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August 5, 1914.

W. F. G. Harding, Msg.,
e/o U. S. Sub-Traasury,

New York City.

harding:I have just received a cable from Mr. Kent, in which
states that the moratorium in London will probably last until
all Bank of England notes have been printed; that no ships are
obtainable for Continental Americans whose situation has become
intolerable; that if our Government will credit him or any responsible person there with 10300,000 out of the appropriation made by
Congress, he believes a vessel under the American flag can be
started to relieve American residents who are in distress at Continental points; that they cannot await ye 88018 from America;
that some Governmental authority is immediately necessary to conduct this arrangement under the protection of the American flag.
This communication seams to me of sufficient importance
to be brought immediately to the attention of those in authority
at Washington, in order that it may receive the President's careful consideration.




Yours very truly,
(Signed)

Benjamin Strong, Jr.,
President.




July 8th,

1915.
Hy dear Mr. Harding:
A number of engagements have

so far interfered with my discussing Mr. Bares letter with
Mr. Platten.

I an making an engggement with him,

however, for the latter part of next week, on My return from Rochester and will lot you know the result.
Very truly yours,

N. P. G. Har41111% Esq.,

PederallVgift

Tashingtan, P. C.

a,

BS Jr/VOU

P. S4

as requested.

Mr. Bares letter is returned herein,




Aug. 20, 1915.

Sirt
in the abperce of Governor Strong, I beg to
acknowledge receipt of your telegram, and enclose herein

conies of two telegrams, which, I trust, are those
desired.
Renpectfully,

Secretary to _Ir. Strong.
Honorable

2. 441gir.44.4x,

7'ederal Reserve

,shington, D. C.

PE

Enos. (2)

ar ,

June 16th, 1916.
My dear Mr. Harding:
I cannot thank you enough for the sympathy aad encouragement I have received from you and your associates on
the Board.

For s2me time I felt that it was absolutely necessary,
in fact, inevitable, that I should resign from the bank perma,4

nently, but possibly that would be a mistnke and I are going to
do as I am told to do.

Fearing that I might be pretty

to go away with nothing at

thinking that

all to do

and the doctors, also,

something to occupy part of

essary, I Shall probably have my

restless and unhappy
my time wil

secretary with me

be nec-

9rd keep in

toqch with the bank more or less, as w-11 as .'oing some private

work in which I am interested.

Your letter of the 15th is just received.

encouraging and

mind of uncertainty as to
proposed,

and helps a good deal

reassuring

the

I cannot tell T'u

friendship which you h-ve ell given me.
Very sincerely yours,

7. P. G. Harding,
Care Federal Reserve Board.
Washington, D. C.
Hon.

BS Jr/VC



to relieve my

wisdon and propriety of

how much I value

It is most

the

course

the help and

Estee Park, Gol.,
August 25th, 1916.

Dear Governor Harding:

For some weeks I have been with

t

stenographic

help and my correspondence has gotten b/Iii behi a hand.
f

Won't you accept this apology for my bated condiAulatiOns
/

upon your

/

appointment as Govermb7F-0-f.the Federal/"Aserve

Board!
It gaveAte

(//
alita d

that there was no dan

deal of

tiring from this work,

no/

atoned when I was in WrAthington.

as you had now and t
I am a(re th

atisfaction to feel

/there are sufficient reasons for

encours\ ent to ibity,"all of us in claiming that success
is well

412iilf7reaoh, and knowing what sacrifices you

made to 1 Ivo Birmingham, I feel that this is the only real
reward

y4,can

receive.

Your term as Governor of the
notable one if, as I imagine, we
tem in the confidence of the

Board should be a

finally establish

country within the

the Sys-

next few

years.

With warmest

regards and

congratulations, I am,

Sincerely yours,

Hon. W. P. G. Harding,
Governor, Federal Reserve Board,




Washington, D. C.




441.

CONFIDENTIAL.

.igut 25

Ilardtrig

to Ale

of ar
9!:
Estes Park, Col.,

you *a soon as poseible a

..syton

Act slid some arguments on
wl

II

August 25th, 1916.

5 r.

e

Dear Governor Harding:

/
+r1^,,,
Just prior to my leaving Eew York, we atarted a serious
I

[

effort to bring some of the larger state banks Onta trust compa-

nies of New

York City into

tembership 91-44eEgd

I Reserve Sys-

tern, and you are doubtless acquaint,sdith the m

%

I am just

to bring it about.

e employed

t the prospects of suce

ieed

cess were rather favorable until\

n of the larger trust come

panics were advised thkibrsh

the

would make it necesa/a y for no

re

Federal Reserve System
banking

private

firms to

I

resign as members o their Boa
,----1
n

79.

This would mean

of Directors.

- lstionships of great value and im-

busi'h

thesevera8cd
portanca(and n sacri.gioe

which I am advised the trust

companies

I

1

,

1

prepar4to

are not

make.

_dif4./culty erises, of course, from

the Clayton Act and unless, therefore, further

provisions of

amendments to that

Act can be brought about I hardly see how we can count upon the

admission
but not

of the largeritust

exactly, the same

companies in New

it may

and other institutions.

disappointment to me and I

be possible to secure

overcome the difficulty.

Somewhat,

situation exists in Chicago with the

Merchants Loan & Trust Company
This is a great

York.

hope that

some amendment to the law which will

With this

in view

I am going to send




-2Adj.

August 25, 1916.

Hon. W. P. G. Harding.

you as soon as possible a sketch of an amendment to the ClaytoL
Act and some arguments on the subject which I hope the Board
,i5th, 191

will consider.
I remain,
F

iO

4,4L

4i

L4,

Very truly yours,

t tt b,
por York

we

chile of the- larger tte banks
inta temberanip

lion, W. P. G. Harding,
Governor, Federal Reserve Board
Washington, D. C.
jus ;
BS Jr/VCM

(1

o.t471

SetieUe

.,rust compa-

in p

dr favorab*e unt

the ie... ,,* trust con-

Idvised.

federal Reeerva System
a.

.Livatc ba,,:king firms to

of Directors.

This would mean

;Lonshipc of great value and im-

,r which Iam advised the trust companies
'0 make.

oulty arise, of course, from provisionr of
the Clekton Act and unless, therefore, further Amendmercts to that
ci oan be brought about .1 hardly see how, we can count upon the
admission of to largerttunt companion jr hew York. Somewhat,

but no* exactly, the, came situation exists in Chicago with the
4haate Leah5 Trust ',:ompany sad other institutions,
is is a great diewappoiatmont to m end I hope that
to seouro s
s
to the law whict, will

we
Form 1207
.RED

age

utter

itild mark an X oppoass of service desired:
WISE THE TELEGRAM
_L BE TRANSMITTED AS A
FAST DAY MESSAGE.

NEWCOMB CARLTON, PRESIDENT

Send the following telegram, subject to the terms
on back hereof, which are hereby agreed to

To

Washington, D. C.

rsnnrt on amAndmont bill printed in full in Chronicle
Paragraph "E"
4,; 26th. maken no provipion for amendment to Section Fourteen
t be ossible that this has

;:f1V1?T'Ar PPP

berm omitted with no pr,9r1i,hj,1+1 of ArPflrii,Rint ilnqrAng

Benjurin girr,n6S VC

SENDER'S ADDRESS

FOR ANSWER




SENDER'S TELEPHONE NUMBER

PI+

7,-..1;

ALL TELEGRAM .3 TAKEN BY THIS COMPANY A

SUBJECT TO THE FOLLOWIN.

To guard against mistakes or delays, the semi, of a telegram should order it REPEATED, that is, telegraphed back to the originating office for
e-half the unrepeated telegram rate is charge,/ in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND I
consideration whereof it is agreed between the sender of the telegram and this Company as follows:
I. The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegiarn, b
ceived for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beye-id fifty times
r sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in
COMM.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telem
used by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless a greater value
ting hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be pail based on such value equal to o,
e per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to rea,
Itination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities
wns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at hisexpense, endeavor t
ntract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such office
dne of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is
ml with the Company for transmission.

Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition to all
, foregoing terms.
No employee of the Company is authorized to vary the foregoing.
THE WESTERN UN ION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
AST DAY

MESSAGES

A full-rate expedited service.
1G HT MESSAGES

Accepted up to 2.00 A.M. at reduced rates to be sent during the night
id delivered not earlier than the morning of the ensuing business day.
AY LETTERS

A deferred day service at rates lower than the standard day mesge rates as follows: One and one-half times the standard Night
tter rate for the transmission of 50 words or less and one-fifth of
e initial rate for each additional 10 words or less.

SPECIAL TERMS APPLYING TO DAY LETTERS:

In further consideration of the reduced rate for this special "Day
?.tter" service, the following special terms in addition to those enu-

Letter shall be delivered on the day Of its date absolutely and at all
events; but that the Company's obligation in this respect is subject
to the condition that there shall remain sufficient time for the transmission and delivery of such Day Letter on the day of its date during
regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.

No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2.00 A.M. for delivery on the morning of the ensuing
business day, at rates still lower than standard night message rates,'
follows: The standard day rate for 10 words shall be charged for the tra
mission of 50 words or less, and one-fifth of such standard day rate for
words shall be charged for each additional 10 words or less.

erated above are hereby agreed to:

SPECIAL TERMS APPLYING TO NIGHT LETTERS:

Day Letters may be forwarded by the Telegraph Company as a
.ferred service and the transmission and delivery of such Day Letters
in all respects, subordinate to the priority of transmission and

In further consideration of the reduced rate for this special "Night
Letter" service, the following special terms in addition to those

Day Letters shall be written in plain English. Code language

Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall

,livery of regular telegrams.
not permissible.
c.

This Day Letter may be delivered by the Telegraph Company

7 telephoning the same to the addressee, and such -delivery shall be a

,mplete discharge of the obligation of the Telegraph Company to
diver.
D.

This Day Letter is received subject to the express understandagreement that the Company does not undertake that a Day




enumerated above are hereby agreed to:

be deemed to have discharged its obligationi n such cases with respect

to delivery by mailing such Night Letters at destination, postage
prepaid.

Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.




PERSONAL.

Estes Park, Col.,

September 4th, 1916.

Dear Governor Harding:

letteT of August 30th,
strongly 4. possible that
f coming on to

Replying to your personal
I am ariting at once to urge as
you and Warburg carry out your

ting.
\

Colorado after the Kansas Oi

If your time
you in

Denver at the

//

Hotel and that will save
t will be a great treat to me
to '4'i3cuss a lot of matters that

opnortuni

cl,

move rather hl ingly by
an

y for wo

Iwill arrange to meet

e ce

B ro

you a few days/prr
and give us

t,

orrespondence.

'7iha6ou

I am waiting

can corn 0,

Thatak you very much for your good wishes.
i

\

I am

i

iRK.. ing o4t)4ere, but so far have not done very much work.

Lva____a"

'''------(ine of the

things which I want to

discuss with you

and ltrburg is the plan really suggotted by him that I do
some writing for the
Reserve Act.

press on certain features of the

I would like to make sure that

le is in accordance

with

Federal

whatever I tack-

your views.

With warmest regards to you and my other gcod friends

under the same roof, I am,
Sincerely yourei

Hon. W. P. G. Harding,
Federal Reserve Board,
Washington, D. C.




Estes Park, Col.,
September 4th, 1916.

dear Governor Harding:

Your favor of the 30th ult. is rle caved and
I am writing to ask if you would min.4 readitlg a letter
which I wrote to Congressman glaao On thi \jest of
the proposed note provisiA f t Federal R erve
!

Act, copy of which was a

Mr. Warburg.

was a great disappotm ent.

7

ant of all tha ,mendmen
i

Tha

\adop
1

It

o have the most importw

at this session.

ng you f ri)your letter and with kind

regaf

Sincerely yours,

Hon. W. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. C.




-2-

648.

been redeemed by the Treasurer in gold or gold certificates,
then such funds shall be reimbursed to the extent deemed necessary by the Secretary of the Treasury in gold or gold certificates,
and such Federal reserve banks shall, so long as any of its Federal
reserve notes remain outstanding, maintain with the Treasurer in
gold an amount sufficient in the judgment of the Secretary to provide for all redemptions to be made by the Treasurer.
Federal reserve notes received by the Treasurer, otherwise than for redemption, may be exchanged for gold out of the redemption fund hereinafter provided and returned to the reserve bank through Which the
were originally issued, or they may be returned to such bank for
the credit of the United States.
Federal reserve notes unfit for
circulation shall be returned by the Federal reserve agents to the
Comptroller of the CUrrency for cancellation and destruction.
"The Federal Reserve Board shall require each Federal
reserve bank to maintain on deposit in the Treasury of the United
States a sum in gold sufficient in the judgment of the Secretary
of the Treasury for the redemption of the Federal reserve notes
issued to such bank, but in no event less than five percentum
OF THE TOTAL AMOUNT OF NOTES ISSUED LESS THE AMOUNT OF GOLD OR
GOLD CERTIFICATES HELD BY THE FEDERAL RESERVE AGENT AS COLLATERAL
but such deposit of gold shall be counted and included
as part of the forty percentum reserve hereinbefore required AND
ISECURITY;
SHALL BE COUNTED AND CONSIDERED AS IF COLLATERAL SECURITY DEPOSIT4D WITH THE FEDERAL RESERVE AGENT.
The Board shall have the right,
acting through the Federal reserve agent,to grant in wbo:e or in
part or to reject entirely the application of any Federal reserve
bank for Federal reserve notes;
but to the extent that such application may be granted the Federal Reserve Board shall, through its
local Federal reserve agent, supply Federal reserve notes to the
bank so applying, and such bank shall be charged with the amount
of such notes ISSUED TO IT and shall pay such rate of interest en
said-affieent as may be established by the Federal Reserve Board and
the affieunt ef ON ONLY THAT AMOUNT OF SUCH NOTES WHICH EQUALS THE
TOTAL AMOUNT OF ITS OUTSTANDING FEDERAL RESERVE NOTES LESS THE
AMOUNT OF GOLD OR GOLD CERTIFICATES HELD BY THE FEDERAL RESERVE
AGENT AS COLLATERAL SECURITY.
Federal reserve notes as issued
to any such bank shall, upon delivery, together with such notes
of such Federal reserve bank as may be issued under section
eighteen of this Act upon security of United States two percentum
Government T:onds, become a first and paramount lien on all the
assets of such bank.

