}eneral, •
Picard, and the head of the Discount Department, • Robineau, joined
us i n the interview, conducted entirely throug.1 an interpretor, and
we discussed at considerable length the tenns of the memorandum which
I had prepared t~e day before at • Pallain 's reqwst, and which was
intended to indicate in a general we.;; the kind of' an arrani;ement that
we probably would need in Paris . ~he memorandum in detail was as
follows:

I

-.

uesday, Februory 15th.
Early this mornir.u, ,. r. Burrell e.nd I drove to ar ohscure little photographer recommen ed by tne men at
he tmbaesy, to havG additiona] photographs taken for use in France.
From ttero, went to tho Frencl Cons~l Genernl ' 8 and by tne
use of kr. Skinner ' s card and a Bhil~int w.s able to get imme di at e at ten+ i o n.
Afterwards, I drove to the Embassy to meet Ambassador
Page by appoin ment.
He se emed ve ry glad to see me e.nd kept
me there about an hour nd a hnl f
alk:ing abou+ he ;ar and
his work.
I
as easy to appreciate, aft r hearing vhat he
said, the endles~ difficul ies vhich confron ed him every day.
He told me win g rett numor of a visit he had had from .r. Harrie, who nnd delivered himself of a scathing denuncin ion of
the Adminis ration and told 'r. Pa re in his pictu resque langurge that if he wero President of he nited States, we would
already have an an:,y in Europe na~isting tno Allieo in he defense of civiliza ion.
·r. Pa."'o said that
e personal 1- felt that ci vili za,i on •as a
s a1< e, bu t hn during his encu~hency nc act had
occurred under the roof of the Embassy ~hich could be construed as unneutrnl, or cculd be in ne sligntest degree erbarrassing in ,o.Aning en .
le said ... na on
of his grea es
difficul ies in performin nis du ies was
nc endf ncy of +he
British Govern•.ent to assume tho.~ we ..-,ere friendly.· In his
conve sations wi"t Sir Edvard Gre he ·as constani.l· being reminaed tnat matters of dispute ere between the British Jovernment and its enemies, and the iT'vH.riable respo T'se ms to
ask Sir Edward wnose enemies ho referred to.
I told the Ambasaador at his r f:. uest of th object of
my trip and hat I noped to accompli si •
He so.id tnat anytnin6 he could to ;iromote m vork he ;o ,ld ver gladly do and
that ho r,,as in .ntir e s mpathy ~·i th the pro ram I nn.d out.lir.ed.
I asked the Ambassador ~hat kind of a. talk I should
, ak~ a tne inner o
5 iven by the Clearing llouee Bankers'
Gol!lmi toe.
lie said it would rt quire a good dnal o:· judgement
nd tact not to give of fence.
Kno ring, ho s id, what my
s entimen s rnre about the mr, he cautioned me to rP-men:ber
hat an
Alk nbou neu rali y ~ul be off~nsive.
On tne
o her hand, ·
I said no h i rig abou th
a', th , \"ould put
me do ·,n n!' a co iar d and his reconnen do. ion •as, ~ fff 1 earning that there would be no rery~rters hare and hat it was
o
be quite unoUicie.l),
hat I should ell hera exactly ho·1 I
felt.

-.

Jr.Page said that the President as a friend of many
yea.rs standing an ne i ad tnc, hi 611e' t respect for his viev.o
and pntriotiom, but unfortunately he was so con tituted that
he could not be neutral in his mind Ind he fel tho President
had made a mistak in his neutrality proclamation in sug 5 osiinb tho tne American people could be so inhu~ar. or devoid of
sympaihy ns to be absolu ely neural in their thoughts.
'thile a , the Embaasy, I arranged with"' ptair Symin~ton to start a complete collection of enlistrr.ent posters
vi h which rtll oi' London seemed to b ple.stere •

-

From tho Embassy, I wont to Lord ieadi~~ • s cha~ber in
the Ho nl Law Couts, Strand, o ke ep an engagement for luncheon.
Lord Reading woe still on the Bench ~hen I reached
there, but s , ortly came to nis office and said tn~ he hnd
ad journo his case for a couple of hours so that \ e co 1hl have
a visit.
·y conversation rl h him was more tha n 1nterestine.
He started by tl lin 6 :ne na
vhen he and nis associates ·1ent
ore York io arran~e for the Anglo-Fre~ch loan, tne1 had
absolute.ly no irtir.:ation as o rnnt the attitude of our government mulct be toward a transaction of that chnracter. ""hey
wer advised that tne report of varioun ~tatementa emanating
from tr.e State Department wo lu make i
ver difficult for
them to arrnngb ne loan so lon as the ~ttitude of tnc administration rcoaineu uncnanged.
i' e •,anted to take t i s opportunity of thanking rne for navinG gotten around the difficulty
for them, as otl-,erwise the loan could not have be£:n rr.ade.
A number of timen after this, wn n I met hi~ at ainner
or elsewhere, her ferre to tLis and said trat after a good
deal of discussion tne Commissi on had decided to take the
risk and o anead witn the transaction after my alk wiih
then at the l3il more tne da o
heir arrival, :ii.nou u dert king through any o her channel to get official confirmation
of the vies which I had personally expressed to them.
Lord Reading did r.o1 as, mo r.e object of my visi
abro· d, but DB very anxious to get oor.1e expression of opinion q_a to political condit i ons in the United States.
J:e
said that he and many of his government associa es ,ere convitced tha the Pr e sident as consciously or unsciously being influenced in his at i ude toward Great Britain by political considerations, lar g ly on uccount of he approacr.ing
campaign for re loc ion.
He tr.oug ht the a ate of a fairs
in .urope wa. s not apprecie. ed citner by he Preciden or by
mos Amt ri cans.
If he l lies •ere beaten, a s he mig hi
be, Europe and ultif'lately America, ould be overwnelmed b ,
Prussian influence.
He admitted neir depender.ce upon uc
durin tne earlJ stages of th ~ar for many supp ies ~nd expressed great appr ciation of he attit~de of a great body
of Americane,a.nd purt cularly ban.-<~rs, toward t e necessities of their situation.

-.

I asked him how he felt about tre progress of the var,

(+re ha tlc of Ver uun not then h~vir 6 been started), und ho
said that i
as fille win the greatest uncertainty.
~nglar.d ~us ~o erleet at that time for lack of adequate supplie
and trnined men, p ti cul rly officers.
':hey "ere concen rai.i g their energies hat 'inter to pArfocting he organization
of 11 much larecr expeditionary force 'lnd to turning ou a stupendous supply of guns and am•,,uni tion.
He propheci ed
hat
when the "u:n:n r CA Daie;n began,
ha· 1.•ould ba F.O equipped as
'l res ul
of the ,linter ' s ,ork,
hat the rorld would he ppalled
11itn the slaugh er.
'hey figured ul irra ly
a1 1 t.f'/ :ould
h~ve cannon pructicnlly wheel to wheel al l
he aJ from he
S iss f rontier
c the Cn~nnol.

I told Lord Readin
hat in my opinion th ere :ere jusi
as many difficulties in
h way of ~n6lishmen forming a c rrec unders anding of mericnn affairs
s there ·ere in tne
way of
•n eric ns forr.iing a correct opinion of tho war si~uuion;
here vms a ver_ stron~ feeling among m ny imoortant
men in 1 e ica, li.<e 1'1• • • aft , .r . Hoosevelt,
r. Root and
otrrrs of ineir t •pe , tha the ni~od Stu+e had boen ultor;etner too complnis nt in the f ce of violnti ... n of t · eir
ri Jhte and tne killing oft cir citizens, ~nd I thou ht the
sympathy of the country as a ·hole was stron~ly pro All •
On the other hand, =r.
ilson h· d su roun ed himself i i r
men mo
· he held he eamo convic .Lo.1s that ho di
r ·ho
ere ~i _ . ng to
c cept his vie a, " at ever might be tneir own,
3.nd tnat unless Geruany real ; 1~an amuck
e Administrati n,
I b lieved, ias deterrined t ,at the country shoul i not be irvolve •
He fina. l· admit ed after some argument inat .. re
as no h · nc., in 1 irn •mr si ·.. ation wnich justi · ed he Uni e
Sta es a,ing up armc ~i r. he Allies except as he reoult of
some overt a.ct of err.10.n·.
'r
English poir. of vie•:, ho ever,
, s
h·t Germ, ny h·td done more than enou,;h nlreudy in
tho sinking of the "L usitn.ni ", o c., to jus if
1
least break ing off diplomatic rol~ ions , if noL declaring ar.
His vhole at itudo searn d to imply
hat England rccogniz d acer ain dependence upon us nnd
J~l.
veto subci
o
almos n yr~ uir ments ~e impose ~pon
~e ir gov~ rnment, hut
ne res 1
·o· ld be
ne develo1men of a
ood deal of hard
fe eli g, no necessarily in GO Ve nment circles, bu n.cong peo ple gen er all , ·ind
he con.·i c io 1 10.t
e •::er e strai. ing a point
in r e ~·ri1g neu r~l, ei her b ecause o: he political ambitions
of he Presiden , or bee .use of mu. erial benefi s w icn
e o ld
g· in by m intaining neutrali y.
~ efforts to point ou
o him
that judgement of tho.
matters by EnglishrH'n i n London was c cnstan ly being misled b unwi so newapa::ier articles and edi aria.ls
did not accomplien much .
iio ndmi ➔ ted, ho ever,
hat ne cri icism onl
pplied to the official at•· ude of our gov n ,ent
and not to the general atti ude of the peo le,

-.

