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Form No. 131.

Office Correspondence

Federal Reserve Board


Date__0ctober 2, 1934
Subject:__Minutes of meeting of
Committee on Recovery program held


in Washington on September 22, 1934.

I desire to enter a protest relative to the
memorandum entitled "A program for banking reform". It Is full of
inaccuracies and Is certainly a very dangerous document and shows
very conclusively that the author of it has given very limited
Study to the problem in hand. If this memorandum presents a
program then I for one don't know what a program is. It seems
to me to be a thesis giving a one man's off-hand opinion of the
causes of bank failures, etc., and Is as a matter of fact an
opinion with which I do not agree.
The statement appearing on page two of the memorandum,
"The weakness of our banking structure resulted in a loss of
$17,000,000,000 of deposits" is so obviously out of line that I
think the whole subject should be gone into pretty thoroughly by
the Federal Reserve Board before permission is given to even promulgate the document. In accounting for the failure of banks in
America during the past years the author of the document apparently overlooked entirely the departure from the functions of
commercial banking into the realm of Investment speculation on
the part of member banks. In my humble opinion this very factor
was one of the major causes of the recent banking difficulties.
Consideration might also be given to the undeniable fact that
lending officers in very important banking Institutions used
stock exchange prices rather than an analysis of assets and liabilities in establishing the loan value against many stocks and
other securities.
It seems to me that in preparing a document of this
character it might have been worth while to give some consideration to the effect upon the American money market and particularly
upon the monetary gold stock in this country of the enormous
volume of foreign funds loaned on[securities]duringthe boom years and
the panicky withdrawal of which was a very large factor in necessitating this country departing from the gold standard.
I merely call attention to these matters because it
seems to me when men drawing a salary of $22,000 a year are writing
about the Federal Reserve System they certainly should possess at
least the qualification of accuracy.