Any Federal reserve bank may at any tiffie redee
its lia'sility fer elite-tending Federal reserve netes 15y de.-eesiting with the Federal reserve agent its Federal reserve-




648.

- 3 -

netes,-geld,-geld eeft.ifieatts, ef IswinI 1,eaney ef the United
Fedefal fesefve netes se depesited shall net be-feZtates.
issued, eit-eet npen eenipIianee with the eenditiens ef an-efiglnal issne.

The FedefaI fesefve agent shall_ held aneh geld7 geld
eaftilisates ef lawfnI ffieney available exelnsively fef exehange
1,9F the entstanding FedefaI fesefve netes when effefed by-the
Upon the request of the
fesefve bank ef whieh he is a-difeetef.
Secretary of thc Treasury the Federal Reserve Board shall require
the Federal reserve agent to transmit se sineh ef the paid-gel&
to the Treasurerof the United States SO MUCH OF THE GOLD HELD BY

iirm AS COLLATE= SECURITY FOR FEDERAL RESERVE NOTES as may be
required for the exclusive purpose of the redemption of sneh
Hetes FEDERAL RESERVE NOTES.
Any Federal reserve bank may at its discretion withdraw
collateral deposited with the local Federal reserve agent for the
protection of its Federal reserve notes depesited with-it ISSUED
TO IT and shall at the same time substitute therefor other like
collateral of equal amount With the approval of the Federal reserve agent under regulations to be prescribed by the Federal
Reserve Board.
ANY FEDERAL RESERVE BANK MAY RETIRE ANY OF ITS
FEDERAL RESERVE NOTES BY DEPOSITING THEMWITH THE FEDERAL RESERVE
AGENT OR WITH THE TREASURER OF THE UNITED STATES, AND SUCH FEDERAL
RESERVE BANK SHALL THEREUPON BE ENTITLED TO RECEIVE BACK THE COLLATERAL DEPOSITED WITH THE FEDERAL RESERVE AGENT FOR THE SECURITY
OF SUCH NOTES.
FEDERAL RESERVE BANKS SHALL NOT BE REQUIRED TO
MAINTAIN THE RESERVE OR THE REDEMPTION FUND HERETOTORE PROVIDED
FOR AGAINST FEDERAL RESERVE NOTES WHICH HAVE BEEN RETIRED; NOR
SHALL THEY BE FURTHER LIABLE TO PAY ANY INTEREST CHARGE WHICH
MAY HAVE BEEN IMPOSED THEREON BY THE FEDERAL RESERVE BOARD.
FEDERAL RESERVE NOTES SO DEPOSITED SHALL NOT BE REISSUED EXCEPT
UPON COMPLIANCE WITH THE CONDITIONS OF AN ORIGINAL ISSUE.

ec-ocr, 41+

5/11/16.

Davi, etc

-




algke

111,

7/

a,
648

That section sixteen, paragraphs two,three,four,five,six
and seven, of the Act approved December twenty-third, nineteen hundred and thirteen, known as the Federal Reserve Act, as amended by
the Act of September 7, 1916, be further amended and re-enacted so
as to read as follows:
"Any Federal reserve bank may make application to the local
Federal reserve agent for such amount of the Federal reserve
notes hereinbefore provided for as it may require. Such application shall be accompanied with a tender to the local Federal reserve agent of collateral in amount equal. to the sum of the Federal reserve notes thus applied for and issued pursuant to such
application.
The collateral security thus offered shall be notes,
drafts, bills of exchange, or acceptances rediscounted under the
provisions of Section thirteen of this Act, or bills of exchange
indorsed by a member bank of any Federal Reserve District and purchased under the provisions of Section fourteen of this Act, or
bankers' acceptances purchased under the provisions of said section fourteen, or gold or gold certificates, OR PROMISSORY NOTES
OF MEMBER BANKS ACQUIRED UNDER THE PROVISIONS OF SAID SECTION THIR-,
TEEN AND SECURED BY SUCH NOTES, DRAFTS, BILLS, OR BANKERS' ACCEPTANCES AS ARE ELIGIBLE FOR REDISCOUNT OR PURCHASE BY FEDERAL RESERVE
BANKS; BUT IN NO EVENT SHALL SUCH COLLATERAL, WHETHER GOLD, GOLD
CERTIFICATES, OR ELIGIBLE PAPER, BE LESS THAN THE AMOUNT OF FEDERAL
RESERVE NOTES APPLIED FOR.
The Federal reserve agent shall each
day notify the Federal Reserve hoard of all issues and withdrawals
of Federal reserve notes to and by the Federal reserve bank to which
he is accredited.
The said Federal Reserve Board may at any time
call upon a Federal reserve bank for additional security to protect
the Federal reserve notes issued to it
"Every Federal reserve bank shall maintain reserves in gold or
lawful money of not less than thirty-five per centum against its deposits and reserves in gold of not less than forty per centum against
PROVIDED, HOWEVER
its Federal reserve notes in actual circulation.
THAT WHEN THE FEDERAL RESERVE AGENT HOLDS GOLD OR GOLD CERTIFICATES
AS COLLATERAL POR FEDERAL RESERVE NOTES ISSUED TO THE BANK SUCH GOLD
OR GOLD CERTIFICATES SHALL BE COUNTED AS PART OF THE GOLD RESERVE
WHICH SUCH BANK IS REQUIRED TO MAINTAIN AGAINST ITS FEDERAL RESERVE
meney
NOTES IN ACTUAL CIRCULATION and net effset by geld er
depesited-with the Federal reserve agent. Notes so paid out shall
bear upon their faces a distinctive letter and serial number, which
shall be assigned by the Federal Reserve Board to each Federal reserve bank. Whenever Federal reserve notes issued through one Federal reserve bank shall be received by another Federal reserve bank
they shall be promptly returned for credit or redemption to the Federal reserve bank through which they were originally issued, OR,
UPON DIRECTION OF SUCH FEDERAL RESERVE BANK THEY SHALL BE FORWARDED
DIRECT TO THE TREASURER OF THE UNITED STATES TO BE RETIRED. No Federal reserve bank shall pay out notes issued through another under
penalty of a tax of ten per centum upon the face value of notes so
paid out. Notes presented for redemption at the Treasury of the
United States shall be paid out of the redemption fund and returned
to the Federal reserve banks through which they were originally issued, and thereupon such Federal reserve bank shall, upon demand of
the Secretary of the Treasury, reimburse such redemption fund in lawful money, or,
if
such
Federal
reserve
notes
have




Estee Park, Colo.,
September 16th, 1916.

Dear Governor 'Harding:

I am sending you under separate cover

five coodes of a brochure issued by the Bank of

Free in an effort to stimulate the use of
cheeks instead of the 3ank's notes. 1 thought
these might prove of intoreat to you and your
associates.
Sincerely yours,

Hon.

P. G. Harding,

7-elreTTirreeri"Virffrted7
Wa eh i n gt o n
D. C.
VC!




(COPY)

October 7, 1916.

Dear Governor Harding:
I ar. very mach obliged for your letter of October

5th and regret to learn of the condition of the matter.

I

am sending a copy of your letter to Governor strong.

Gov_.rnor Strong Culd

I should like It ver:, much if

Yr. Curtis could be 3ivpn an opportunity to discuss the matter with the state department authorities, and if you should.
approve of his being given such an opportunity and a favorable
opening should arise, I trust that you

will

be ible to arrange

it.

Very truly yours,

Chad rman.

Honorable W. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. C.

COMPARISON OF THE ACTIVITIES OF THE FEDERAL RESERVE BANK OF NEW YORK
ON OCTOBER 23, 1915, AND OCTOBER 23, 1916.

1915

Deposits by mail
over counter

Items handled
Clearing House
Amount
Home debits
Amount
Transit
Amount

1916

210
45

902
109

787

9,120,279.35
38

6,453,122.20
6,918

2,186,292.17

3,603
21,466,049.18
140
11,735,108.00
31,255
10,012,091.56

The Transit Department on October 13, 1916, handled 50,983 items amounting to *12,770,717.43

Government Deposits
Items
Amount

0
0

5,092
882,863.26

On August 7, 1916, handled 16,030 items, $1,751,966.30

Items returned unpaid

Discount Department
Number of items
Amount

67

5

17,990.67

378

51

1,345,531.26

On September 13, 1916, handled 453 items, C6,732,040.14

Money Department, bills handled

25,045.

75,700

11/205
Number of Employees - officers,
clerks & watchmen

Salaries for one day




73

431.34

174

700.76

e:DERAL RESERVE BANK
OF NEW YORK

October 30, 1916.

Dear Governor Harding:

Confirming our, telephone conversation of to-day, Mr. Curtisand I had
a meeting with Messrs. Eent and Hemphill, representing the trust companies
interested in the French acceptance development, and I advised them that you
had authorized me to state that the Federal Reserve Board, after giving further
consideration in session to-day, would not issue any farther statement in regard to the French acceptances; nor would they deem it necessary for the
trust companies interested to issue any additional circular, provided the amount
of the acceptance of member banks should not exceed, as a maximum, $20,000,000.
and should be held to that figure.
e

I further advised them that the decision of the Board in re acceptan-

ces would be outlined by an address to be made within a few days, in which
there would be no reference, directly or indirectly, to this particular acceptance.

We understood them to give us the assurance that tney would confine
the member bank acceptances to not to exceed

20,000,000., putting out such

other amounts to State banks t private bankers and individuals as they were able

to do and felt justified in doing.

I trust that this carries out your

instruction in this matter.
I understood in my later conversation to-day that you approved of
our submitting the copy of your address,' which will be mailed from Washington

to-night, to the governors who will be at the New York Federal reserve bank
to-morrow (Tuesday) for an informal conference, with the understanding that




VE BANK
YORK

-2-

they are to treat same as confidential until after the address is released
to the press Thursday morning.
Respectfully yours,

Deputy Governor.

Honorable W. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. C.

}T /CEP




D,

ffice Correspondence
To
From__

ttr. AV.
R. 1.?renna.

FEDERAL RESERVE
BANK OF NEW YORK

Date October 30, 1916.

Subject: Telephone conversation by Governor

Parding to :it,. Trenan, October 30, 1916,

at 2:45 n. n. in re natter of french ac-

oeptancen inaugurated by the Guaranty
Truet Calearvi and the Bankers ?rust CovInany4

Governor Harding stated that the Bowed hed been considering thie.

natter in farther aeselon to-day and they desired that I aee teern. Kent and
Penphi// to-day, informing then that if the acceptances of :somber banks under
this negotiation eherld not exoeed, as the Pederal Reserve Board understood
they won Id not, t.20,000,000. and they (Mestere. Kent and Henphill) would avrnre

the ",onrd that they would be '.1ald to tle fare, the Beard on Ite part would
not insue aay ennorneenent of their own; nor would they ask the trust oorpan-

les mentioned to iseue any further circular; and that ).1e 3oard would not parene this matter further, other than to have the general eub,iect of acceptances
treated in a public addle:se (by Governor Parding presumably) within a few

dart, In which addrees there would be no reference, directly or indirectly,
to the ?rendh acceptances which have ben ender consideration, but would only

explain the Board's interpretation of the acceptance byeinees.
Copieft of euch addreen will be nailed to-day ?7'endity), acoompanied

by a cenfidential let-er from the loard to each Federal reserve agent, and it
will be suggested confidantial'y to the ?ederel reserve agentn tn-t a /ightly
higher rate, nay 1/3 to 1/44, sheuld be necnred on sueh finance bills over

regular bona fide aceentences as anatter of general policy, bnt the nendling
of these nattere will be left to ouch individual -batik after they have receive.
this statement of the general policy of the Pedinna ;Reserve Board in re aoceetgL1143e ff




r-

ovember 2, 1916.

Pear Mr. Harding:

Your letter of October 31st relative to the Prench acceptance
credit and yonr dismission of the matter in your addrese before the American Institute of Banking were duly received and were read to our board
of directors yesterday.

e had quite a discussion of

the whole

question

of rates for the purchase of acceptances and decided that we should make
no different rate for domestic acceptances and for acceptances naae to
furnish dollar exchange than for the import and export acceptances of the

sane institutions which we.have hitherto been buying.

7e

also felt that

for the nresent, while acceutancee uneer the so-called renewal credits were
being offered in moderate voleme we shoeld not, as long as we were purchasing them in conservative amounts, make a differential in the rate for these
forms of acceptances.
Inaenuoh an we presume that

your letter of October

31st was writ-

ten to all Federal reserve agents and as we shall probably receive inquiries

from other ?ederal reserve banks as to the policy

this bank will pursue

In regard to purnhasing the different classes of acceptances we thought it
edvieable to write to all those for whom we are now ourchaeing acceptances
stating the views of our board, copy of which letter I end

se

Very truly yours,

Chairman.

eeable

P. G. Harding,
-ernor, Federal Reserve Board,
hington, I. C.
Pe/RAH


herewith.

November 10th, 1916.

Dear Governor Harding:

I hate enjoyed
before

the American

reading the addre

Institute of

Banking ve

which you

much.

Apparently you hold to t

ongly maintained

by Warburg that these foreign acceptance credit
ble to reach

dangerous

prop.

ercise some restraint of

t now are lia-

u that the Board should exsiness of this character.

trol

rtily

ere the world at peace, 1 iroZ-

you have expressed

agree with

v.Lews

e such that I cannot help

fecling we must
and

delivered

methods for the

-

-

time being

employ ever

lich is undoubtedly good and well

tak

f foreign con- erce and to protect

secured, to

possibly our international balance
shee

11 be the reverse of the present.

Don't you

pplying to
ways ap

c

nk there is something in the view that
't transactions

in

time of peace, do not al-

r conditions?
We

are shouldering a great responsibility whrn we accept

such a large share of the world's gold, if we permit it to expand
our own banking structure exclusively and it will give rise to no
end of trouble in the future.