Af, r spending nearly t~•o hours with Lord Rending,
lJnchin~ nnd smoking, he invited me to go don
o the court
room ~here he ~as presiding in
ne trial of a dacnge cnse.
ass artled in the cnange in hie appearnn e when he put
on his wi 6 and gown.
It rnfl.de him look t en. ) t:nri- oljer
and gave hin n severe exoression which one woJld ha c to face
in the dock.
I sat for 15 or 20 minutes listenin~ to the trial whicn
was enlivened by a g reat m~ny hu~orous remarks fron Lord Reading ~ho se med to take pa ticular pleasure in poking fun at
counsel for both sides.
Later, an inquiry disclosed th t
this v~s uite a habit
ith him nd vas not a
all for my benefit.

-

neturned to the hotel to take tea win Aiss De vereaux
and discuss,. r pl ns for r eturning to hospital wor'.< in •' r ar.ce.
She ·anted me to see rhat I couL.1 do w ,en I •:as in Paris.
_ e
history
: her performances is ~orth recording~
I knew hr
as a little ~irl eiuht or ten years old in Engel wood vnere he r
father 1·
for a few years.
Afte r som~ hesitation she told
me the story.
t seems that she spent a fe
years in a c nvent in ' ranee, af erwards ma' in 0 a walking trip t.rou 6 h trie
country with friends and had become very much attache to a number of French people and to the countr •
,hen the war broke
out, altnoubh she wa or>l'
\'1enty-one years old, she told her
fath e r sne must •o to France u.s a nurse.
f er he posi ively
declined o nllo
hr
s~e ran a ay from ome, crossed in ➔ e
steerage i h only 40 or
50 and on arriving in London \"f'n
directly to
11
Page ' , Katht ine P r;e hay_;_ ng boen a school
friend.
er a good deal of dispu ea
ran ~ling by
cable vi i. her f11·1ily, which r sulted in almost a comnlete
break, she crossed o l''r nc.e ,._"l at first got some 1ork ir.
Paris.
Lo.tor she "ms transferred o one o:· the Red Cross
Uni ts
nd co:nbined a ing dis 1es,
oinE; er.ores an scrubting
floors, e c.,
i r,
course in Red Cro"'
.1rsinf,.
,fter aor.,e
'TlOnths, S'l was allo 1ed o do regular nursing work but
ren it
was discovPred
nat she spoke French fluently, ahe wPs transferred as interpr ter to one of the mili arj police cour s.
Urgent cables from home asking her
o return for her
sisters wedding led her to resi 0 n but wh n she reac hed London, she had not sufficien moneJ to re
rn home nd was app ently too proud or ashamed o c ·~ll on ·.e P, ges, so he
ot work or a
~r abo t ~O o i l s ou of London by pplying
0
to an emoloyement agenc •
After some eeks on the farm, ~ !lO
Pages located nor and very reluctantlf
ho farmer,
fter offering to increase nor pl from 15 snillings
o ·5 snillin6S
a week, lot her go .
Sho con fi cted o me tilat her cni ef desire
was to beco1,1e a tached to one of tne arn
uni s ri 0 ht at tne
front r. d
fin lly agree to see •:nat I could do after reaching ?ari s.

J

-.

Af . . er ea, saw Dr. ,,.odd, had my no~ treated al"d at
7 o'clock Sir Edrard Holden came to
he ho el for dinner ·nd
remained until nearly midni ~ht.
':'he gi " of ihc>t Sir £dward
s'1id after dinner, to
r.ich I listened without attaching great
importance was as follows :
He spent moot of the evening in ratner a violent and
ext r eme criticism of the ~ovornment, the Bank of En~lnnd and
bankers generally.
Sid that the Guaranty rust Company nad
been detected in various transactions with Germany w1.ich msde
ther.1 ver
suspicious of their business genorall·•.
~he Park
Ba~k also nad been found a ticipatinL in transactions between the Argentine r-,epublic and Swojen, tn
effect of .vhich
ias to li uidate Ge man bills hold by German b nks in he Argentine, ear-mar' in 6 gold in !cw York an releusine it in
Sieden ana ernany.
Speai<inJ of the bill mnrket, he said he volum~ o f
prime bills had been tremendous! roduced on account of •he
extent to :vhich the businOGG 01
he nation was no·, conduc ed
on n cash basis, the gov rnment pving cash for overyt1 inb•
He as dispose
o think that tile <>overn.ncn afier the wa1·
should ira~ se restrictions by legislation u on the London
ngencieo of foreign banks.
~his, by tne way, is a solut lJ
con rary to the vie s hold b, o iJGr bankers an bf the Ba ,k
of En land.
rhe, said ha tne b'l.nk a.gr ncies in London
hnd been one of
hP- cnief ins rumontali ioo in making London
he hill ma.r~et and the 110n y center of tne world.
Holden strong! favored correc ing he Dutch exchanges
between l'e ·, York, London nnd mstordam · nd i.,ought. p_;old nhould
be released for th t purpose.
He also thought thH.t we would
snip nhroad an immense ar.iount of gold when the ~ ar "'aS over.
I asked him wh·1t he estimated to be the norrn•tl volume of bills
carried in London prior to the war wnic, had been drawn sirrply
for exchanJe )urposes.
He oaid ht he ~.ought the total
·old be about £200,000,000 sterling, a considerable part of
them being dram h Ame1·ican ban1<rrs on London banks.
I discus ed .vitn him brief!· ihe poasibili yo: the Federq.l Reserve
Bak huyin 6 bills in 1::ngland.
lie said it ~as sornot iriz tint
must bo considore· most caref!llly in London as it migit prove
to
e a di st rbing irifluence and tnat , · r t ever we did sno Ltld
be conducted in conjunction vith the Bank of Enilund, to ~hich
I m·.de no com□ ent.
Holden ' s criticisms of
he government, ... nd articul'J"lJ
of Lord Cunli fe struc me as bein exceedin·l bnd taste nd
in m y respects undi nified an uaj Jstifie·.
0

-.

In discussing porsonali ies, ha spoke ver, sliehtingl
of several i.port~n people in London.
Said th~t Kitchener
·us a complete fail re, had been entirely supplanted an
would bo elimirated were it not thnt he wns so much the popular idol.
Sai that nis (Holden '
principal competitor in
London as Lloyds Bank, Li1.1ited, rich he thougi1t ha.d no h~ d.
Bell was 1ot mucn of a banker, •ind Vassar Smi h hn arisen
from a very small beginning. 1he latter said man tnin·s abou
him (Holden), ~nd indulged in unfair competition.
It is only
f ·r to say tnat Dell, while he men ioned no names, inti wated
that he felt tnut Holden wae ~uilty of exactly ne sum • ,ing.
Holen also said that Bnrings hau los
heir standing to ~ome
extent in London on a.ccoun• of nc large extent of t~eir German busin s as well as on account of some Sou h Am rican bu iness rnich ha
urned out badly.
Lord Rev ,lotoke was Unflopul'lr, cold and vindictive .nd a much overrated r e.n.
.. e also
spoke ra 1.1;,r slight' ngly of Lord Rea.din.; ar. d tho arr.cunt of
trouble he h~d had · ii him bou various mat ers, , nd sent
a long time abusing Lord Cunlifie.
0

-

)

.,

-.

Wednesday, 1''ebruary 16 h.

After a ood eal of discussion,
r. Harris ·nd
I decidod to tok
he regu ar rou o ior Paris, vi FolkestoneDiep e, al hough ·e could oubtleas have obt inea ermission
to cross on one of ho milit~ry service boats via Folkes 1 oneRo·..:lougne.
he third uva.ilable route to lla.vre bein ar, all
night rip, we thoueht in· dvisable.
After repen e efforts i'1 London, :ta oun it impossible o secure a reek cabin an were o liged o take our
chances of bad w athcr o~ ~~ open deck,
In tho middle of
the night I was awakened in ny bedroom ut the Ritz by a grent
clat ering na rc~a11zed thnt 1 severe storm \'/US raging witil
evei y prospect of an unple• sant ex Jeri once on t 10 channel.
'ie deci dt,
to risk i ,
o•·,ever, so 'r. i a.rri s nd 1 is valet
and r. Durrell and I lef b tne >:~0 rain at Cha ing Cross,
expecting the bo t
o leave 'olkes+one at 11 A• . •

e.

On rea.chin Fol eotons, it was arran,ed that
•.:r. Harris •1ou ld investigate tne ') aspects of tht 00< ➔ !ieing
delllyed ,,il I endeavored o arrar t.i ubout our as por a,
etc.
There 1as a gr at cro d a1aitin exITTin ion and after
·,hat seer, e an i,iterrnina.ble ola· , I rto o t ined from one of
the c s oms officers i.h· t tr ere as rac .. ic9.ll no prospe t
of the boat sailing th1t d yon a.ccoun oi h storm, whicn
was ho ·or-st I huve eve1 seen on he c., nnol.
,..he aves
wer dashin• over he bre·k wo er and the o iicer i formed mo
ha.
11ere as danger o!' mi nos bre· king from t11eir nnc,.orage
nn flo ting into the channel from ihc rnine fields.
nder
such conditions, bo
a iere ntt permitted o s il as n rule
un il mine sweepers h d cleared he ch~nnel.
I sen
n look up accomodations a.
ihe
nea.es ho el, •1hich a
r. " Pavilion" ,r1i1,;h adjoined ne
doc
n
here he succeo ed i
.;e ing four roor.io.
'e
abandoned n· ffort
o h ve our papers examined t11nt a
ernoon ands rted out to see he own.
About eve1y en or
fifteen r.iinutee roop trains ere arrivin~ and th re •ere
a num er of -ra cporta tied up at the dock ready to take ◄ hem
across th c, n1 1.
onu of
hem, no ever,
ore perr.,i ted
to sail so h·t in a fev houro I estim ed that from 6,000
to 10,000 roops had a. rived in o 1. u•ait..i.ng el"!barkmont. As
tney
0
off
ne rain,
he· ·,ere lined up on he pl form
and were inspec-ea by heir on of:ic rs ·n
hes aff officers ota ior.ed n.t iolkestone ir cnrrge of ransport.
After
insp•ction, toy ~arched to barracks loca ed on t~e beuch
nnd wee then disc~a ged n sea erect t11rough he tom
whi ·n as so cro --dad · i · mer. in uni for,
nut one , as obliged
to valk in he middle of th street.
0

-.

'!o spent all tho re t of the d'"'y wa.nforine t .. rough
the village, looking into book snops, etc und atc1.ir.g the
men.
Ha.d luncheon t u largo ho el up on the cliff here
the wind vas 60 strong hnt it was al~oo impossible to ,alk
a or.g the edge vi hou the pro action of he ank.
In the
afternoon, :e ... nt to a movini; pil! ure sho and that night
agnir. dined at the ho el on the cliffs.
During the eni ire do.:,,, no wi hs andin; i h·1t he
saloons wore open par of he time, we only saw t .o noldiers
who showed the efiec of rinking.
:hey Yee very orderl ,
ppnrentl" <,uite cci oaed nnd indifferen to tho fac thnt
the~ were goir.g to the fron ; none of their families or
friends .ere there to see them off.
.. any of the carried
packages indicati n
h·t they had becn·~ell cuppliod with
food and other things by friends or r"la iveo.
'lhAy :ere
u disiinctl good na ured, carefree cro d, constantly joking ~nd romping and guve ev r evidence of relief tr.·t tney
\'I r
fi nall · ordered . o ucti ve service.
'rhat evenir., Cap ai"' Sa:lcs, lhval AttachP ir.
Paris intro ( ced himself und introu·1ced his ·ife to i,arris
o.n .nyself, she h:vin· jus ret~rned fro □ America.

-

A notice was posted in the ho ~l that evening
that the boat .7o 11:.i snil a. 7 o ' clock t 11e nox
ornin~ nd
we
e e obli 0 ed to get
) at half p~st fou so us o be in
time to have our pass~orts examined at tho ock.
This was
done without greu formality, but imrrediately afterward we
were rcqui ed to make a etatemont to one of the mili ar auhoritics, first, 9.s to vhethcr we •,ere carrying iny letters
or o her communication to friends and, second, whoiber we
had a :l !::nglish gold.
I had about ~400 in English gold
which they required me to give up o the m~n sta. ioned here
for he ourpo e and from horn I received ank of •nglnnd notes.
I asked hio about ?.er.c'l and Arncricar. gold unu he sfid I could
re ain
.le iere early en o ug
to avoid tile crowd ana aft er
conside int; Le direction of tile \·Jind Yilicn was still blo ,ing a gale, nnd tho possibilities of a dry rl ce on 1he boat,
the six o us located chairs near he stern ir hat e houghi
~o.s a sheltere pl ce and ,larri ' valet put o:..r l:.iggRge under
a com anion-wn; lea ing o he upper deck,
hich · ppeared to
be protected.

-

1o left promptly at 7 o ' clock and wore no soonLr
free of tho s. el er of thl dock vnen t110 ooa.t - wi ic, was tho
Sussex - literally stood on ond.
People '11 o had been unable
to have their chai s laoned t o t e bo•t found themselves
slidin& over the deck and a most a once a er began to pile
up for,vard so tha all ➔ he pas angers from he bo v of he
bot ~•ere riven o ho stern.
':'he E" orm increused in

-.

intensity un il a ll one side and the for" d par
o~ the
boat was washed itn water un no one could 3ta there.
This crovded the passengers alon· he other side and in
the stern were trunks piled up on the deck and lashed to
the hatches.
Almost wit ou+ exception nearly e,,ery 01 e
'13.B ·11, a pa:-ticularl
distr r,~ing sigh being about a
dozen young Canndio.n ru-r.1 nurses ·ho lined the r a il in a
row regardless of appearnn s or the ca her,
oo ill o
seek shel
r · nl they were soon drenched to the sdn. Our
bags \ ere in an exposed place ·rnd were ooaked, ns vie could
not gei: at t hern.
S o111 e o
h e p n s n g er s er e o li g e d t o st · n d i r.
unsh l ered places on accoun of he crowd ~nd ut ti1es
:1a. er
ms literally pourin · over the:n.
It ;vus raw and
cold and rough enou 0 h o be decidedly dang rous.
he
runk
ro~c loose rom he d ck und eg n to pile up on
the r'lil wr1cr, the; caui:;, one nan who fortunately was not
badly injurP.d. If the r·il hnd broken, evory runk would
hav,. bone overboard.
I stood the rncke for a cou. le 01 nours ·:ithou t bt:ir
.t all seasick, no di rt all of our part except
-rs. Sa;les.
twas gett in so et, ho,evor , hat I took
shelte in tne din'ng room an managed o et to sleep on
some dinine room chairs before I Mas reall y drencned to tte
skin.
':'he boa pitc,,ed so that it th rew ile c1 ina and
g1 a s s ou t o f
he r a c k s •
S o rn e p a s s en g e r s g h o h n d 1 i <e wi s e
a.ken shelter in the dini~g room were so ·11 th·t they
s retched ou on tr.e floor e.nd rolled abou wi h he r:1otion
of the bot reg~ctless of ~at huppenc to them.
uring he ime t ut I ms in . e dir:ing saloon
asleep, ' r. ,arris attemJted o c ,a, ge hi" sen and the bo~t
L.1rched and threv. nir:i +o i1e deck \, ic r gave 'im a dangerous
frll.
He r:· ruck his hend on he •ret deck, smashed his g lasses
a l
t hi" n "8,
he blow dazed him an eave him such n
viole~neadach •hat he was desperately ill
he rest of he
tr_p.
J nov.r saw a more de·ecte · nd sic or looking individu~l
nn he ~hen he cf
the boat.
e ,as soa 1 ed to he
skin, cold, 11i1n a violent sick r.eada c h e and I hnd to dose
him up or1 he +ruin and M lee him comfor
le un i l '.'8 got
o Paris "here re wen
o bed right a·ter dinr,er.
During the trip, a youn 0 officer, stnr ed dow
the compo.nionway, too nic · to see •mere he •~r, ~oing and
i. he motion of the boa
hre him he1 dlong do ·n the steps and
here he l11y for t',a rest of he rip, too mi"e able to pick
himself up.
~inally u trumeclous ave broke over the boat
so that she shook from on'= en to the o r er an, t ose belo~
decks were alarmed, thinking e hati been torpeuoed.
""hey
"lowed tho er.~ines down i~:rn:ediat~l:; and changed our course
somewhat · fte· •hich we m,Ade a little better weather, but it
·us still trF rougnest I have ever exlC ienced on he oceun.