If we use it to expand our

abroad, we automatically get protection,




loans

so I am inclined to think

2
To

Governor hording.

Nov. 10, 19_

that every good loan which can be made abroad under present

conditions, is so much insurance for the future, whether it is
a short government loan, an acceptance credit, a commercial

credit or a collateral loan.
Thank you for sending me the adds and success to
your administration as Governor.
Very sincerely y

Hon. W. P. G. Hording,
Governor, federal Reserve
Washington, D. C.




avember 10, 1916.

Pederal Reserve Board,
Washington, D. C.

sirs I,
baste report as the butanes* of the bz?zik for the month of
October,

1916, as follows:

Deposits at the end of Leptentber October -

DEPOSITS.

Lnerease

206,246,564.86
....112A2451012:15.

15,722,194.49

- 5,500,603.29
October..3.428.285.05

Govt. Deposits at the end of September
" "

"

Decrease -

4

2,072,316.24

Tan member banks seMeittee 20 applicatifts for reeiscounts

aggregating 4,055416.65, an Increase over the preceeingmerith of 5
In mbar and 4474,535.-36 in amount.

Rediscounts at the end of September41

"

4

" " October- - -

increase

- -4?

REDISCOUNTS.

Reelsoounts maturing:vie:in 10 days- - e

0

0

"

"

0

0

30
60

90

If - ..., ...

" .... - -

*---

0

762,244.86
4043.406.9;4
261,162.00
229,873.68
516,760.26
278,428.00
10.345.00

Total- - - - 4 1,0430406.94

SO chances were made In the discount rates; vie., 3% for 15
dap, 4% 15 to 90 days, 57) over 90 days, NI trade acceptances SO.
ACTANCEs.

The bank purchased for its om account banleare° acceptances

for .13,600,297.20 and for other Pederal reserve btaas 416,085,972.77.




2.

Federal Reserve Board.

11/10/16.

The high rate vas 3fr%, low 2%, and average 2.539%.

Acceptances awned at the end of September - - 424,529,174.45
ft

"

"

"

" October - - - ...2.5eg94.E.3..

"

Increase - -

4

Acceptances maturing within 10 days - - - - -

4

562,220.48

ACCEPTANCES.

"

"

"

ft

ft

ft

"

30
60

ft

"

90

"
"
"

3,074,146.90
5,486,982.43
8,333,373.08
10496.691.72

Total- - - - 425,091,594.93

The bank purchased for its own account warrants amounting to

43,560,000., and for the account of other Federal reserve banks
44,700,000.

The high rate was kiS, low 2e-:fe plle, average 2.601%.

- October -----

Warrants armee at the end of September-

WARRANTS.

ft

ft

ft

ftff

Increase -

arrants maturing within 10 days
It
"
30
"
"
tt

ft

tt

It

0

"

"

"

over

"
"
"

60

90
90

.....

.11.0

+11. WM am

vs.

Total- - - No. of Items seat to Transit Dept. in Oct.- ft
VI

COLLECTION
5/Benxi.

"

"

" Clearing House " "

Average No. of Items daily
AreerIt sent to Clearing Home
"
" Transit Deeertment

--

4,673,237.30
7.534.783.09
4 2,661,545.79

4 2,314,160.20
1,281,756.97
3,370,164.97
76,516.74
492.162.21
7,534,783.09

634,360
90,880
38,550

-.:1337950,612.46

227,017,372.04

The daily average in September was 31,399; the total to the
Clearing House was ,:;304,248,655.85, wed

to the Transit Department

4195,156,814.23.

FED. RES.
NOTES.

Federal reserve notes smessting to 431,240,000. were delivered
to the btu& by the Federal reserve It up to November 1, 1916, when the
notes outstaading were 04,230,815.

The decrease of

e47,009,185.

in gross

amount represents the *otos sent for destruction to the Comptroller of the
Currency.




There were paid out to 36 member banks 13,548,500., and to

3.
9 nonmeMber banks 1A33,000.

43,545,000. sorted bills.
FEL.RES.
NOTES.

11/10/16.

Federal Reserve Board.

Of these, .10,336,500 were new bills, and
New York City banks deposited 4.:3,122,830.

notes of this bank, and out-of-town banks sent in 4766420.; the
Treasurer of the United States sent in 41,105,500. Notes of other
Federal reserve banks amounting to 41 349,600. were also received.
Tq.

0

Income from bills discounted - northers
ft
- purchased " investments
" U. S. bonds
ft
" sundry profits

0C'20

4 3,243.00

Total - -

5/9740.62
18,904.33
6,746.59
16.404.87
99,041.61

Via.t_ Lsense:

Assessment ?ederal Reserve Board

Salaries

Directors' fees- Per diem allowance
Traveling expenses

--

......

pfficers' and clerks' traveling expenses
INCOME AND

EXPENSE.




Rent
Telephone

2,819.85
22,528.05
SO,

----

290.00
70.00
55.00
154.85

4,233.34
166.10
187.75

Telegraph
Postaoit
Expressage

1,234.14

Insurance and premihiss an Fidelity bonds

601.63
377.83
1,748.89
20.80

-

Printing and stationeryRepairs and alterations
AS Oil
All other expenses, N. L. S.
Cost of federal rest notes issued to the bankft..

--

1,374.74
17,080.00
1,666.66
3,013.95

Total - -

5,282.95
117.90
4 64,024.04
7.037.36
4 56,986.68

Fe&eral reserve notes - monthly proportion
All other emortization
Depreciation, furniture and egaipment
Service charges paid
Yee- Res. Agts." Conference, traveling expenses-

Less service Chge., Transit Exp.- 2otal

Income over expenseAs compared with income over expense in Sept.-

-

947.63

42,054.93
43,437.23

-

Federal Reserve Board.

4.

11'10/16.

No important fluctuations occurred in money rates in October.

all loam rose to *1', an the 9th and 17th but declined to 2..41 during
MONEY

BATES.

the last week.
to term.

Time money aa collateral raneed from 3% to Oaccording

Bankers" acceptances remained tracheagedat 20e2V.

Com-

mercial paper was taken at alidatly easier rates of 3e% to M.
In the foreign exchanges closing rates for sterling, francs,
marks, guilders and roubles, Show only slight fractional Changes during
FOREIGN

EXCHANGE. the month.

Lire declined to 6.70je, a discount of 29.3.;; against a dis-

count of 24.3% on October let.

No slackening wasnotee in October of the intense activity pre-

vailing in trade and industry.

Nee records of volume were made in many

lines, but the demands of consupere are so great that under eresent con-

ditions there is not such danger of over production.
prices which be

three menthe ago, has developed into a widespread

speculative movement in commodities aid securities.

the highest price since 1890.
GIMML. Civil War.

The advance in

Meat is quoted at

Corn is dearer than at Soy time since the

Cotton teuched 20.04 on October 25th.

After a prolonged

dispute, large New York distributors of milk: agreed to contract for a six
months' supply at 151 advance per quart.

Leather prices have risen rip idly.

Sole leather advanced 5'

per lb. doring the lent week in October, and various grades are 15i to
2011 a lb. higher then a year ago.

In upper leathers, colored kid is

now 84 par foot againnt 490 in July, 1915.
taken place on sheep leather.




A similar rise of 100% has

5.

Federal Reserve Board.

11/106.

Comparative cash prices of staples on November 3, 1916, and No*ember 5, 1915, are the following:

Bor. 3/16
49.75

_Lour, Minn. pat.
Wheat ,No. 2 red,

winter
Wheat, No. 1, speg
Corn, No. 2
Oats, No. 2
Cotton, mid. up

Print cloths, 64x

Wool, 0. & Pa. X

l.93*

2.25

1.14

1.12,k

.59i

64

Lard, choice
Butter, ex. army.

Cheese, state 1.c.f.
Sugar, centrif.
aagar, gran.
Coffee, 110. 7, job
lots

Cotton-seed oil

Petroleum, rfd.,gal.
Iron, basic pig
Iron, Bessemer

Iron, No. 2

Steel billets

45.50

2.051'7.

Wool, No. 1 comb.
Pork, mess, new

GENER AL .

Nov. 4115

Billets, open-Wth
Steel rails, 0.-41.
Copper, eleotre, lb.,
Lead, lb.
Tin, lb.
Spelter (St. Louis)

.1890
.31 & .32
.48 & .49

31.00
.1710
.37 & .37t
.

.22

.0646
.0735

S

42d

.1180
.03B-

.30 & .31
.40 & .41
16.75
.0935

.29i

& .26
.0446
.0524

.09k

.12
.0835
22.00

26.95
17.00
50.00
50.00
33.00

.2850
.07
.41874-

.1037k

.0770
.0775

15.00
16.95
13.00
25.00
26.00
28.00

.18121.

.05

.361*
.1475

During the month, New Yea bankers arranged a credit of
;)50,000,000. to French merchants and a new British loan of
,;300,000,000.
A published computation of the

foreign loans and credits ar-

ranged in the United States since the war started and still
outstanding,

is as follows:
l'OREIGN.




Anglo-French 5-year 5's on 45
basis

British 2-year 54 ool. loan on
ok% basis
British 3 and 5-year col. loan,- -

4500,000,000.

250,000,000.
300,000,000.

6.

Oedema awry° Board.
Broudat forward

11/10/16.

4,a5o,o0o,coo.

French 3-year col. loan on al%

basis

Prendh connmrcial credits

British banks extends( loan -

400

air

.111

Miscellaneous crefilts

City of Paris 5-year es on

tools --------London Jot. Later Board 1-year
dies. - -----

4.1,4

a-

50,000,000.

6%

0111

Canada; Dominion 5, 10 and 15-glar 5'sOh Ime
Dominion 2...yr. 5's at St%
Provincial
Paalcipal

riofoandland 3-year 5's at 5e-

-

krgantina: 5-year 6's on 64-:: basis- - WM,
2 and 3-year 6's on 64,% basis
MOO

ix months notes- 1-year 5"a an 4.70% basis 1-year discounts, 5 to 5 basisRussia 3-year loan an fre basis
OM Mt OW,

IR*

high

WOO

Italy 1-year 6's on 6. basis

------

9Witserland 3 and 5-year 51s on 6%

taide
Gasaany 1-year treasury notes 0 bestsdn.

Ey.

Norway 2 and 3-year 6's on 6 basis;
7-year S's on 5.75:7 basis - - Ole OW .0
Greece bank credits

Chile bank loan --- - --

Bac Zaulo, Brasil, 2-11-year

W.
61s-NW a **

Bogota, Colodbla
.Ageeen 2-year 6's aa 6% basis - ref IN"
China banking loaae

411, .4Ir

Panama aortal 5's

12-year 5's on 5.20

Bolivia txurdc 1O

a a-

9116 MO MO- O.

100,000,000.
/70,010,000.
50,000,000.
*50,000,000.

--

basis-1111. a 101

OW M. a #111-

60100,000.
75,000,000.
20,000,000.
57,500,000
63,000,000.
5,000,000.
25,000,000.
10,000,000.
6,000,000.
16,000,000.
15,000,000.
50,000,000,
25,000,000.

10,000,000,
10,000,000.

3,004000.

5,000,000.
7,000,000.
6,000,000.
5,500,000,

5,0,0,000.

5,000,000.
4,000,000.
1,200,000.
1,250,000,
111.910050,c00.

Estimated.
Leading houses consulted have reportaa on various lines of

business as follows:
Department Stores, no change in business during the last
month.

Sales keep up; collections are satisfactory and the outlook is

go0d




Drugs and Chemicals; goods are Obtainable at higher prices

7.

reders1 Reserve

from all siastrIso except Germany

and Austria.

Board.

11/104

Salee of proprietary

articles are above the normal; collectioes are fair.
Hardware;

some houses seam to have bought goods above their

requirements, conseqaently there is some falling-off in sales and collections are only fair.
Clothing;

nerefaeturers and jobbers are looking ahead and

trying to avoid any possible trouble.

Business seems to be going well

with spring orders in satisfactory volume.

There is a good ammasd

for men's wear but lees activity in cloaks and suits.

Collections are

fair.

Pianos:

trade is sood and payments are prompt.

Meets and Provisions: sales are

being maintained, and prices

are good with payments satisfactory.
Silks and Drygoods:
restrained.

prices continue to rise and buying is more

The retail and cutting up trades are fair; collections are

good.

Labor is rally euployed at high wages, and there seeus to be less
disposition to strike than in recent months.

The loans of the New York Clearinghouse members on November 4th
e 43,357,047,000., deposits
4124,107,040.

43,524591,000., and excess reserves

Since September 30th loans lemrsamed :,19,609,000., deposits

increased .58,758,000., and excess reserves Inc reed ;;;;54,917,470.
Other statistics of October, 1916, campared with October, 1915,
are the following:




New York Clearing House, 415,711,195,935., an increase of
,971,517,283.

New ineorporstlems, eastern states, capitalized at

.0000000. or over, ,;303,768,700., an increase of 495,073,700.

100/16.

Federal Reserve Board.

8.

Transactions on the Nee York Stock Exchange, par value of bende

4143,543,000., an increase of 439,420,500.

Building in New York City, 11,542,880., an

an increase of 1,743,659.

increase of 4,150,255.

Shares of stocks, 28,348,361,

Postal receipts New York City, ,;3,095,923., an

Failures in Mew York State, 153, with liabilities

increase of 003,743.

of 41,643031.0 a decrease of 136 Al number and 4;6,113,510. in liabilities.