-.

Ve reached Dieppe aome i
fte
12 o ' clock nd
• ~en I wont up on deck
o Join my par , learned hat Capt'lin SuJles, Durrell anrl Ir. Harris' valei, while standine
a
he rail had seen the periscope of a ubmarine, which appeared to be a.bout 150 feet from the boa and in a few minutes dioanpenred.
'one of
he other passengers no iced it
as they were all too ill an
ro ably he o hers rould not
hav don so wi hout ho exp~rienced e1e of a naval officer,
It ,:us only vi sihle when in th
rough of 1 he ~.aves but the
glass could be seen distinctly turned in the direction of
he Su"sex.
Had ti1e passongei·s noticed it, tnore ould certainl·
ave been ·1 panic.
Captain Sayles assu cd h t i
was an English submarine.
Sub!38 uenily, I inou·red of Cnptail -all, Director
of' --avo.l Intelli~ence of the Ari isr l,nvy ,., to nnt kind of
boat he tho..igh i
·1aa.
He said it wa un uestio nbl a.
German submarine as none o
he British subr wines 7e•e permitted in those waiers submerged,
he ino rue ions o putrol
boats being to shoot at an periscope they observed.
On returnin g nor:ic 11i~' Stet iniu. in April he
old r~e
at he had repeated th' r story ·hi ch l h d old him
o Ca•Jt in 1-i 11 zu½oequen l , and Cap in llall had said they
had l unc, ed a
orpe o at us,
u. missed,
.is
o~ he inciden
1:as hat the submarine ou d he
oo
honvy o tr v
on ho surface and as traveling
ome
dep h only comin, · p occasionally o make ob" rvaiio1is. 'he
··•ea :1or · . "O t hie k ney had not seen he Su sex until it
camP. up nlon side, so clo<>o, ir. f c ,
ha Wf' Mi•ht have
ramme i., uni
en ion lly.
'.. he of fi ce1· o th submarine
~roba ly ha no irne tA obte·
informa ion or de ermine defini ely he ch~rac er of
ur boat nnd in the thick weather
+: e·· hn immediately ried . o or~edo i , b·J
h
co. ➔ her
was so roug'1 hu.t i
made heir aim bad. Had hey succeeded
in such ;ea. her, no one could possibly h v been se.ved.
loni:; del,. or. the bo t
fo e n pas~en ers 1ere
,i
o di embBrk, occusi
~
y .,he c"reful
scrutiny of L· gg'l e,
ss">oris and papers carried by ne oa~f: en g er s •
,1 e 11 c r o 1 e d t o h c f c r a. r d • ar
o " h e bo t n n d
partie., o · three or
r · e e ta. en ofl" a
irne.
'.:'he iscomfort om· ny of
passen e
unendurable a"
t · e y •,e e so· rn d , o h e s , in
r w
Cap nin S yles carr·ed an Emb
to l u v
n b on
a once,
· s in one
purti a ta' en off an i"' looke
for me her.
uite un xpec e 1 , an Envlis h
and l was hustled o f and p
ver
possible ou e_y.
It oeeffi
in e vie ed
th
in cnar
and arr nle

-.

I •,a.e i'Tlpressed ·ith the fact +l .,t rhile ne
street li hts i
Paris "' e :;o mewh
hi
· -n " h e
fore
e r c ::id . h e i r· li 6 _t 'l 1 i t 1 e m::, e t h an t e Lo n d o n s t r e et
l.'.!mps, not ne[lr y so m... ny v;ert. lighted and i h sill"i 1 "r
ther condi i r.s, I be ieve Paris ould h ve been as durk,
if no
darker, ~hon London.
\'e foun

it im oscible o g~t a taxicob af~ er
o .. 'l
o
he hot 1.
DLJrinc.· 1he rest cf
o·.r z :.i.y i
Pa is, evrn \hen a axi cob ·:ae er.ga 6 ed in advance, it rns <-,ener-.lly ilT'posc-· ble o roly upon ge ing one
a f t e r 9 : 3 0 or 1 O o ' c 1 o · i n t hr e v en in g •
Dur in r; my entire
eta ir Paris, I did
o~ see an automo ile bus, all of i.herr
having been commandeerecl for
he n my.
It ·,a "lsc notice. le ~t th fhe~ ➔ re, DPide from En3lish, Rusei"n, frican end
her foreign of ice ·s i"' uni for,, .::ir c: call, he er: ire
cro • ;,ns compos j of l<'rench ;)eople.
In tre r>Y
soon as one ""o+ o~ of tne snoppin_:: dis1rict ar,d
diate vicini ➔
of i-.e Op a i-iouee end ,. l:< a do··,n to :ards
the -itz riot, ... , '.-\ue e Rivoli, e c., th.re •;:ere ver: few
peo'.)le on rL ntroc sun mos~. of
ho.,e : r
dre od in bl:i·k.
,~
dt...y, for -tile fist time, 'P. hoard rumor.
battle co m= nci~
~t V ,dur., ~hi h ccn•i ~ct
cinvio ence d:.:r.:.n g m
·ho f' stay on he con+ inc,:
h

shot

r~

r

1

d

Sa urda

.re rua ~•

1.

h d m iled
uor:ting
nppcintmen s an noi. huvin heard frorr
m put in h time
making 5omc parson 1 callc and doing ~orr.e shoppin·.

Conforming to •ne cu +om ir P

o. nu!7'bn· of letters of introduc ior.

Had a viaii ··i-t

r. 81 de, --ana-e of he P1ri.,.
ho •3.s very much in in some infor~ t~on I ~ave him abut he Feder,.,l
rtem nd exolnined he difficulties nich he r.ad
in orkin· up muc rl us.:.n S" for his comp ny in
my requ st, he o t iced and la er sent me he
fo le · ng fig•tres as
o th~. a::ount of
o ·1err.men lo ns outs ·ndin• a+
t tiffie, exclusiv of mor..y borrowed a+ the
Bank of ~ranee, which ras then flue uatir.g bet~een six and
eieh+ billion fran s :
0

ice of

5 r. o

h e F.qu1table 'TrJ.d Cor-,n.ny,

t nrm ,Jat i r. n.l J;e f e .- e nondc
DGCf" her 31, 1914,
II
II
1915,

Is cued ir. ror£1.-n _;o :.in ri P. r
D C" be Jl, 1914 I
ti
II
1915,

en Year • :3.' i O ! l Defence Bon 4 s
D~ceIT e1· ,) 1 , 19]5 ,

Frs. 1,288 , 000,000
II
'g 2,000,00'.J

"

"

102,000,000
1, 64,000,000

"

632,000,000

ti

15,300,000,001)

1

New 5

11/

PE!rpeiu 1 Lo· n
I
. 1, 1915,
Dc-:en.b

-•

'Tot al 1 Dec emb r-r 31, 1914,

Frs. 1,390,000,000

Total, December 31, 1915,

irs.24,0SB,ooo,n~o

I left wi -th I,tr • S 1 l e abou llOO francs in Fr cnch
gold for which he gave me B n~ of ~ranee no+ns a~d la er
sen me
certificate of merit such a::: the Ban' of France
issu s to +irn H,asants hen they surn~ndc1· their ~old at the
re uest of the zov.-:rnme1 t..