Production of pig-iron, 3,508,049 tons, an increase of 383,358 tons.
Foreign trade of New York for the fear weeks ende'3 October 26th, exports

4254,591,463., an increase of 450,149,104.; imports ;118,918,710., an

increase of 48,689,976.
The changes in the statements of the Bank of England, the Bank

of Prance and the Imperial Bank of Germany since my last report are the
following:

BANK OF ENGLAND
Gold,

November 1, 1916

September 26, 1916

Reserve

b56,363,340

107,569,000

1167,729,000

53.652.336

35.564010

156.852.000

2,023,000

10,877,000

Is 2,711,002

Increase

Other

SeCarities
Novqber 1, 1916
SepteMber 28, 1916

B105,714,000

95.384000
10,326,000

Increase

17

Deposits

Increase

Ratio of
Reserve
22.40%

22.87.
.47%

Decrease

BANK OF FRANCE
Gold

Silver

Oircalaton

November 2, 1916

P4,992,020,250

P326,095,000

F16,128,267,000

September 28, 1916

4.832.751.000
F 159,269,250
Increase

340.034.000
F 13,939,003
Decrease

16.720.027.000
F
591,760,000
Decrease




9.

a.

F4

11/10/16.

ildtawitg.

beendan!

2, 1916

F1,924,180,000

September 28, 1916 i.).615.0C214c42

P1,969,429,000

-104ArtElagA

F 714425,000

257,214,0X

Decrease

Decrease

A L

174

iLLtNJ

aga
October 23, 1916

Circelettpn.

M2003,401,000

H7,033,961,000

bepteober 22, 1916

-1107,444,QPQ
IA

31,776,000
Increase

II

136,705,000
Increase

=LAU=
The month of October is reported by all branches
as having
very satisfactory.

The crops have not been evenly good; but

the average milit be said to be fair.
the instability of prisms.
I.

The grestest complaint is of

Some of my informests believe that this

leading to too mach speculation within business linen.

One

largo mnnufacturer confessed to no that he had bougnt a great amount

of oottoabeyond anY present needs and that the sale
of the emcees

Ald give him a larger profit than his manufacturing.
are

Mew:bents

arally satisfied with the voluna of business.
It should be noticed thei there has been much less dis-

turbance of business than is ustua because of the presidential
election.
21.LIR4

2here has been no change in fundamental conditions since
my last report to you.







10.

Federal Reserve Board.

100/16.

However, the high cost of commodities is giving meny people
mudh concern.

It is very difficult for mapy merchants to plan for

the future.
Salaried nen are feeling the burden of higher costs, and
manufacturer, who make standard goods for which there is a standard

price are feeling the necessity of sore change in the price fixine
method.

In banking circles we hear more and more discussions as to

the coot of doing a country banking business, and it seems inevitable
that some measures be taken to eliminate burdensome accounts.

Business conditions in our vicinity continue to be very

satisfactory.

Our minufacturing industries are working to capacity,

Metechants report a rather better than usual trade, and in every line
of endeavor there seems to be a feeling of satisfaction over con-

ditions and results.
In many instances there has been an enlargement of Mi4U-

facturing plants and the only complaint is scarcity of labor and
the hige price itscemeands.

We think we see evidences of additional

capital requirements due to the increased cost of merchandise and
the

ter cost of production.
ego:n=0mA

This section is in the center of the greet dairy region of
New York State.

There are probably more cows to the acre for 50

melee around Oneonta than any other section of the United States,

and Is semetines called the "Wiley 'egy," and there seems to be a

better feeling among the farmers on account of the increased price




11.

Federal oserve Board.

11/10/16.

of milk which they are now receiving.

Along other lines things seem to be running along in about
the usuAl way.
ITE4CA

November in this section finds labor still in great demand
and LvT 'vastly no labor in night to satisfy it
Farmers, stile only having in some cases a partial crop,

are realizing such unusually high prices for such products as potatoes, cabbage, beans, Wheat, etc., that many of them are having a

very profitable year.
The increased salary lists amd high prices paid for agricultural products are enabling certain portions of the public to be

in a position to spend freely, and in many cases the money, instead
of being saved, ie being spent for luxuries, which is one of the
unfortunate developments of this period of proeperity.

The foreign element who are in this section, and are benefiting by the increased wages, evidently are, as individuals, saving
their money.
Collections .are good and improving.

The outlook is for
prosperous business conditions up to at least the middle of 1917.
FAX 3,11';(2i4V4VM.

General conditions in this section still rain very astisfactory.
Merchants and manufacturers are all having an increasingly

satisfactory business,,mmd banks are experiencing a better &stand for
money.




12.

Federal leserve Board.

11/10/16.

gAALPYR4QUa,

No change in business conditions.

The business of the aralcultural implement manufacturers is
normal, having been no change practically for a year or more.
Mannfactarers of automobiles and parts of same report busi-

ness better than ever before.
Brewers: nosiness conditions about as last month, but much

better than a year ace at this time.
Building trades: Show a slight falling off from last month,
Farming industry:

several years.

The farmers have not been as prosperaus for

thlle the crops have not perhaps been up to the

ONMPeate, with the inception of hay, the prima are very high.

tatoes are bringing now 1.75 per bushel.
vanced.

Po-

All dairy products have ad-

Vegetables, such as onions, cabbages, carrots, etc., are

bringing prices nearly double to that of some previous years.

Meat

and buckwheat have also largely advanced.

The above condition. places the tamers in this section in
a very favorable position.
aanafacturers of hosiery and underwear: Report busivose
good.

Prices within the last year have largely increased, owing to

high cost of labor and material.

The reenracturers are not urging

sales, as most of their goods are sold for future deliveries running
from six months or longer.

iludh of the material now used has more

than doubled in cost during the past year, and the maaufacturers fear

that, should a decline in price of such material occur, there would

be a large cancelation of orders.
nanufacturers of clot/it-yea Sales are larger than a year

ago and collections are much better.




13.

100116.

Federal Reserve Board.

Mercantile houses, both jobbers and retailers, report business

very satisfactory.
Shoe nnnufacturers: While business contlasee satisfactory,

they have much difficulty in obtaining sufficient labor.

Loather has

been steadily advancing and is new more than double the price of a
year ago.

steel asaafacturers: Business continues to improve.

Raw

material Is more easily obtained, and the approadh of winter Is making
labor more contented.
AWAILSMUIVEML

0.7,666,367.49
14,756,767.69

October, 1916
October, 1916
yR01.1 UTICA

There is no change to Mart in the general outlook in this

vicinity.

Baldness continual at an abmegaml rate, the demand for

money Increaming as the cost of all raw materials is rising.

De-

posits apparently continue to increase with the same rapidity that
the deaand does.
:MU JAMLLTOLk

The presidential campaign has not interfered with the

business of western :lee Yeez this year, and while registration is

large - sure indication that the electorate is interested in national
policies and candidates - there has been little open enthusiasm and
political speakers have not had overflowing audiences.

There is abundance of "pep" in manufactaring districts.

Your correspondent does not hear a single cry of distress.

Every




14.

?ederal Reserve Board.

11/10/16.

belt is stretched tight with the load lepose4 by the necessity to produce to the limit in order to meet demands.

ZIanafactarers are often

heard to say: "we never had such a tremendous volume of business as

this year, but not until we take the close of the year inventory will
we know how profits coepare with previous years -whether or not our

advances in prices have beam proportionate to the increased cost of

materials and labor."

Farmers are finishing their harvest.

It has not been a

good year for them, but as usual they are better off than they
prophesied during the crowing maths.
?.muting does not share in the ever rising tide of vo1uMe

and profits.

aoney Is toe Abundant.

interest be paid theme

Depositors are insistent that

Rates on loans remain stationary.

of conducting banks advances.

The cost

tasareholders will look in vain for

extra or increased dividend* from country banks this year.
PPM VCATIZTOpt

Our report for this month is just the same As last.
Orders in money are in great abundance, the table bane
Shortaee of labor andmaterial.
ZAMA OWNSBURG

Business conditions are good all through this section.
. holesalers, retailers and rxennfacturers report increaso6. sales and
gocil collections.

Labor Is fully employed, farm products bring high prices,
OA the pest may be said to have been a successful season.




Amissol. Reserve Board.

,

100/16.

Bank deposits continue to increase, and there Is a good
dommnd far money at this lima.

There has been practiaAly no chmOMO in business conditions

in thin neighborhood since the last report.
All our factories continue busy; payrolls gem to be con-

stantly an the increase, and while sone of our factories are experiencing difficulty in getting a oopply of raw materials, production

is large and we can see no falling off in any of our various linos,

with the possible exception of the corset business, but as this Is
normally a dull period with these people, the ftennfacturers in this

lino appear to be satisfied.
Building operations continue active, and the demand for

Inc accomodations is still largely in excces of the =pray.
Retail business In all lime Is mod. and depoolts In
all our savIn6st institutions are rapidly Increasing.

Businems conditions continue very satisfactory in Nee

Brunswick and vicinity, in fac. seam to be coing on with a con,

otantly acceleratini: speed.

A groat deal of complaint is heard

from mommtacturers and merchants about the diffloulty in getting

snpplies

With the approach of cold woornher UM expect labor

conditions to be nomedhat cased up because of the enforced clooin

down of certain outside activitiesOne to the season.




16.

Federal

eserve Board.

11/10/16.

Bank deposits and clearings continue at high water mark with
a noticeable improvement

however, in the demand for money, which is

very welcome.
FROM ENGLIZilITMLT. R. J.

At the and of October we find conditions in our coast towns

quiet;

there is some activity in building operations, some new cot-

tages are being built and many renovated.

Bank deposits continue to

be good and considerably in excess of last year.
In the inland section the farmers are progressing with their

work; they are now in the midst of harvesting their corn of which there
is a very good crap.

This has been the most prosperous year the

farmers of this section have ever had.
narily large and prices high.

The potato crop was extraordi-

There is plenty of hay and corn and a

lery good yield of apples, which also sell at high prices.

Bank deposits continue to run heavy with little demand for
'teazle.

Respectfully,

Chairman.

HVC/HAB

November 20th, 1916.

Dear Governor

It444.01;_.

Your letter of

November 16th has ust reached

me and

I greatly appreciate the frank ste.ement

We are really not as f
I

to be

mount of fine

do favor a limitation upon

Federal reserve

ed by

ban

e

position of

any restrai

by citizens

or banking inst

the case.

aper purchas-

other hand. I

think the im-

upon the extension of credit
ns of the United States

ligerent countrie

to

t only a serious blow

our on domest

calar

ty of the greatest

tude to the ci
not

loans

share your view

to

magni-

Of course, we do

want to make

bel-

not

that these

ink every one of them will be paid.

are hundred of millions of people in the world to be fed
an

lothed ,Jid she

in

after

red, and the business of the world is go-

the w

that t

notwithstanding the inevitable readjustments

involve.
We must not lose

issued one loan in

sight of

which the

the fact

that England has not

gov,rnment has engaged

empt the holder froE paying any amount of taxes

itself

to ex-

which the neces-

sities of the government may require it to impose upon the holders of its own bonds.

England will not repudiate, even if it

has to tax a half, three-quarters, or even all the interest on
its domestic debt.



To a great extent,

that is true

also in Francs.

-2Nov. 20, 1916.

eovernor Harding.

I do not like to hazard a ;;ttOss as to whet kind of dif-

ficulties will arise when the war ends.
meny possibilities of difficulties thet

There seem to be so
prophecies are almost

But I

certain to discredit the prophet.

from the category of dan::.

measure eliminated

billity that these credits now being extended

and their banking

in a considerable

have

any strong

,

England, Yrance

.

institutions will .; fault.

What I think is
a in this

much more likely is that they may need to renew

country at

ending

es absorbed th

a time when 'we have

prob-

that day comes, England

capacity created by gold imp

necessity of not only pay-

and ?ranee may be confronte

loans, but also pledge col-

ing unheard of rates for

lich as yet they would

lateral for the sec

not contemplate

uration of

What y

sentiment e

e stopped.

ctly.

I beli ve

i lson.

and wi 'irig to
do so b

stop Ii

that she has

personally that Germany has been

-Ling for a

in the

terms of peace

which she must accept
accept

punish-

The effect upon the German people is

German Government fears.

third party can break such
annihilation, whice is too




ready

face the consequences of the

been wrong from the start and must

ment for wrong-doing.

Pres-

year past, but is unable to

unwilling to

use unabl

admission in

what the

No outside in-

government represented by
n stop it,

fluence
ident

the war is my oen

Only the intervention of a

a deadlock except, of course, complete
appalling to consider.

I, personally,

-3-

Nov. 20, 1916.

Governor Harding.

believe that peace sentiment is stronger to-day than at any time
during the whole war.

,hether you and I believe or do not believe tha- we are

going to face serious problems growing out of the war, everybody
without exception should agree that F.:eri

problems are posible

and it is the duty of the Federal Reserve

stem to prepare for

them.

As I recently wrote Warbu g

the m

effective prepara-

tion beyond all doubt is to clear up our hod
ld basis with

and get the country on an ac

odge currency
great mass of

free gold held by the res
and I know you will not mind

You have wkitt

my stating quite as frankly

n conviction that the most imand your associates is to

portant duty now

ass that we must get rid of our

convince the P

s, take the burden of redemption

greenbacks, ou

Federal reserve banks and put them
in po
in
er

requ

ion to actu

em in gold every dollar of paper money

culation in t is country by enabling /hem to gather

togeth-

thousand millii dollars or thereabouts in excess of their
reserves

on is proud of his constructive achievements.
of them would approach this in importance to the country
at this time.

I am amazed that he being a student of these

matters,nas not seen it long ago and prepared a message to go
to Congress with an

urgent recommendation, to com,lete the work

started by the Federal Reserve Act.




-4governor

Nov. 20, 1916.

Harding.

Once the reserve

banks

can get this gold in hand, my

future is reduced to an
out that, and risking all the dangers of
concern for the

ourselves to remain in a

bsolute minimum. adthprophecy, we permit

position where persistent and long-

continued adverse exchanges might force a

n suspersion-of specie'

payment.
You say you cannot see ho
gold without giving value.

many and Fiance and by flo
ted by high tariff, with

for th

ents.

this r

of

gland, Ger-

the world not

ode,- South

vor.of London,

have

American countries,

Paris and

make direct loans

We only

protec-

meet these

he world over will

in New York end
do not

s now due to

t

our

squiring the

In order to

and
Eastern countries,

e

going to get

They will get it

rest of the world to pay all

debts to Europe and pay

Euro e

borrow
Berlin.

belliger-

heir own debtors to bring about

t.

Essays couls be written on this subject and I do not pro-

pose

we shi

o inflict you
d get our

d

t as stated above, my conviction is that
in hand and that we cannot do it too prompt-

ly
quite
personally and hope you will understand my having written you a
I would be glad to have you consider this letter

little more definitely and positively than I

write to any of your




associates.

have been willing

to

5
To

0_

Nov. 20, 116.

Governor Harding.

I am getting along first rate but suffer from the irksomeness of this banishment.

I am also constantly conscious

of the consideration shown me by members of the Reserve Board
and frequently think that I ought to insist upon resigning so
that you might have an active head for t
ith warmest regards, beliove me
Faithfully yours,

Hon. W. P. G. Harding,
Governor, Federal Reser
Washington, D. O.

BS/VC:.




Now York bank.

December 9th1 1916.

Dear

It was a great pleasure to receive

ur nice letter

of the 5th to which I want to reply

ce to a few

points and again to ask if there is anything wit

that I cn do to promote progr
The views expres

ment of November 28th seem
of the Advisory Counci

is currency

action.

en shared by the members

will understand my stat-

it necessary to take this

for an orderly and constructing of the problem of our huge gold reserves and the

expan

on which it wi

these

portations o,

steps a

regret that the

ven larger additions to our

gold stoc

ive h

ter.

d in the press state-

ing frankly that I
Board and the Ad

my power

ken

control over its use.

I agree

with the

Board that

old are not necessarily bad, provided,

ce to impound the gold and exercise some
This is an ideal situation in which to

deal with our currency, but the opportunity will be lost once
the gold is scattered in detail through our banking system and
is permitted to develop an immense expansion of credit.




-2Dec. 9, 1916.

Governor Harding.

Could it not be arranged to retire the greenbacks at
one stroke and give the Reserve Board discretion to effect

the

retirement of, say, not exceeding t100,000,000 of national bank
notes per annum?

I would personally be

gled

see the Board

t

given discretion without any rE:striction in eff

ting the re-

tirement of national bank nrAes and it 3trikes m

that the lim-

itation of 4200,000,000 within the nex

is compromis-

ing with a situation which should be dealt with much
getically than is suggested by tI

No scheme of curren

limi

oform w

at least some brosdening of the
even though short of the
cash reserves.

e ener-

tion.

be complete without
s of Federal reserve notes
of having them count as
be truly scientific

Nor

and complete without

o

revision of t

present methods by which
ned and by

the denominations of

which our

Sub-

treasuries

ter a good deal of thought on these subjects, I am
hat satisfacto

convince

ing the s

athy and coo

that you an

progress can only be made by enlistation of the President and I do hope

ates find it possible to impress him with

the importance of early action.

You can imagine that I am awaiting with a good deal of
interest some word in

d to the action of the Board on the

subject of our foreign relations which / am informed is now about
to be taken.




Alitt

-Governor hording.

1111111111111r
With kindest regards, and again many thanks for your
letter, I am,
'Very truly yours,

Hon. W. P. G. Harding,
Governor, Federal Reserve Board,
Washington, D. C.

BS/VCM




Form 1201
'ASS OF SERVICE SYMBOL
Message

Blue

Letter

Nile

ght Message

NL
If nuns of these three symbols
appears after the check number of
Night Letter

1

words) this is a day message. Otherwise its character is indicated by the

symbol appearing after the check.

WESTEOISENA UNION
TEL
M

CLASS OF SERVICE

Citt

Day Letter

Ws\

Blue

Night Message

WESTERN

Nite

Night Letter
NL
If none of these three symbols
appears after the check number of
words) this is a day message. Otherwise its character is indicated by the

NEWCOMB CARLTON, PRESIDENT
BELVIDERE BROOKS, VICE-PRESIDENT
GEORGE W. E. ATKINS, VICE-PRESIDENT

RECEIVED AT

symbol appearing after the check.

Denver, Colorado,
December 21, 1916.

Hon. T7.P.G. Harding,

Federal Reserve Board,
shington, D. C.

Christmas and New Years Greetings to all the Board.
After two years of unexampled success I

im sure you must view the

past with satisfaction and the future with confidence.
Benjamin Strong.

Chg.



Benj. Strong,
4100 Montviow Blvd.,
Denver, Colorado.

SYMBOL

Day Message

Denver, Colorado,
Decamber 22, 1916.

AMLIIDIMITS BO'S 1 & 2,
FEDERAL RiMERVE BOARD liEBORANDUkt NUMBER 9

AMENDING SEC. 19 RISPECTING RESLNVES.
4,4

The inelusion of Postal Savings

a little ambiuous. Itight not tbi

OS

8 8

-e accurately o

words - "and all deposits of Po

me as being

ed by the

funds"?

r

In general, I am convi

theo, of this amendment

is absolutely correct and one which

ld be adopted just as soon as

ionh arises is whether it

it is safe to do so.
involves in fact an

o in

sequently Whether

servo requirements, eon-

ntraetIon or open the door to

expansion.

n1
144SIs111/11'
as disclos IA. ; reports to the comptroller and

bank rose
amendme

upon ac

no

of this eharact r would in nu opinion be safe unless based
te knowledge o its effect upon the reserve situation.

est compt

r s report, as i recall, Showed cash (IDA do4.1

posited reserv

ountry banks as a whole in excess of 26A, all re-

,

serve city banks around 22A aad presumably, even if this amendmont
A

involves some increase in the reserves of those institutions over What
is now required by existing law, it would be more likely to cause diffi-

culties in the central reserve cities, due to withdrawal of balances,
rather than in reserve cities and in the country districtslAhiCh now soon
over supplied with cash and deposited reserve balances. Approving as I




2.

Amending Sec. 19 :eeseecting Reserves.

December 22, 1916.

do of the theory of this amendeont, Which helps to solve the difficulty
in regard to the Federal Reserve note issue, I would still very strongly
urge that most direful inquiry be made as to its

feet.

The other euestion naturally arising in re

to this amend-

ment is whether the bankers of the country by tra

and exnerience

ean be safely trusted to use their own

ut statutory

restraint, as to the amount of cash

hould keep on

Foreign canmercial banks almost
statutor

requirements, but w

tion are not subject to
uch a

Where we have nearly 30,000 banks o

uation be safe

serve banks neces

ion

h reserve centers and re-

which are applicable to a system

Europe possibly may net be safely

branch banking un
stroke to

system.

11 organized

nig

more diffused banking

e can take a le son in this matter from England.
if the war the '

outbreat

in the no

to my know1

borbood

this country

This is a country of vast

extent, distances a if eat. c3mmmi .

applied

in

°sit and discount as contrasted

with only 76, as 1 re

if

In vault.

Prior to the

of Ragland customarily carried a gold reserve

000,000. No estimates of value hadAbeen made
erne-ant of gold held by the joint stock banks in ad-

dition to their holdings of Bank of Ragland notes, but a very careful esti-

ante

L3

made by 1r. J. H. Tritton of Barclay & Company in the early part

of 1916, Which disclosed that the joint stock banks of Rngland held about
300,000,000 of Independent gold reserves,(yitich bad been auemented during
A

the early part of the waras disclosed by other careful estimates, to the
extent of at least $125,000,000 as a result of the issue of currency notes




Lmendin, Sec. 19 Respecting Reserves.

December 22, 1916.

Which to that amount had taken the place of gold in general circula-

tion and driven an equivalent amount of gold into bank reserves.

The fact is that tSe gold reservestilysthe banking system of
England prior to the outbreak of the war probably id not exceed
50,000,000 to s400,000,000 gold, sum so insis leant in its proportion to the immense internationsl banking trans

Britain as to expose the British system
Os/
disaster, in Vaa time of crises.
The English banks have, in

tion to their reserves and the
could correct this tendency was b
and thereby seriously
would have been a r

banks for the purp
England the lack of

keenest ki

it imps

of all the

turbance, if not
years overloaned in propory Which the sank of 4ngland

ing its own loans into gold
power.

The other alternative

ts of all the joint stock
id, and even in. conservative

uirements and the existence of the

meets

he big joint stock banks seem to make
A
cable for them to strengthen their reserve position by voluntaly

action. Briefly expresso
LAgland

ion of Great

Id, in fact

the absence of a statutory reserve provision in
many years result in an ovaries:nod condition

hind less than the outbreak of war could have convinced tSe Snglish banking community that their situation was unsomd.
Can we, therefore, exnect our oncontrelled and scattered bankins
; 4 tit,

organization, as a Stole, to sufficiently fortify its cash position at
all times end under all conditions, without any statutory requirement?
Al not competition drive them into difficulties?




This reference to the situation in Great Britain is intended to

Amending Sec. 19 Respecting Reserves.

December 22, 1916.

support my recommendation that the greatest care be

taken to insure

that the deposited reserves required by the amendment will be adequate
now that it is proposed to embody no requirement
1 recommend, restoring the line proposed to

the first paragraph on the third page.

Authority

to vault reserves.

stricken out in

ained by the Federal

Reserve Board to permit assistance to be

tate 3anks having

no affiliations with the system may prove to be a powe
protection

in time of trouble.

My persoeel view iS tha
investigations disclose that the
required are adequate.




agency for

should be adopted after

deposited reserves to be

The ratio of reserves shown in this memorandum is
calculated upon the Total Net Deposits in order to make comparison with old conditions.
The proportion of Time

Deposts of the three classes

of National Banks, since the ,)romulgation of regulaions defining Time Deposits, has been approxiAately, as follows:

Central Reserve 13ankS

Reserve City Banks
County Banks

35
10 to

leo

30%

The ratio of reserves required under the Act in relation to Total Net Deposits, therefore, works out, as follows:

Central Reserve Banks

17 .7C

Reserve City Banks

13.80%

County Banks

9.905

The proportion of Time Deposits varys widely in different sections of the Country, hence the percentage of cash
reserve required will show a corresponding variation.




44"
ANENDNEWIS NO'S 8 & 12,
FEDERAL RESERTE /WARD 14141eRADIDUU NO. 648.

NOTE PROVI SI OHS.

I cannot urge the adoption of this aeendme

too strongly and

recognize that coupled with No's 1 & 2, and subjocs o the remarks in

relation to a proposed retirement of gre

tional Bank

notes, it is probably the best that can be done with C

se at this

time. In other words, it is doubt

ot to attempt

Congress to make Federal Reserv

tender, or count as cash

reserves, if the other amendment

ask

tamed. The following comments

as to detail occur to me:
ovides that eold or

The second

gold certificates s

t of the gold reserve of the
t they are pledged as collateral

Federal i.eserve Sank,

to be eaivine a red flag under the
noses of

critics of this plan and 1 should think less offensive languaee

might be

"Provided, hoeever, that when the Federal Re-

holds gold or

serve

notes issue

the

id certificates as collateral for Federal Reserve
such gold or eold certificates shall nevertheless

be counted as a part of the assets of the hank and the 2ederal Reserve notes
issued against such collateral shall be considered and sheen as one of the

liabilities of the Tederal Reserve banks until they are finally retired and
cancelled." The saes suggestion applies to the second earaeraph on the
second page of the memorandum.

The enlargement of the functions of the eederal Reserve notes proposed by this amendment will undoubtedly impose heavy expense upon the



2.

December 22, 1916,

Note Previsions.

Reserve Banks, if thee are loyal enough and bread minded enough to
take advantage of the opportunity thus afforded to accumulate gold.

Should the provision for the retirement of green acks be adopted by
of

Congress, particularly if the tax is 14/2; ins

2o, the

ed to support the en-

of the Reserve Banks might be sufficiently augme

income resulting

tire note issue considerably enlarged.

requiring the

from the greenback retirement, I eould favor a mew
Bureau of Engraving

e

Federal Reserv notes without

Printing t

ation In aid of the Bureau be

cost, with the suggestion t
made.

revenues

1 It strikes

The danger of aperopria

MB

is no greater

ssionnl meddling eith the ile-

than any other danger

.ressIowl interference

serve system. Fre

I can see no particular

will depend upon

s managed.

danger as a resul

ropriation of the character suggest-

ed and th

advantage if the
cted to accumu1a e say

to be
serve

otes, end those

D

if our circulat

Banks wo

be

1#000,000,000 1)

eserve Banks are

issues of Federal Ile-

tes are turned over, as they form so important

say

only twice a year, the cost to the Reserve

judge not less than 42,000,000 a year (this is a

guess Which could be readily verified from statistics which are available
to the Board).

At an average earning rate of 3, , this eould require the

Reserve banks ta increase their investment account

e70,000,000,

not;ith-

standing that the United States Government will save a large part, if not

all, of this 2,000,000 in connection

eith

present Issues of gold cer-

tificates.




It seems certain that the first obstacle Ahich will arise to the

Note Provisions.

December 22, 1916.

passage of this amendment will the charge, or the fear that it aill
open the door to inflation of the note issue. To save repetition,

please refer to a recent letter which I wrote t Ar. Delano of the
Board on this subject. 1 have not the aighte t fear of inflation resulting beyond possibly what may be required to crrj the cost of the
note issue, if Congress makes no appro iatio4

t the strongest kind

of argument will be necessary with both the congres

and with congress itself to ove
argument'before the committe

as being the most direct will
the management of the Re

Which are the pipes

objection.

committees
Th

strongest

which will appeal to them

hat can be advanced directly by

elves, and if the Reserve 3anks,
ich expansion might spread,

unite in presenti

point, I should think it would be

effective.
on for issuing Federal Reserve notes

i. ; ,,qvois4
0.11116....

A
in in 7e. Odenominations,

natio
wise

being 4500

'leg

strongly urge be recommended, the denomi45e00, 10000 and 4100000, with provision like-

the issue of if ificates payable to order in the denominations

$

of l00'' 4

d $1000 d

This amendment MOze than any other is the one that 1 hoe() may be
adopted by Congress.




.\

GSV)

elf

04.

,

g4IS 210 homii

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That Section
19_of the Act approved December 23, 1913, amended by an Act Of AugUTC14, 1914, be further amended and re-enacted so as to read as
follows:

Sac. 19. Demand deposits within the meaning of this Act
shall comprise all deposits payable within thirty days, and
time deposits shall comprise all deposits payable after thirty
days,

aTecl- all savings accounts and certificates of deposit

which are subject to not less than thirty day.' notice before
payment, AND ALL POSTAL SAVINGS DEPOSITS.