On c~lling la.1,er to see i .. r. Harjes, l learned
that ho ~ould net e i~ Paris until ~onday, havinJ bee~
ordered by the government tc IJ'1ove t·-,e ambulance ·nit cf which
he h- d charge from llontdidier to som&w, ere in the neighborhood of Verdun, a distance of about 150 miles.
Jet 1,r. Phillips a~ the Cafe de Paris for luncheon
and afterwar <> he drove me -to tr,€: Ame:-ica.n Hos;Jital at 'euilly
Nhere I waE introduced to Dr. Du Bousset, who h~d succeeded
Dr. Bla' e in cr.arge.
"his ms one of the mos intereoiing
expe iences of mJ trip.
The hos,it~l is st~blisned in an
imr.·ens school building :rici1 was only p· rtlJ complet~d v.hen
he v·ar broke out and \'Jas hurriedly converted in o a hos,,ital.
l1y direction of the militar_ authori i s, they had ju:ot r~moved all of the ounded wno '7" e coy,valescer.t in ordPr to make
room for those expecte. fro~ •ne V dun b ttle.
But there
v,erc sti 1 ::.omethine li e ::oo o ·nded men _._ 11 e.
As I went tnrough the en• ~r r rr'dor, a ?rench
soldier, ao stort as to be almost a dvarf, came hobbling
along :ith great difficulty on crutches, one le en irel
gone and one arm prutly mi ing.
rie looked o cheerful
and uncon erned hat I asked the doctor about him and learned
that he ha bee~ awardo
he Cros8 for gallantr~ of an unusual
character.
\fter repente at empts by different parties, o
cut a ection of Ge man entanglenents prepare. ory to at•ack,
ttis little fellow vol nteered, claiming the advantage of being too small to make mucn of a arget.
ie succeeded i~ cutting the opening but +hey s~o+ted him rii1 their rocket illumination and a. macnine gun v.nicn wa. turned on him pructicnlly
amp u t at e d hi s a ·m an d 1 e g •
I was sho il'n the ward v·he e • hey ar p r1rf orming arvellous operation in dent~l and plastic ~urgery, a joining
which
re the v.orkshops for manufacture of the ..ielica•e ir.strumer.ts, bandages, etc., used for ne purpose.
~ost of
th oc opera ions on the fac were conducted i
c,airs like a
dentist chair, ana 1 gel; with local anaesthesi~.
I sav
men whose f ces had be n mutila ed, some of them ~iih their
lower jaw shot away who were ~radually h· vin; so:e sfmblence
1

-.

of a ace rrs ored -nd he photographic record o
cas s whicn I exami.ed xhibi ed ' he marvelous
· r:d ~:c:. 1 ·i h "hich i.he iork was being don •
on ~horn hey ha no
ye
s nrted
ork, had ~e en ire
jn~ mi sing, al nougn h~s ton: e ha~ not een i~jured.
I
us a sot ken into
he bathroom r re men ~10
were able o be r;;ovod •;ere bathed ever' day.
•~his "'S a
ng room ··,ith eho,:ers on one side and porcel in uub
on the
other.
~ ose whosG
oundc ere o~ a character ~o prEvent
their t ak ing a sno er or get ing in o a tub . ere curried from
tr,e wards into
he b. t. room on wooden frun:.es ·.hich restej
on he op of
he tub nnd where they ~ere scr bbed wi ho
etting tne bandages.
'h re mus
huve been a dozen or mor
ounded chap there v1hen I •;ent in und ne chnruc er of
he
ca sual ies seemed to indica ca gr a pe cer.tage of shrapnel
• o nds and
very sm1ll percentage of rifl
bulle wounds.
Orie man ·.ho w·t::: nlmos ➔ •1ell hrHi been sot by a rifle bullet
i n h o r i g h n .t p ; h e r e i
1 e f t · p er f e c 1y c 1 e nn h o 1 e t h e
oize of u le'ld pencil but -.•here th
bul le c· me out on the
out.ilP- of his lef
hip, it •ook greai pieces of flesh in
strips running up nrl do m hie lt: •
0 hers •;horn I sn
·er
sno ir h
neck and
Dr. Du 3'ous e said hey had n
o.stonishin ·ly hi ·n p rcen ge o' •·:ounds in ire· r head s nd
eg in he early st·ges of
r1e •ar a
•he rr.en ''ler so frequen~ ly ·oun Jed :i.ile lying on th
ground, bu
during he
1 te o ages, m st of the rnunds 'J re in r.e r.ead , n"ck,
eh ulders 1nd ar s, sho ing ine pro ec ➔ ion of te tranches.
One of iheir p ien s waA an inl'nn r ' colonel ... o ha.d h· d
his righ arm,
he rirh
oi e of his face ·nd the ight side
of hie body badly mangled by picking up n hand grenade ~ .. ich
had cen dropped in
ne ranch in order o protect nis men
from ~he explosion.
i eh d three broken ri sand ~we •yeight •;ounds in his che"'
and abdomen.
.'le 1.1ere a.t the hospit~l tne grea~ er part ct tno afiernoon.
I gave Du Bousce
500 on leaving an
re eived a mos
ao 1 recia ive let•er from
him 11ter.
From there, Phillips drove me o the Bank of rr1ncc
mere by appointmen I s w •• Sar gent , Depu y Goverrcr of the
B<>nk, ,r . Phillips n.ctir,g
s intbrpreter, a.lthoug'1 Sar 0 n
snoke Enb'isn r .the h
ingly .
Arr n 0 ed to call irrmediate1 • upon returning from Cannes --:.ere .. r. narris nd I had arranged to go on the 19 n to v· cit wi h. r. Sillman for a fe"'
ye •
. e arranged t hat a t e ·no or. • o h v e c u r pa o a po r s
vi~,d for tne rip to Cannes titho~
no necessity of ppeu rin~ ir person,
r. Ellis ~r the Ritz Ho el having ffieans for
co i ng so.
Spent tee rest of ,
afternoon nnd e:ening p eking nd la rris and I th_n dined a
h st~iion rectauran at
th Gare d u L yon, ta,ing llP 8:15 P.
• -trair:,

-.

It w• ca very slow trip, tho trair s oµping ever1wnere instead of runni~ g tnrough exJress ns in ordinary times,
and did not reach Cannes until 12 : 30 the ncxt da.
e were
ourprised to see from the car ~indo~e, German prisoners workin in the fielde t different poi~ts.
·on d een tnem
·or king en the dock a Dieppe · nd un er
od no. ➔ the
ero
scattered hrough tr nee,
enera11·, a
::ork handll 3 freight,
etc.
r. Sti lmon and r. ~hristiansen were a
the station o meet t;.B and had
ai .ed our arrival for luncneon.
r. Stillman I s really o •er jo ed to have us come do 11n and
make him a visit.
He felt tho exile from horn v ry 'e nly,
havir_ reen dan erously ill in Switzerland t·.e rear before
and unablP s et to r vel tc America.
hat afternoon, .. r. tillrr:an took
s for an automobile ride along the coast back of c~nner.
He hnd between
his knee i n the car a sack tha
ust h ve held more r.·n a
bushel of c· ndies wrapped u in pqper nn a,parcn-i-ly all he
chil.:lren or miles around Cannes ne·: him and , dead sh for
he car
enever the· so• i
coming i n tne di • ne e.
Dy
he
timP ne re urned to he ho i el ,
here ~as very little candy
left.
He took
ne
ccnes1: enjoymer.t in "pe pperir'g, 11 r.em, alwo.yn r:ing o hit
hem ntl m 1do his driver slo· do ·1r. o watch
➔ he zcramble.
Sometimes older people joired in the party.
h t evenir.g, ~r . S .illm~r., .. r. and .rs. Chris ians n and r. Peix
o iho r
he
Ji table Life in Paris,
and is President of th
me1 icon Ch :r.' er of Corr.IT!e ce, tcgetr,er
:i h Harris ad I, nll dined obe ner und spen
h
ever.ir.g in
tr.e smokin room.
"r. S'!,illman tr.en did aver characteris ic
hing - annour.cir~ that he IQS oing o turn in, he walked to
the elevator n
just before g etting i
called 1:c me to join
hirn for a minute.
All he said ms, " Co o up to my si ting
roon n li tle lat er. "
lt m
uite
..-"lrort hat .:.r. f.tilJmn.n ianted o have
c.,n
·i 1 hout
he o
s being present r.d
:nen I jcir.ud h.:.m fo'..ind
he a read 1:o t lk a.11 111i.;. t.
e sat up until nenrl 2 ,, , lock aiscunsing te iar si ua ·on
and tr.e ob~ect of my trip.
He L very strongl• pro Ally, I
hav unders ood has given immense curno for Rad Cross an o'her
r lief wor,, hui seemed pretty pessimis ic about he oi untion.

-.