AQR the Secretary et the Treaeury

all hav

in GUA14 ARARAV 34 IqGmay elect, the establishment
el a Federal VGGQVW; .baRk in any dietriat, every GI,thAGC-tiAg
R6Fikt6f EVERY bank, BANKING ASSOCIATION, OR TRUST COMPANY WHICH
IS OR WHICH BECOMES A MEMBER OF ANY FEDERAL RESERVE BANK shall
estabilsh and maintain BALANCES WITH ITS FEDERAL RESERVE BANK
reservelsas follows:
aARGUAG"44,

(61.01/1f

eakt.a.C.4-04,,




A bank not in a reserve or central reserve city as
now or hereafter defined shall hold and maintain WITH THE FED-.
ERAL RESERVE BANK OF ITS DISTRICT A BALANCE IN COLLECTED AVAIL- 797,
ABLE FUNDS reserves .equal to NOT LESS THAN twelve SEVEN per
centum of the aggregate amount of its demand deposits and f4vec3 IV-4444;
THREE per centum of its time deposits, ae tellowe:

date

In its vaults t.cor a-period et thirty gix menthe after said
and permanently thereafter
1AP-

tivo-tweltthe thereet

twGlitici.g.
/n the 784GVal VGAGVV8 bask At it district, ter a peried
said date, two-twslftes,-and for each
et twslve menthe at
GUGGG44ing GiX MARtIqG an additienal ene-twslith, until tivetwelfthe have been ee deposited, WI1ehall be the ameunt permanently required.
For a-peried'ot thirty-gix menthe after said date the balance
et the vezerve may be held 4n it ewn vaults, AV 4n the Federal reeerve 1;alak, or in natiOnal banks in OGGGFVG or AAntVal

PG4GFVO qiti4A aG ROW detined bF law.

Atter said thirty-eix menthel paried,-said VAGAVVG4,9thGr
tlqA va1,114, et
VAal; theee koreinbetere required te le held
V6GGVA bank, shall be held
the-member lank and in the Vederal
in the vaulte ef the membe; bank er 4n the RQ421Gral VAGAVVA bank
OF
eptien et the member bank.

teth, at the

A bank in a reserve city, as now or hereafter defined,
shall hold and maintain WITH THE FEDERAL RESERVE BANK OF ITS
DISTRICT A BALANCE IN COLLECTED AVAILABLE FUNDS reeervosequal
to NOT LESS THAN fifteen TEN per centum of the aggregate amount
of its demand deposits and 4ive THREE 116:r centum of its time
deposits, as-fellowe:

koatAtrie3A.




-2-

904.

In ite yaulte ter a peried et thirty-six menthe at
Gaid
date eix-tifteentha thereet, and permanently thereatter tiye-fifteenthe.
In the ;g4gPal VgGGVVQ bank of it dietrist fer a peried ei
twelve menthe. after the at afereeaid at
at threg-tittegnthe, and y45,..x,
4G each eugsgeding GA MORtiqG an additiGhal 0144-ti4t;gath,-lantil .3Efifteenth; have IgGGR GO deposited, which shall be the ameunt pgrma,
Aently required.
Geld date the balance
FG; a pgried el thirty-eix menthe at
(4' th CGgVVGG MaY bg held in ite GWR vaulte, er .i1=1 tlqg RG4Gra1
POGGVG er eentral reserys;oltiee
reGerve bank, er in natienal banke
as new detined by law.
-At er said thirty-six menthe' period all et :4,944 VGGGVVgG
except theee hereinbetere required te bG iqgld permanently in the
dGral VOGGcV6 bank, Ghall be
ya.ulte ef the member bank and in the
ggs 3ig bank, er in beth, at the
held in the yaulte er in the Federal
eption et the MgMbgr baRk.
/=1

(c) A bank in a central reserve city, as now or hereafter

C6t.t.
62444r2-.

defined, shall hold and maintain WITH THE FEDERAL RESERVE DANK OF

1,0011..`

ITS DISTRICT a BALANCE IN COLLECTED AVAILABLE FUNDS reGerve equal to

/..)

pC:

NOT LESS THAN eighteen THtRTEEN per centum of the aggregate amount of lg 4
its demand deposits and five THREE per centum of its time deposits
ae fellows:

In ite waults eix-eighteonthe thereef.
In the Federal rgGGrVg bank Geven-eighteenthe.
TI=IG balanee et Gad reserves shall bG held in
V-0G GWR vaulte er in the YGdGPR; rgGGVVG bank
at its option.

Any Federal F6GGV*4 bank May VGGG4Vg trem the MgAbgV banks. as
2=1GtaalMG14t,-giblG paper
GRG4=1
ag deecribed 114 Geetien teurteen, properly indereed and acceptable

VgeGPVGG, ROt 6KGG94ing ene-half of
to the' Gaid VGGGPVG bank.

It a 0tat e bank er truet sempany ie required by the law et ite

State te keep ite reegryes 61;C.4 tt`g OWP vaulte or with anether
gtate bank AV truet company, eueh VgGGPVG depesite GG kept in Gush
gtate bank er truet company Ghall be Gene-trued within the meaning
ef-thie GgGtiGA, as it they were VgGg-rlig dGpG4itg in a-natienal bank
a VGGgVg er eentral PGQ,G.rVG Gity t.GV a peried et three yeare after
the Secretary et the Treasury snall have effiGially anneuncgd the
eetabliehment et a Federal reeervg bank in the distrist in which Gush
State bank QV trust eempany is eituate gxeept az thus provided, RG
No member bank shall keep on deposit with any nonmember bank a sum
1=1




004
4-

3-

in excess of ten per centum of its own paid-up capital and surplus
UNLESS SAID NONMEMBER BANK SAHLL HAVE QUALIFIED AS AN ASSOCIATE
OF THIS ACT. No
MEMBER BANK UNDER THE PROVISIONS OF SECTION
member bank shall act as a medium or agent of a nonmember bank in
for or receiving discounts from a Federal reserve bank
applying
under the provisions of this Act,- ;t by pg.nniegien el thg F6dGral
RQGGVVG g9a4, UNLESS SAID NONMEMBER BANK SHALL HAVE QUALIFIED AS AN
OF THIS ACT.
ASSOCIATE MEMBER UNDER THE PROVISIONS OF SECTION
The REQUIRED BALANCE :;G,74V3kg carried by a member bank
with a Federal reserve bank may, under the regulations and subject
to such penalties as may be prescribed by the Federal Reserve Board
be checked against and withdrawn by such member bank for the purProvided, however, That no
pose of meeting existing liabilities:
bank shall at any time make new loans or shall pay any dividends
unless and until the total VGGVATG BALANCE required by law is fully
restored.

In estimating the rggevvgBALANCES required by this Act, the
net DIFFERENCE balaneg of amounts due to and from other banks
dhall be taken as the basis for ascertaining the deposits against
which PGGGVVGG REQUIRED BALANCES WITH FEDERAL RESERVE BANKS shall
be determined.
Balanc.eg in PGGgcVG banke dne te =GRIVQP bank;
gha-11 te thg gxtgnt hevein p.newidgd, be gennte4 ag r_48;VGG.
National banks OR BANKS ORGANIZED UNDER LOCAL LAWS located
in Alaska or outside the continental United States may remain nonmember banks, and shall in that event maintain reserves and comply
with all the conditions now provided by law regulating them; or
said banks gxPept in thg Philiping Iglandg, may, with the consent
of the Federal Reserve Board become member banks of any one of the
reserve districts, and shall, in that event, take stock, maintain
reserves and be subject to all the other provisions of this Act.
THIS ACT SHALL BECOME EFFECTIVE SIXTY DAYS AFTER ITS PASSAGE.

q/L
a

905.

AMENDMENT TO SECTION 22.

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF
THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED,

That that part of

Section 22 of the Act approved December 23, 1913, known as the Federal
Reserve Act, which reads as follows:
"Other than the usual salary or director's fees paid to any
officer, director, Or employee of a member bank and other than a
reasonable fee paid by said bank to such officer, director, or
employee for services rendered to such bank, no officer, director
employee, or attorney of a member bank shall be a beneficiary of
or receive, directly or indirectly, any fee, commission, gift, or
other consideration for or in connection with any transaction or
business of the bank,"
be and hereby is amended and re-enacted so as to read as follows:




Other than the usual salary or director's tQQ;;; FEE pad to
any officer, director, Gy employee OR ATTORNEY of a member bank and
other than a reasonable fee paid by said bank to such officer, director, er employee, OR ATTORNEY for services rendered to such bank,
no officer, director, employee or attorney of a member bank shall
be a beneficiary of or receive, directly or indirectly, any fee, commission, gift, or other consideration for or in connection with any
transaction or business of the bank.) PROVIDED, HOWEVER, THAT NOTHING
IN THIS ACT CONTAINED SHALL BE CONSTRUED TO PROHIBIT A DIRECTOR, OFFICER, OR EMPLOYEE FROM RECEIVING THE SAME RATE OF INTEREST PAID TO
OTHER DEPOSITORS FOR SIMILAR DEPOSITS MADE WITH SUCH BANK, OR TO
PROHIBIT A DIRECTOR, WHO IS NOT AN OFFICER, OR EMPLOYEE, FROM RECEIVING, DIRECTLY OR INDIRECTLY, THE USUAL AND CUSTOMARY COMMISSIONS
OR FEES FOR SERVICES RENDERED IN BUYING AND SELLING SECURITIES OR
OTHER INVESTMENTS FOR OR ON ACCOUNT OF SUCH BANK, BUT IN THIS LATTER
CASE THE ACTION OF THE BOARD OF DIRECTORS, IN DIRECTING THE PURCHASE
OR SALE OF SUCH SECURITIES OR OTHER INVESTMENTS, MUST BE RECORDED IN
THE MINUTES OF THE MEETING OF SAID BOARD, AND SUCH MINUTES MUST
SPECIFY THE NAME OF THE DIRECTOR, OFFICER, OR EMPLOYEE AND THE FIRM
OR CORPORATION WITH WHICH HE IS CONNECTED, IF ANY, THROUGH WHICH SUCH
ORDER IS TO BE EXECUTED, AND, PROVIDED, FURTHER, THAT NOTES, DRAFTS,
BILLS OF EXCHANGE OR OTHER EVIDENCES OF DEBT EXECUTED OR INDORSED
BY DIRECTORS OF A MEMBER BANK MAY BE DISCOUNTED WITH SUCH MEMBER BANK
ON THE SAME TERMS AND/ CONDITIONS AS OTHER NOTES, DRAFTS, BILLS OF

EXCHANGE OR EVIDENCMF DEBT UPON THE AFFIRMATIVE VOTE OR 1RITTEN
ASSENT OF AT LEAST THREE-FOURTHS THE MEMBERS OF THE BOARD OF DIRECTORS OF SUCH MEMEER BANK.

ImAttoks7N3f -NALL




Denver, Colorado,
December 22, 1916.

AU4R1MENT NO. 9,
FliDERAL RESERVE BOARD Wia0RANDMIL NJ.

05.

PROFITS JF DIRSCT,MB.

This is a great improvement ov

statute and 1 hope

can be passed. I would suggest adding after the wo

seventh line from the bottom t

xeouted" on the

r investment ma e."

11411-494N,

q34-110-(l4,uprPyit...e.,
906

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That Section 11 of the Act approved December 23; 1913, known as the Federal Reserve Act, as amended by the Act approved September 7, 1916,
be and is hereby amended by adding at the end thereof two new
clauses as follows:

/t/11

t4.'
riVik

VI

(n) Upon the request of a Federal reserve bank to authorize it from time to time to repay to its member banks
a part of their cash-paid subscriptions to its capital stock,
provided, however, that such cash-paid subscriptions shall
never be less than one and one-half per centum of the paidup capital stock and surplus of the respective member banks
and shall be the same percentage for every member bank in
any one district, and provided, further, that the subscribed
Ig*
capital stock of Federal reserve banks and the liability of
/ stockholders shall remain as now provided by law. Nothing
herein contained shall be construed to deny the right of
the Federal Reserve Board, in its discretion, to call the
balance, or any part thereof, of any member bank's subscription to the capital stock of its Federal reserve bank.

::

All provisions of law luconsistent with any of the
provisions of this clause are to that extent and to that
extent only hereby repealed.

4

AmMOVv

-

;11"11'




(0) Whenever extraordinary conditions justify, to increase, from time to time for periods not exceeding
days, on the affirmative vote of five of its members, the
amount of balances required by this Act to be maintained
by member banks with their respective Federal reserve banks,
per
provided, such increase shall at no time exceed
centum of such required balances, and provided, further,
that the Federal Reserve Board shall make a report to Congress in writing setting forth the conditions on which such
action is based.

AILIZIDIlt.NT NO. 3,
B JAM ...1.1113RAIIDILI N. 906.

Fx1D,1aUL

CAPITAL STOCK.

The proposed clause (N) of Section 11 is a

se recommendation,

in mu opinions iii its present form, enab1 ng as it d.es those banks Jose
capital is too largo in proportion to deposits to e

them to earn
not be

dividends without overloaning.

York to reduce its paid-in

necessary for the Federal Bose

end to the directors of the

capital by one-half, and I you

do so be made, at any rate at

bank ,hat application for permissi

r ,t2,)0.000,000 and a paid-in

Wit

the present time.

ve d fficulty in earning dividends

capital of .J2,000

conditions, and I believe that

and a substantial

k is none too large as at present.

the naid-in ctal
On the ott

anks can doubtless safely take advantage

hand, other

°vision, thereb' strengthening themselves with their on members

of this

very muc

and mak

hett

showin

in both earnings and reserves.

TY TO INORLASn

RLSIRVE. REcaiagaTS.

?his will prove to be a most unpopular amendment, and, While seem-

tag to be

logical, taken in connection with No's 1 .1 2, I believe is un-

necessary, if the reserves required by No's 1
investigation.

S2

2 are based upon careful

This amendment strikes -me as placing powers in the hands

of the Reserve 3oard which will prove obnoxious to the member banks and
provoke serious criticism throughout Lilo country.




It will have the

2.

Authority to Increase Reserve 2equircuaents.

December 22, 1916.

appearance of placing powers iu the Reserve Board of such magnitude
as are exorcised by no other public body outside of Congress, and 1
would urge that no attempt be mAfle to secure its
of congress.




ssago at this session

907

BE IT ENACTED BY THE SENATE AND HOUSE 02 hEPREE:ENTATIVES
OF THE UNITED STA.TES OF AHELICA IN CONGLEbb ASSEMBLED,

That every national banking association possessing a
capital of more than one hundred and fifty thousand dollars
shall pay to the Treasury of the United States in the months
of January and July, in addition to the tax now imposed by existing law, a tax of
per centum each half year upon the average amount of its notes in circulation in excess of eighty per
centum of its capital, Provided, that after January, 1918, the
tax thus imposed shall apply to the average amount of its
notes in circulation in excess A. sixty-five per centum of its
capital, and after January, 1919, the tax thus imposed shall
t
apply to the average amount of its notes in circulation in
excess of fifty per centum of its capital, Provided, however,
18010je that the tax imposed by this Act shall in no event be construed
to apply to the circulating notes of a bank which are not in
excess of one hundred and fifty thousand dollars.
The first payment of the tax imposed by this Act
qr."41
shall not be due until July, 1917, and shall be at the rate
of
per centum per annum and shall be based on the average
circulation outstanding, during the period between a date thirty
days after the passage of this Act and the date of the payment
64
of the tax in July, 1917.
No national banking association hereafter organized,
regardless of the amount of its capital stock shall be per,9art 1)1(P1
mitted to issue circulating notes in excess of fifty per centum
of its capital stock,
So c.uch of,.thu provisions of Soctionniri, of the Act
of March 4, 1907, as limits the deposit of lawful money with the
Treasurer of the United States for the purpose of withdrawing national bank circulation to nine million of dollars in any one month
shall not be construed to apply to the deposit of lawful money made
21t"°
for the purpose of wiehdrawing circulation which is subject to the
,c46.0) tax imposed by this Act.
L

led
C04 6'A

)IP

to°

*a,

A

601
nAlc-




D

Denver, Colorado,
December 22, 1916.

AKENDILINT NO. 44
FMLRAL RESERVh; BOARD :,ZAORANDMI NO. 907

TAX ON 1-iLTIJ1Ai BANE NOTES.

This appears to be an amendment

Bank Act and

a

itself dis-

not of the Federal Reserve Act, but no ing in the ame

closes what place it will take in

d banking laws of the

United States.
at Which should be based

This again appears to be an

ler's reports to determine

upon a careful investiga

e the present provisions

What effect it will
of the Reserve

Act f4

National Bank notes a

purchases of go

too rtid and

the rate of

retirement should

e Reserve Board and that the rate

be deterral:

to be paid by the government on the 30-year conversion bonds

of inter°

Lied in the die

should

,

in mini

meat bonds and retirement of

tion

uf

a maximum 14 ations of

If AO

493

the Secretary of the Treasury withsay 3,.

and

considerable general advance te interest

rates following the conclusion of the war, with a resulting decline in
the

value

of United States

bonds, it might result

in the

suspension

of conversions by the reserve banks, notwithstandin6 that the

increasing

tax upon National Bank notes would render it unpoofitable to continue
National Bank note

circulation. In other words, the increased tax, par-

ticularly if a large one, would force sales of government bonds by National

banks, at



the saes time that the decline in the value of government bonds

2.
Tax on National 3ank Notes.

December 22, 1916.

would. make it difficult for the Reserve banks to purchase them and

convert them into 3's and re-sell them.

it is a little difficult to

see how the proposed plan would aork and i have n means of ascertaining
bow much National Bank note circulation would be

ected by the new

tax, as the calculation would require a_ examinati

of the circulation

report of each National bank.
There would ac no danger whatever in this aaer

with it the Secretary of the Treas
rate of interest on the convers
i am in favor of any plan

note circulation and will
aCcumulation of !tilt

place =OW, the acse
seems no more than

of millions
bonds is




if coupled

have discretis. to fix the
ove suggested.

safely reduce National bank

e banks against an excessive
government bonds have no

Banks or member banks, and it

ke transactions involving hundreds
mitation of 3:.,; on the conversion

tinned.

40-4-4
908.

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That Section
5202 of the Revised Statutes of the United States, as amended by
Section 13 of the Act approved December 23,

1913,

known as the Fed-

eral Reserve Act, as further amended by the Act approved September

1916, be and is hereby further amended to read as follows:




No national banking association shall at any time be
indebted, or in any way liable, to an amount exceeding the
amount of its capital stock at such time actually paid in
and remaining undiminished by losses or otherwise, except on
account of demands of the nature following:
First.
Notes of circulation.
Second.
Moneys deposited with or collected by the association.
Third.
Bills of exchange or drafts drawn against money
actually on deposit to the credit of the association, or due
thereto.
Fourth.

Liabilities to the stockholders of the association for dividends and reserve profits.
Fifth.
Liabilities incurred under the provisions of
the Federal Reserve Act.
SIXTH.
LIABILITIES AS INDORSER ON ACCEPTED BILLS OF EXCHANGE REDISCOUNTED AT HOME OR ABROAD, PROVIDED SUCH BILLS
MRE NOT DRA,iN OR ACCEPTED BY THE INDORSING BANK.
The discount and rediscount and the purchase and sale
by any Federal reserve bank of any bills receivable and of
domestic and foreign bills of exchange, and of acceptances
authorized by this Act, shall be subject to such restrictions,
limitations, and regulations as may be imposed by the Federal
Reserve Board.

7,




Denver, Colorado,
December 22, 1916.

AMENDMENT NO. 10,
FEDIAMAL RMERVE BOARD LiEmaammua

LIABILITIES OF NATIONAL B

. 908.
NG

ASSOCIATIONS.

This, it seems to me, is
banking Law.

wise and neces8ar7

41i-4
910
BE IT ENACTED BY THE SENATE AND HOUSE UFId,i2LEsENTATIVES
OF THE UNITED STATES OF hLual-i.i.c.a IN CONGRESS Asbh:ABLED, That the fiftg
paragraph of section 13 of the Act approved December 23, 1913, known
as the Federal Leserve

Act,

as amended by the Acts approved march 15, 1915,

and September 7, 1916, be and is hereby amonded so as to read as follows:

Any member bank may accept drafts or bills of exchange
drawn upon it having not more than six months° sight to run, exclusive of days of grace, which grow out of transactions involving the importation or exportation of goods; or which grow out
of transactions involving the domestic shipment of goods provided
shipping documents conveying or securing title are attached at
the time of acceptance; or which are secured at the time of acceptance by a warehouse receipt or other such document conveying
or securing title covering readily marketable staples. No Member bank shall accept, whether in a fcroign or domestic transaction, for any one -oerson, company, firm, orcurporation to an
tx amount equal at any time in the aggregate to more than ten per
centum of its paid-up and unimpaired capital stock and surplus
unless the bank is secured either by attached documents or by
some other actual security growing out of the same transaction
as the acceptance and no bank shall accept such bills to an
amount equal at any time in the aggregate to more than aac-half
of its paid-up and unimpaired capital stock and surplus ax.*
PROVIDED, HOV,EVER, THAT THE FEDERAL RESERVE BOARD, UNDEL SUCH GLNERAL REGULATIONS AS IT MAY PRESCRIBE, WHICH SHALL APPLY TO ALL BANKS
ALIKE REGARDLESS OP THE AMOUNT OF CAPITAL STOCK AND SURPLUS, MAY
AUTHORIZE ANY MEABER BANK TO ACCEPT SUCH BILLS TO AN AMOUNT NOT
EXCEYDING AT ANY TIME IN THE AGGREGATE ONE HUNDRED PER CENTUM 02
ITS PAID-UP AND UNIII2AILED CAPITAL STUCK AND SURPLUS, PROVIDED,
HMEVER, THAT THE AGGREGATE OF ACCEPTANCES GRCkING OUT OF DOIL.IG
TRANSACTIONS SHALL IN NO EVENT Exerm FIFTY PLR CENTUM OF sUCK
CAPITAL STOCK AND SUhPLUS,
-

12-1B-16




AMENDMENT 10. 7,
FEDERAL RESERVE BOARD MEMORANDUM NO. 910.

ACCEPTANCES BY MEMBER BANKS.

This amendment is undoubtedly wise and necessary.

strongly favor removing the limitation measar

surplus in favor of a provision requiri
reserve on accentance liabilitieS az




.

I would

capital stock and
Its to

;

dePosit liabi/

the same

es.

tz),

<010"---

912

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That Section 18 of the Act approved December 23, 1913, known as the Federal Reserve Act, be and is hereby amended by striking out from the
second

19-k_




paragraph thereof the Proviso worded as follows:

"Provided, That Federal reserve banks shall not be permitted to purchase an amount to exceed $25,000,000 of such
bonds in any one year, and which amount shall include bonds
acquired under section four of this Act by the Federal reserve bank."

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED, That Section 17 of the Act approved December 23, 1913, known as the Federal Reserve Act, be and is hereby amended so as to read as follows:

Sec. 17.
So much of the provisions of section fiftyone hundred and fifty-nine of the Revised Statutes of the
United States, and section four of the Act of June
twentieth, eighteen hundred and seventy-four, and section
eight of the Act of July twelfth, eighteen hundred and
eighty-two, and of any other provisions of existing statutes as require that before any national banking associations shall be authorized to commence banking business
it shall transfer and deliver to the Treasurer of the
United States a stated amount of United States registered
bonds AND SO MUCH OF THOSE PROVISIONS OR OF ANY OTHER
PROVISIONS OF EXISTING STATUTES AS REQUIRE ANY NATIONAL
BANKING ASSOCIATIONS NOT OR HEREAFTER ORG4NIZED TO MAINTAIN A MINIMUM DEPOSIT OF SUCH BONDS WITH THE TREASURER
is hereby repealed.

12/12/16




Denver, Colorado,
December 22, 1916.

ALIA:WM,
FEDIMAL RESIEVE BOARD IMIORANDUIT NO.

12.

laza.
These changes,' umiersta

e

inconsistency from the Fedora

:.

Latitude in dealing with go

0.1

xli

remove quite an unnecessary prOv
ownership of gove
me as being wise.

'

.

as to the f

an

and permit greater
and, as to the second,

from the Law as to the

;nks, and both strike




Denver, Colorado,
December 22, 1916.

GEWERAL COMUENTS ON PROPO3E1 ALEEMME-11,9 Ti TEE
FiDERAL RESERVE ACT.

A careful study of the program of amen

ts to be proposed by

the Reserve Board leads me to believe that ther

a good deal of danger

which may result from Congress tad_

proposals L.nd rejecting others,

upon so:_e of the

are Largely in

should be dealt with as one p

lation.

/arly to amendments No's 1

ec 12, and

the Board would group at least t
so that the inter-de

nt

proce
if a.

shOuId suppose that

roof might be explained to the
P th

a more comprehensive view of

e accomplished.

These prop°.

recent

This applies particu-

ndmonts enumerated into one bill,

Committees of Co
what is sought to

°pendent and

understand, were disonssed at the

erence of

I have not yet read the record of their

ngs, Which ii .,'t develop some facts that would modify the above;

I will send

'a

ilementary memorandum.

,96(.9e0t'd

A
014

ASSOCIATE MEMBERS

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES
OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED,

/

kk_

4A-1;;0

,fio,t(r1

11/40,4:;14

Prifb-44"

g

That any bank or trust company incorporated by special
law of any State or organized under the general laws of any
State or of the United States shall be entitled, under such
rules and regulations as the Federal Reserve Board may prescribe, to become an associate member bank of the Federal
reserve bank of the district in which it is located.
Any
State bank or trust company which has become an associa-ce
member under the provisions of this Act and the regulations
of the Federal Reserve Board shall have the privilege of
clearing and collecting checks through its Federal reserve
bank and shall have all the rights and shall be subject to
all the restrictions imposed by law, by the regulations of
the Board, or by the regulations of the Federal reserve
banks upon their respective member banks/in so far as they
relate to the clearance of checks through Federal reserve
banks. Clearing members are hereby required to maintain
the same balances with their respective Federal reserve banks
as are now required to be maintained by neml:er banks under the Ttaag-4..*

1

)P3IP

Nrcad

1,; krei
)44

provisions of the Federal Reserve Act.
lations of the Federal Reserve Board governing the admission
of associate members shall provide, in addition to such other
requirements as the Board may specify, that each associate
member shall satisfy the Federal reserve bank of its district
at the time of its admission, or at any other time, as to tilr
financial condition and each Federal reserve bank is hereby
authorized to prOvide for special. examination of any associate member at such time or times as may be deemed advisable in order to procure information necessary to determine their condition.

The Federal Reserve Board may upon thirty days' notice
suspend from membership any clearing member which has failed
to comply with the provisions of law or the regulations made
in conformity therewith.
Any provisions of law inconsistent with this Act are to
that extent and to that extent only hereby repealed.


12.12.16.


cco,0

The rules and

(A10




Denver, Colorado.
December 22, 1916.

AMENDNIXT NO. 6,
FSDEBAL RESERVE BOARD 11410RANTUM BO.

914.

ASSOCIATE LIIIB.:13.S.

The wisdom or unwisdom of this plan depend

88 on 0

effect in promoting or retarding the

1 am inclined

membership in the Pederal Reserve

that it will be a long time befo
or the other, on the attitude

t has

those in New York City. To

vantages ahich they will

the extent that it wil
th member ban..

ons Match give associate

extent that it is co
mote the

still wi

n the sound development of the

urd their admission. To the

collection system,
considora

effect at all, one way

institutions in the larger

cities of the country and particula
suffer as contrasted

tire1:1 upon its
to
anksifull

advantages

members

sociate members, I think it may pro-

ission of OOi try State aanks to associate membership, but
have little or effect upon larger institutions IL reserve

centers.