Sun a~ , February· 0th.
r. Stillman ~ot comi~E do;n as a rule un il time
for luncheon, H rri~ ond I
al~ed hrough the om which was
almost deaertod except fo convalescen so iers and tr.air
frienwc and r~milies.
ost of
he b'g ho
le '.'ere either
en irely closed or only partl; open, and the promenade alone
he sea front •·;as literally deserted save for '.'ounded soldiers
siting on the bencoes.
0

'l'he part:,· lune ed o e"!her nd ·.r . Stillm"n, i arris
r.d I
ook o. ·onderful u 4 omohile ride up ..
one o
he old
La irian fortif:ie
o
nd castle si-1-ua'ed righ
r,e top
of , moun in
mi es nort. o C nnes.
e must
h:ive climbed 2500 or 3000 feet on
magni ice + r c• d 1hi ch
en-1hrough coun+ less unnels nd over n r I er of bridg s,
some of them of i~~ens high .
r. Stillrn~n ngair. h d his
sack of c nd · and finall · hen we renci'le t .. e c atle, the
whole popul·tion, i ncludin~ ihe priest, turned out to welcome
him.
•·e seeme to have been a fre uent visitor.
',ese peep o nev r min led much
i h hos livin • on the
ore
h ve
dark he.ir nd blue oyes hicn seemed to be ui e
idir.ct tJpe
from n; I ·
seen in 'runce.
r:-hey over~hel ed t r. Still
ith a-1-te tions and inally he ot out a p ck
of poc~etbooks,
ne'.• coirs "nd verioue trin«e s nd fer an hour or 4 ·o onduc ed come improvised races for the· children in :hich ·irls ook
an e ceedi gl' ac 5.ve pari.
'lhe • ·,•·ere all ver mucn embo.rrassed b
r. arris and m ~elf, bu -r , Stillman aeomad to be uite
t home ·itn he~.
Jr. Sillman fina ly persuaded some of tte
b own girlA to tr
a foot race wnich set the whol population
off in o snrieke of 1 ug, er.
'lhe.t eve:r.in
··o.s a repetit.1.on of i1e previous ev nir.g, ·r. Stillm n as~ing m
30 r him in \_p room
fter din ner nd we .,
here
·ein until af er o:r,e o'clock.
I ·as
a o.zed o.
ne exceedir.gl· .frank nd in erei i.. 0
n in ··.nich
h d i::cribed ni"' r la one ·liih r. B er, .!r. :organ,
ne
Roc~efellers, Kuhn, Loeb nd I os of ne o her inportan pr:o ple do"n own.
··os+ o· +nis I will r,ot be a
libert
o dice u it wa exceedingly in re +ir.g to hear him describe
the polic
uhich he ·ac really imposir.i u,on r. Vanderlip in
r.e City o.nk in he rr:at er o
ne b, nk ' s re1a+ions ••'i+b o her
ins itu ions ani banking firms in ew York.
He also gave me
av ry in rertir.g accoun o n1s experiences vi+
a
r.kerc prior .o -1-he Russian-Japan °e
r •
0

•

·e .

•

i onday, February 21st •

..r. Stil mnn, .. r. 1 arris (lnd I drove to .onte
Carlo, ntarti;; airl early in the morning after gettir.g
the necessary ?Bosports, safe conduct, etc., wnich necessitated ~rnisnin photo raphs as usurrl.
~e drove immediately to ! r. Amos uc ' s residence and spen about an
hour wi cl him.
..r. muc,,; nnd his ·vife hav a beautiful
ap rtmont overlc kin
tho editerranean where they a nd
most of their ti fie when not in Paris.
he conve sation
.vas en
~l · bou the ·.-ar and I ga.ti1ered from all they
said and vh• t I la er learned tnat botr. .,ir. and l rs. ·uck
•rre d Pnl 1 interested in a great many relief enterprises.
They
r very hig~l regarded in France

Later •1e luncried a the Hotel de Paris ·nd paid
a visi
o tr.e Casino.
'::"here , ere about sever: ables running but the; ~ere no v~ry cro•ded and ho stakes seemed
o be sm 11.
."os of he players were old people, particularly old vomen nd all of them seemed to be habitu6s as
moet of he~ h·d charts and ~ere la icg ~ystorns.
e had driven o • on e Ca c hrough +he h C<
coun ry n re"'u,ned along r,e s. ore a" the "'"s+ ea tiful
ime o: he d yon the :edi erranean.
,ice seemed o be
cro ;dod 11i h convalescent soldi s nnd I ..in.!erstood ~ hat
ffiOS
of he ho els here nad been converted into hospit ls.
Off
he snore be ween Jic and Cannes, e la ge GerrnPn cancer ra ion camp and prison nad een established on a isl·nd ',:hich they e id
as cro ded with civilian Geri .s.
~he same p
din d toge1ner
a evenin and
after dinner r. Still an, .r . . arris and I spen tne cvenine in hr. S illman ' s siting room alki~! principally of
the ar, fr Harris in ulging i ,.is usua violent
aterner.•s in r ~r J o ne Adminis ra ion and our attl u 'e o:ar Gerrra.r •
0

-.

/V t
~u sday, February 2'lth.
, r. 111rris ,as oblieed to return to Paris on he
rain but I bad learned from. r. Still~ n tha he was
oing up he following day nn he was very anxious to visit
Jack ~• organ ··ho was expected in Paris a that irr.e, and I
decided to sta. over nnd o up wi h him.
After seeing ·r.
Harris off, r. S illmar., r, Christiansen and l m de a long
automobile trip nor1h es of Cannes along the s.ore and
nroug
he town of • rei juse, ·nic, abou :COOO ears ago ,as
one of the mos important Roman colonies on tne \editerranean und sup osod to have had a populR Lon of five or cix
hundred nousand people.
~nere ere Gtlll ex ensive remains
ther of old docks ·1hich re no· some miles frcrr. the pre!: n
shore, also, an im me nse acqueduct here and &ere and u marble
shaft. comMerr:ora in· some of nc hiotor: of he old ci y.
2:46

A er dinner a~ the ho el, Wr. Sillman and I spent
oP to· the evening di~cussing he younger generation of ew
York bani.: men for whom he seemo to h:i e a high regard.

,r

I
2,.

•

I

)

•.

Sunday, Jt'ebruary 23rd .

f lo'-

I wrote letters during the morning and after
luncheon r. Stillman, Mr. Christiansen and I left for Paris on
the 2:46 train . Mr. Stillman had provided a most excellent supper which he carried in a very complete leather lunch case, which
he said he had specially made and it was a much better meal th n
we could have had in the dining car .

-

•

On the train r. Stillman confided to me the reason
for his desire to see Jae~ Morgan. It seems he had been deeply
impressed with the heavy responsibilities gradually devolving upon
the younger generation of ew York Bankers, not only by reason of
their succeedin~ during the past tan years to the responsibilities
of an older generation which had largely retired but also because
of the inmense responsibilities resting upon New York as a financial
center as a result of tho war.
s one of the old school, he is a
strong believer in personal leadership and r. Pierpont organ ' s
death bad so altered conditions in New York that he thought it wise
to take this opportunity, notwithstandin~ that he was still pretty
feeble, to have a very frank talk with Jac4 organ on this subject.
Unfortunately, ~e discovered upon reaching Paris that
r . organ bad already returned to London and r. Still.man's visit
was fruitless although it gave us opportunity for some very delightful times together in Paris •

- .•

Sunday, 1•'ebruary 27th.
t 10:30
., onsieur.Lewandoweki of the Comptoir
National d'Eecompte, called and l went with him by tube to
Montmartre, visiting the two Cathedrals on top of the hill.
Both were filled with the poorer people of Paris, attendin~ the
services and all gave the appearance of being in mourning, and,
in fact, the services were rather impressive and affecting.
fter walking about that -part of the city we returned by tube
and walked out to the Cafe Ambassadeurs,
on the Champs
Elysees for luncheon. I was impressed with the fact that the
underground railway was entirely operated by women, except
for the motormen. The ticket sellers, ticket choppers arxl
conductors on the trains anu the guards were all women in
blacK uniforms with little vihite aprons . After lunch we walked
to the Invalides Museum to see the various trophies captured
from the Germans and to go through Napoleon's tomb. The Museum
was crowded - there must have been 10,000 people there, notvri thetanding that there was snow on the ground and the walking
muddy and bad. It was a very quiet French crowd. In ordinary
times a large gathering of French people liAe that would be
chattering and la~ing but there there was hardly a voice heard
an practically everyone was in black. In the court of the useum
were arrayed large numbers of 'erman aeroplanes, the remenants
of the Zep,elin and a large number of canon of various caliber,
all more or lees damaged by shell fire. I saw some 0'"Uns that had
chunKs torn right out of the barrel, apparently by French explosive
shells._ Inside of the building was a vast collection of rifles,
helmets, flags and atarxlards, trench mortors and all of the various
paraphernalia of war, including many mchine guns vihich had been
taken from the Germans and in various cases iron crosses anu last
letters, diaries. memoranduns, etc., that had been taken from
captured and killed German soldiers. The buildin0 s were so crowded
that one bad to move slowly from one end to the other in the crowd,
which was very 6 oainatured but very quiet. 0 . #alking back to the
hotel down tho Avenue de Champs ~lysee,
the street was pacAed
with people and lookin~ ahead a few blocks, one ained the im~ression that it was a blac~ stream, 9ractically every woman being in
mourning, no one wearing colors •
. t 3:30 ?. ~ I mot Captain Logan and Captain Symi11t;ton,
but was interrupted by a call from Mr. 1illiam elaon
who spent about an hour discussing various m tters, including the
business which had taken me to Paris. He said that he was ther
loo.ct.ng after some matters connected ith th
razilian railways.
That night I dined with r. Phillips and afterwards ~e 1ent to
see a little show in the C pucines theatre.

-

--

onday, Pebruary 28th .
I called in the morning at organ, Harjes & co .
to get my mail and found that r. Harjes had again 50ne to the
front in connection with the transfer of his ambulance unit.
I stopped to see r . Slade, i, ana er of the Paris branch of the
Equitable Trust Company of New York, and had an interesting
chat with him about busi ness conditions in Paris and the business his Company was doing there . He said that vihile they were
making gradual progress , there were endless difficulties to be
encountered. He was finding the best anployment for his money
in dealing in short bills, including those of the 'overnment .
From there I went to La ues with
. ?hilli~s and 'r . Jraves
to ta~e luncheon with the members of the onday Lunch Club, a
little American organization of about twenty men, including a
Captain 'aeon, Mr. London, tr . Thackara, the .Americar Consul ,
Mr. ona.han, re~resentative of the .American Radiator Company,
Captain Sales of the Embas sy and a number of other Americans
doin6 business in Paris. It was a very interesting meeting.
All of those present emphasized the difficulties with which they
were now confronted in developing the credit end of comme r cial
transactions between the United States and France . They said
that something must be done to give larger credit to French
purchasers of American goods or our business would stop .
After luncheon Mr . Phillips and I did some shopping and we then
called on Baron de Neuflize at his offico , whom I had previously
met, some years ago . He was delighted to see me , we arranged a
luncheon date and later, r. Phillips anu l went through two or
three of the stores and markets to get a little idea of business
and the prices of meat, butter, et;t:>s, etc . As an illustration
of prices, I quote the following:
Coal ,i,30 . 00 per ton; lamb and veal from 5 f .: 25¢
to 7 f.:50¢ ; butter per half pound l f .: 35¢; ham 80¢ per
pound; eg 5 s 60¢ per dozen; chickens 10 f . for a ~ood, big
roasting chicken down to so much per piece - they sell a part
of n chicken at a time; fine cheese li~e oquefort 1 f .: 35¢
per half pound; fancy eating apple s 2 f . each . These prices
were obtained in the best general market in Paris, viz . Poulin ' s.
Ead dinner at the hotel and ,vrote mail in the evening.

-

-•

Tuesday, February 29th.
Called on r . Harjes, received only one cable from New
York . Found that he bad a in been called out of tho City by his
ambulanoe work . Prom there I stopped at the Bank of France and
found Monsieur Sargent still away ill. ~hen called on Monsieur
Rosselli, llr. Stillman ' s friend, at the Credit Lyonnai s, had a
very pleasant talk and we arranged to lunch together the following noon . Lunched with r. Heidelbach and his wife, also some
relative of rs . Heidelbach's and ·r. Petrie, a Paris partner of
Coudert Brothers. The latter impressed me as being exceedingly
well posted and an interesting talker, exceedingly pro-French
and yet very fair as to the attitude of our administration .
After luncheon 1 r . Heidelbach and I had a long visit in his study,
discussing generally conditions in France and the banking methods
pursued there by the banks and private bankers. From there I went
to the Comptoir and spent an hour and a half with • Lewandowski
amd M. Paul Boyer, General Manager of the bank .
• LewaDiowski
called in the head of his Portfolio Department, together nth the
attorney who conducts the American correspondence, and the clerk
who has charge of the Clearing House settlements . They explained
fully and very clearly the operation of the Discount Department,
methods of collecting checks and the operation of the Clearing
House, of which the following are the main points:
CREDir:1 AND DISC
T D.1:2.ARTMENT : Very limited
discretion is given to the managers of branches within the
City of Paris. They are given certain fixed lines of discount which they may not exceed ,rithout authority from the
head office.
he supervision of their authority is very
close. Somewhat greater discretion is given to managers of
the branches in the provinces. However, the supervision
is very close and maximum lines of credits are fixed •
.Most of the bills which they now discount are domestic,
largely those drawn by manufacturers, jobbers and commission
houses. ':i.'o some extent also, bills of jobbers drawn on retailers and even retailers on their private customers . Prior
to the outbreak of the war it was not unconmo for the bank
to hand.le 750,000 bills in a month . ~hey have in their ... ortfolio Department alone 450 clerks. These bills come to the
head office from all the branches, nth certain exceptions,
and are collected by the head office. The exceptions, of
course, bein5 agencies in the provinces • .Lxcept in time of
a great crisis, such as the war period, the Comptoir never
melts its _ortfolio, but instead of collecting many of the
bills itself throu.;h its own agencies, or by messengers
throus'h.out the city, it finds it much cheaper to turn them
over to the B nque de France three, four or five days prior
to maturity, and obtain an immediate credit there . The
Banque de France makes a minimum discount charge of five days

-•

at the bank rate, even though the bill bas matured.
This oompensates the Banque for collectino the bills.
Just now there is a dearth of bills, and such institutions as the Comptoir and Credit Lyonnais use a good
deal of their funds in short 6 overnment obli~ations,
which run for 3, 6 and 12 months - three months being
at 4%, 6 & 12 months 5i~ discount . r.i1hey principally
purchase the six months bills, which can be disposed of
at better than s; after they have run three months, as
the Banque de France is always ready to discount them.
CREDIT D•
TM.ENT: This department has been
building up its information for thirty years and is managed by a large staff of exoorts who keep very precise
information about their customers, even to the extent of
visiting their establishments and inquiring into the character of their business operations . Any bill which comes
back unpaid (or where a renewal bill is drawn) is apt to
come to their attention and is noted as an indication of
weakness against the dealer and acceptor . There is no bill
market in Paris such as exists in London, as the brokers
do not carry bills themselves . Transactions between the
banks in bills are rather infonnal and arise simply when
one of the smaller banks wish to realize on rome of its
bills, and they can generally do so at the Comptoir or
Credit Lyonnais at a slightly better rate than at the
Banque de France . The broker runs around inquiring for
opportunities to trade and received a small commission.
Sometimes they deal between each other direct. These
brokers dea l in a variety of transactions such as securities, foreign exchange, bills, etc . and I gathered were
not particularly responsible . The business of the private
banks is somewhat different in that they ma;ce advances on
"pension". That is to say, they advance for considerable
periods, 3 or 6 months, against bills as collateral, the
obli tion of the borrower being in each instance 30 days
up to 3 months, with a general understanding that there
will be little difficulty about renewals . rhe large
private bankers, known as "haute banque", are also considerable buyers of bill s .
CLEARI.1.lG HOUSE: This is of comparativel y
recent development and has only about twelve members,
being the most important and responsible banks . Checks
are so little used, compared to banA notes, that when
the war broke out the operations of the Clearing House
were entirely abandoned and 1ill not be resumed for
another month . They have two clearings daily and the
average turnover thro~ the Clearing House of such institutions as the Comptoir and Credit Lyonnais will run
from 700 to 850 million francs per month - only a trifling amount of course compared with the American Clearing
House operations . The custom is to send the checks to

-•

the Clearing House, much as we do, and settle the balance
by an order on the Banque de France, which is debited and
credited to the respective accounts of the institutions that
are either credited or debited at the Clearing House . They
have only admitted very strong institutions, as instances
have arisen where some of the weaker ones have iven orders
on the Banque de France which have not been honored. It is
customary to send bacK checks which have been found to be
N.G. early in the day prior to a certain hour, similar to
the t8W York practice. lt is the general belief here that
the laws are not sufficiently rigid to enable prompt prosecution of those who improperly use checks and that has deterred
the use of the check system.
t the present time all of the
banks and bankers of ?aria are collecting checks by hand at
considerable expense and inconvenience, particularly as their
clerical force has been much depleted by the war and have
been largely ma.de up by women clerks.
COilllTRY CHECKS: The practice here is quite
similar to that in London, wi th certain variations. 1 think
it may be said that checks are handled by four methods:

•

l.
iven immediate credit where the customer is undoubted, but charging the customer interest at bank
rate plus 1 to 1-1/2%, for the period allowed for collecting, which would vary from 1 to 3 days.
2.
Giving deferred credit, in which case the account
is credited with the amount of the check and the customer
charged with interest at bank rate plus some addition in
case he draws sufficient to impinge upon the amount .
3.
Credit upon "advice of payment" which means that
the customer is not permitted to draw, and if he does,
his chec;c will not be paid until "advice of payment" is
received .
4.
Giving immediate credit bJ red chec~ on the Banque
de France for a checK which the customer does not expect
\vill be paid until the following d.ay 9 in which case the
checK deposited is a white check. This is simply another
method of extending credit and the customer is charged
ban~ rate plus a commission charb"8 for collecting the
check. The first method described is rather a rare occurrence .

-

The operation of re-discounting bills with the
Banque de France is apparently closely associated with the
general system of eettloments between banks, only two or three
of the larger banks anparently not availing of the facilities
of the 3anque de Franca for convertin6 their portfolios when
needed. It is quite apparent that French banAs rely upon the

-•

balance at the ilanque de France as reserve to a much
greater extent than was even prevalent in the United States,
under our old bankinb law, between country banks and reserve
city banks .
Subsequently 1 prepared a report for Mr . Jay in regard to
collections, etc., which suumarizes various conversations in l'aris ,
copy of .lhich report is as follows:
CHEC.i{. COLL.t!IJ~'l

-

S l.1. PAfUS.

Checks are so little used in France, while notes
of the Ban ue de France nd ~ld are in normal times so largely
used in effecting payments, that no such highly organized collection system is developed nor is as necessary as in the United
States. It should be borne in mind that a vast amount of the
domestic trade of France is settled by the use of bills running
from thirty days to a mrud..mum of six months, the usual time bein~ three months . ~hese bills are not universally domiciled
at t he Banque de France, ~hich would be the "e rman system, nor
at the ban~s generally in Paris, which would be the English
system, but are accepted payable at the office of the drawee;
in rmny cases at the drawee's pers onal residence . The bill
of excba.nge, therefore, takes the place of immediate cash
settlements of accounts, and the pa~nt of the bill of' exchange at maturity is, in the vast tmjority of cases, made
directly to the Banque de France, as it is customary for the
banks and brokers that hold these bills to discount them with
the Banque de France within five days of im turi ty, as the
minimum discount of five days' charge by the Banque de France
is fieured to be less expensive to the holder than collecting
the bills direct . This places a great mass, for collection,
of bills in the hands of the Banque de France, not only in
Paris but throUc,hout the Provinces. Those payable in the
Provinces are sent by the Banque de France to their own
agencies, which are now established in everyone of the French
provinces, and in some instances vhere they have no agency
they employ special collection agencies, or oven the officers
of other banks.
r. Robineau, head of the iscount Department at
the Banque de France informed me that he had collected in Paris
alone as many as 100,000 bills in one day, requirin 6 the services of over 1, 000 messengers for the purpose. This custom,
of course, has a tendency to reduce the use of checks. I was
infonned by some of the bankers in Paris that the use of checks
was so little understood, a man could not even induce his wifo
to ta~e a check when she wanted money, did not understand about
endorsin~ it and had doubts as to uhether she might be able to
get the money for it. French women are accustomed to holding
the household money. It is their prerogative and they are

-•

scrupulously careful to avoid in.forming their husbands
and relatives as to how much of the money entrusted to their
care ha.s been spent and how much they have saved . A check
book and bank account would disclose the condition or their
cash account, and this they seriously object to.
\/hen the Banque de France ma.de its appeal for
gold, one difficulty encomitered was the necessity which was
then imposed upon the French families of disclosing how much
gold they ha.d hoarded . Baron de euflize told me that near
his village, Chantilly, a little hamlet of a few htmd.red
people and of vib.ich he is · yor, in order to get the gold he
had to hold a public meetin · in the town, taiee bank notes
personally with him and have the certificate of merit in blanie
(which he was authorized to fill out and sign on the spot)
filled out by himself personal l y as he had no clerks to assist .
'i'he village people were convinced that no one would know how
much money they had given up and out of this little settlement
in a very few days he collected 125, 000 francs in gold .

-

Under such circumstances it will bo seen that the
check problem in France is not important . The 3anque de France
has made efforts to induce a greater use of checks, believing
that it would reduce their note issue as well as increase
their gold percentage and e,'Old holdings . So far, these efforts
have been without success . At a meeting of the officers of the
bank, hov,ever, and which I attended, this natter was discussed .
They all agreed that it would be a great achievement if they
could bring about this practice at the present time, as they
estimated that there were five bi lion francs of French bank
notes now hoarded in Frnace, largely by people who had given
up gold or who had always hoarded notes in preference to gold .
Under the above circumstances, no cooperative
effort in the mtter of check clearing and collection has been
undertaken by •rench banks until in recent years, when a Clearing House was established in Paris, oomposed of about 12 to 15
members and consisting only of the most important and influential banks . The operatiomof this Clearing House were entirely
abandoned ihen the war broke out and are not to be resumed until
about the first of April .
The Clearing House ma.i<:es two clearings daily, and
the average turnover thrO't16h the institution by the two largest
banks, i . e. the Credit Lyonnais and the Comptoir National D'
Escompto de Paris, will run from 100 , 000 . 000 to 850 , 000 , 000
francs per month, a trifling amount compared with the volume
going through the New York City Clearing House. 'l1he custom
is much the same as ours. Checks are sent twice a day to the
Clearing House and the balances are settled, not in cash but

by a special order on the B nque de Fr nee, which results
in the debit or credit to the respective accounts o~ the
institutions that were either debtor or creditor at the
Clearing House . 'i'hey have onl~ admitted very strong insti tutions to clearin~ as instances bave arisen where some of
the weateer banks have given orders on the Banque de France
which have not been promptly honored . It is customary to
send baruc checks found to be "N. } . ", prior to a fixed hour ,
alon 6 lines similar to the Now York practice . It is the
general belief in France that the las of the state are inadequate and not sufficiently severe to enable prom~t prosecution of individuals who use checks improperly, ~nd that
bas also been a deterrent in the development of the check
system . At the present time all the banks and bankers of
the City of Paris are collecting checks by hand, at considerable expense and inconvenience, particularly at a time when
their clerical forces have been depleted by the war and temporary staffs of women employed .
COONTRY CHECKS :

---

The practice in handling country checks is somewhat similar to that in vogue in London, mth certain variations.
llorin~ for various exceptions to fixed rules or customs , it
may be said that country checks are handled by the banks in Paris
by one of four different methods, and these four methods cover
tho vast majority of chec~ transactions:
First , by giving imnediate credit to a customer whose
standing is tmdoubted, in which case the customer is
charged interest at bank rate, plus sa; 1 to 1- 1/2~, for
the estimat ed period required for collection, rhioh varies
from one to three days. This applies to a very small proportion of the checKs handled .
Second, by giving deferred credit, in which case the ac count is credited with the amount of the check, but if the
customer draws any part of the credit, he is charged with
int erest on the amount drawn at bank rate, plus a commission
charge, or a little additional interest upon the amount
drawn if it impinges upon the am:>unt of uncollected checks .
This is similar to our system of "holdout" .
Third , by givint:, credit only upon "advice of payment" which
means that the customer is not permitted to draw, and if he
does, his check will not be paid until "advice of payment"
is received .

-

In none of these three cases does the customer
receive interest on the amount of the balance until after collection time or transit time has elapsed, and only in the first
instance is he expected to draw before the transit time has

••

elapsed. In the second instance he is penalized for drawing, but his check would not necessarily be refused.
Fourth, by giving imnediate credit, or by making immediate
payment by "red checic" on the Banque de I•'rance for a check
which the customer does not expect will be paid until the
following day, in which case the cheoic deposited by the
customer is a "white check". ned checks used by the Banks
are drawn upon the Banque de France and are payable on the
day drawn; white checks are not payable until the following
day. These white checks, which are dravm in anticipation
of the receipt of funds, are cashed by the big banks, at
times, for their customers by the use of these red checks,
and this is simply another method of extending credit, the
customer bein invariably charged bank rate for one day
plus a small commission for collection charge.
The first method, as stated above, is very little
used. The second and third methods cover the great volume of
checks. The fourth method has reference solely to settlements
in the City of Paris and suburbs.

•

•

The operation of red is counting bills with the
Banque de France is apparently intimately associated with the
general system of settlements between banKB, only a few of
the larger banks apparently not availino of the facilities
of the Banque de France for converting their portfolios when
needed and even those institutions almost invariably discount
bills vihen within five days of mturity in order to save the
trouble of expense and collection. The bi 6 French banks rely
upon their balances with the Banque de France as reserve to
a much greater extent than I had realized, and the immediate
convert bili ty of their portfolios gives them a feeli~ of
assurance as to their cash position . I think it may be generally said that so far as checks are used in France, it is
only in rare cases, and only for the wealthiest customers
of French banks that inmediate credit is given on checks deposited, and in those cases not only is no interest all~aed
on the balance during the transit time, but interest is charged
at bank rate, and in most instances a small coc:miasion in addition •