If the

provisions are changed, as proposed in amendments

1 & 2. it will mean no penalty or loss to the big Trust Companies in New
York City of an; consequence, as they are already required by a state law
and Clearing Horse regulations to maintain 15 cash reserves in their
vaults .;:rid 10 deposited reserves with banks which carry 25% vault reserves.

In that respect the provisions of the regulation are exceedingly liberal,
and by avoiding the difficulty of loss on Reserve balances and the further




Associate ..embers.

December 22, 1916.

difficulties of the Clayton Act as to private bankers serving as
directors, it soems as though the last bar had been let down ia favor of
the big New York. institutions. Of course it affo s ne relief to New
York State Banks which carry 251 ease reserves.

Another comment is necessary generalle as t

-eserve requirements.

Has sufficient investigation been made

mission of State Banks to associate

ther general adzrahip may not m

relaxation of reserve reouirement

Is proportions? It seems

to me a thorough investigatio
This amendment should not be based

et should first be made.

guess in that regard.
as been advised of efforts

The Federal Rese

Whice I made last sp

largest Trust C

, to brine a
s into the Rese

failure was the Clay
brought ab

difficu

Act and that

the

ranee of a number of the

System.

The principal cause of

as is not eliminated by the changes

operation as it did not reach private

on the

bankers

general

ing on Trust Company Boards. This amendment does avoid that

and were I In

stens be
this amendme

confiden

York, I would be inclined to recommend that

lly and privately,
tam n actually

advance of recommending

whether pledges could not be ob-

tained from a few of the larger institutions to take associate membership
ie the event this amendment passed. Such a program might accomplish two

results - it might secure the admission of some powerful institutions

on

the one hand and it would furnish the Board with a powerful argument to
submit to Congress as to the wisdom of the amendment.

This is the most difficult of all the proposed amendments upon

3.

Associate Members.

December 22, 1916.

whicl to form a definite conclusion, but on the Whole I am inclined
to disagree with the Governors of the Reserve 3aaks and to recommend

that this amendment be attempted, particularly if ome course such as
the one suggested above can be followed in Our di

i a surprised that the Board has not coupl

lot.

with this amend-

ment a provision for associate membersh
Board aware that a strong movement is

State Rankint; law so that Saving

bills Which are eligible for
a conservative

provision.

+deposit requirements co

strength to the Syst
companies, like for

mt_a_




Trust Co., et al, ha

by Which

nks.

foot in New Yo

is the
amend the

e permitted to invest in
o discount?

I believe that

to membership, with moderate
vino; Banks, would add great
deposit and state trust
.nd Tryst Co., Uerchants Loan

partments, that the

RA

incentive

class of institutions would be

very

tz(-1 0/(4

909

MEMORANDUM - RETIREMENT OF GREENBACKS.

The twelve Federal reserve banks shall be authorized
and directed to assume all liabilities for the payment and re-

demption of all outstanding United States notes, commonly known
as greenbacks, amounting to $346,681,016, and all outstanding
United States Treasury notes of 1890, amounting to $2,254,000,

and such banks shall be required to redeem any of such United
States notes or Treasury notes which may be presented at their
counters for that purpose, and shall also be required to reim-

burse the United States for any of such notes which may hereafter be presented to it for redemption and actually redeemed
by it.

Any United States note or Treasury note of 1890 here-

after redeemed either directly by the United States or by any
Federal reserve bank on behalf of the United States shall be
permanently retired and canceled and shall not be reissued.

In

rte.voN

for the responsibilities and obligations imposed upon

the twelve Federal reserve banks the Treasurer of the United

40,101b

States shall give and deliver to the various Federal reserve
.ec

'

banks all of the gold now held in the Treasury of the United
States as a gold reserve for the redemption of United States

notes and Treasury notes of 1890, amounting to $152,977,036.63, and
the Secretary of the Treasury shall be directed to issue to such
Federal reserve banks, free of charge, aneyett-r---ge.1.4L







909

twenty-forty

year gold

bonds Of the United States in an amount

equal in the aggregate to the difference between the total

amount of United States notes and

Treasury

notes now outstand-

ing and the amount of gold hereinbefore directed to be given to
such Federal reserve banes; such difference amounting
957,979.37.

The total liability or

reserve bank

either to

to $195

obligation of any Federal

redeem directly or to reimburse the

United States for the redemption of United States notes
ury notes of 1890,

shall be

or Treas-

limited to such proportion of the ag-

gregate of such United States notes and Treasury notes as the
capital and surplus of such Fecieral reserve bank shall bear to

the aggregate

capital and surplus of all Federal
eee(

Each Federal

per

I-

reserve bank shall

,,t:et:(

reserve banks.

4 it T1414/

maintainla reserve of one hundred

cent um against the amount of United States notes and Treasury

notes outstanding which it is under obligation to redeem.
reeerve shall consist of notes, drafts, bills of
kers' acceptances acquired under the
teen and fourteen of the Federal

exchange

previsions of

Reserve

Such
or ban-

Sections thir-

Act, and gold or gold

certificates and bonds or notes of the United States in such proportions as the

Federal Reserve

Board may from time to time deter-

mine, Provided, however, that the amount of gold or gold certificates held as reserve shall in no event be less than
centum of the

total

liable to redeem.

forty
per--c6,1-3eumfr-

amount of greenbacks outstanding which

is

The Federal Reserve Board shall have power

from time to time to make adjustments

reserve banks with the view

d

between the

maintaining

the

various Federal

proportionate lia-

bility imposed on the Federal reserve banks by the provisions of
this Act, and such Board may require the transfer of such amounts




909

of gold, gold certificates or bonds or notes of the United States
from one Federal reserve bank to another as may be necessary to
effect such adjustments.

Any Federal

reserve banki

to

which gold,

gold certificates, or bonds or notes of the United States are
thus transferred shall assume the

liability of

serve bank from which they were transferred to

the Federal re-

redeem an amount

of United States notes or Treasury notes outstanding equal to
the amount of the gold, gold certificates or bends or notes of
the United

States which were

thus transferred.

Upon the request

of the Secretary of the Treasury the Federal Reserve Board shall
require each Federal reserve

bank to

deposit in the Treasury of

the United States a sum in gold equal to five per centum of the
amount of United States notes and Treasury notes outstanding

which such Federal reserve bank

posit of gold shall be
centum reserve

herein

is liable to redeeml but such de-

.4/
included as part of the

forty per

counted

required.

The twenty-forty year gold bonds

and the gold fund herein required to be given and delivered
various Federal reserve banks shall be distributed to

to tile

such banks in

proportion to the amounts of their capital and surplus.

The bonds

of the United States herein provided for shall bear interest at

the

rate of three per centum per annum, but each Federal reserve

bank shall pay to
rate of two

the

United States each half year a tax at the

and one-half per centum per annum on

amount of such

bonds

owned by it during such half

the average

year.

Any Fed-

eral reserve benk whtch may acquire from time to time bonds of
the United States provided for under the provisions of this Act
shall have the right to deposit such nolommer bonds with the Treas-

urer of the United States in the manner provided by existing law




909

and shall be entitled to receive from the Comptroller of the
Currency circulating notes in blane: registered and countersigned

as provided by law equal in amount
so deposited.

to

the par value of the bonds

Such circulating notes shall be obligations of the

Federal reserve bank procuring them and shall be similar in form
and shall be issued and reeeemed under the same terms and conditions as Federal reserve bank notes authorized under the provisions
of Section 18 of the Federal Reserve Act.

IHMORANDUM - RETIREMENT OF GREENBACKS.

The twelve Federal reserve banks shall be authorized

and directed to assume all liabilities for the payment and redemption of all outstanding United States notes, commonly known
as greenbacks, amounting to $346,681,016, and all outstanding
United States Treasury notes of 1890, amounting to $2,254,000,

and such banks shall be required to redeem any of such United
States notes or Treasury notes which may be presented at their
counters for that purpose, and shall also be required to reimburse the United States for any of such notes which may hereafter be presented to it for redemption and actually redeemed
by it.

Any United States note or Treasury note of 1390 here-

after redeemed either directly by the United States or by any
Federal reserve bank on behalf of the United States shall be
peimanently retired and canceled and shall not be reissued.

In

exchange for the responsibilities and obligations imposed upon
the twelve Federal reserve banks the Treasurer of the United
States shall give and deliver to the various Federal reserve
banks all of the gold now held in the Treasury of the United
States as a gold reserve for the redemption of United States
notes and Treasury notes of 1890, amounting to $152, 977, 036.63, and

the Secretary of the Treasury shall be directed to issue to such
era-1Federal reserve banks, free of charge, one year gold notes of







909

-3-

bonds and the gold fund herein required to be given and delivered to the various Federal reserve banks shall be distributed to such banks in this same proportion under rules
and regulations to be prescribed by the Federal Reserve Board.
The notes and bonds of the United States herein provided for
shall bear interest at the rate of three per cent per annum,
but each Federal reserve bank shall pay to the United States

each half year a tax at the rate of two per centum per annum
on the average amount of such notes and bonds owned by it
during such half year.

Any Federal reserve bank which may

acquire from time to time the notes or bonds of the United
States provided for under the provisions of this Act shall
have the right to deposit such notes or bonds with the Treasurer of the United States in the manner provided by existing
law and shall be entitled to receive from the Comptroller of
the Currency circulating notes in blank registered and countersigned as provide'd by lam equal in amount to the par value

of the notes and bonds so deposited.

Such circulating notes

shall be obligations of the Federal reserve bank procuring
them and shall be similar in form and shall be issued and redeemed under the same terms and conditions as Federal reserve
bank notes authorized under the provisions of Section 18 of
the Federal Reserve Act.

0
909

-2-

the United States and thirty year gold bonds of the United

States in such proportions as he nay deem advisable in an
amount equal in the aggregate to the difference between the

total amount of United States notes and Treasury notes now
outstanding and the amount of gold hereinbefore directed to
be given to such Federal reserve banks;
amounting to

195,957,979437:

such difference

Each Federal reserve bank re-

ceiving one year gold notes from the Secretary of the Treasury under the provisions of this Act shall enter into an obligation with the Secretary of the Treasury similar to that
now required of Federal reserve banks which obtain one year
gold notes in exchange for two per cent gold bonds of the

WI"
$1'

United States under the provisions of Section 18 of the Feder1"*
f
'KAPP 101

6.441

al Reserve Act.

The total liability or obligation of any Fed-

eral reserve bank either to redeem directly or to reimburse

Irft
the United States for the redemption of United States notes
6N
OL

c4,4

or Treasury notes of 1890, shall be limited to such proportion

-

of the aggregate of such United States notes and Treasury notes

-1,07

04fr,,-.

'014 cA/1"'

as the capital and surplus of such Federal reserve bank shall
bear to the aggregate capital and surplus of all Federal re-

eAlb

rfi'41/:x/i)

6141'6/

serve banks provided, however, that the Federal Reserve Board
may, from time to time in its discretion, make adjustments
between the various Federal reserve banks so that the outstandimposed by this Act
ing liability of such banks/will remain approximately in the

apAt
OA

660,04/0/4




ret.r otiNxi

same proportion.

The one year gold notes, the thirty year gold

Denver, Colorado,
December 22, 1916.

ALIJIZ1.i3NT NO. 4a,
F.a.,KRAL, RiZERV E. BOARD amktAilDUit NO. 90RaIRALIENT OF GRIXTBACKS.

The word "charge" on the last line of the f F t page would imply

e charge for the nreparation of the bo

se

o me the word

"cost" should be subetituted.

etion of the Secretary of

The provision leaving it

the Treasury as to the proper

ar gold notes and of 30-year

conversion bonds, to be issued to t

serve Banks, is dangerous and

may give rise to dispu

um nraportion of 30-year

ute so as to avoid any

conversion bonds sh

danger to the Rose

The rate of in
the dis

should be

the ra

On the 30-year conversion bonds

he Secretary of the Treasury, within

say of 3,, and 4:

It strikes me that
the Rose

Banks will

of greenbacks

is amendment contaies one serious defect --

called upon to retire a total of i;346,000,000
e UON legal tender for all purposes and Which are

likewise available as cash reserves for National and State banks.

To

make the olleration successful and to avoid denuding the .eserve 3anks of

gold, they Should be able to issue Federal Reserve notes against the retirement of greenbacics. Neither these notes nor Federal

Reserve 3ank

notes being legal tender or reserve money. the Reserve Banks will in-

evitably pay out their gold to a very
conversion.



large extent

in the process of

Once having paid out their gold, it is difficult to see

2.

December 22, 1916.

Retirement of Greenbacks.

how they can recover it by issues of Federal Reserve notes, unless the

certainly

note provisions of the Act are considerably amended,
extent contemplated by Memorandum No. 648, and p

to the

bly to the extent

of making Reserve notes count as cash reserves, Wh
1 & 2 would accomplish indirectly if adopted by
The mechanical

pracess of

on resulting

redanp

e

Banks

3reenbacks Which the Reserve
Balances duo at

11 be settled by the use of

he Reserve Banks will be settled

in gocau

not be acceptable un
the Act and the Note

rovisions of th

it

ct are

both

adopted.

This will

uying greenbacks with gold and
ant for 44% gold and 56% 30-year

eenbacks to

selling t
bonds a i

eserve Ban

deral Reserve notes will

the Reserve provisions of

a the amendmen

result in effe

Reserve

reupon cancel and retire.

the Clearing Houses

in gold and must be so

m this amend-

ouseSin the

ment will take place through the '1

cities. Balances due to the Res

Co..EISS.

fter,
3% notes. Ther,

in order to put out circulation, the

to use the 56% of government bonds and notes
ks will be'for

Reserve
as securi

or Federal

serve Bank notes, and the result of the transac-

tire the greenbacks, but to

tion will be no

convert 56%,

say 496,000,000 of greenbacks into bond secured hank notes.
)ard as a most unfortunate method for the retirement of

that is

This I re-

greenbacks.

The object of the above remarks is to suggest that unless the eronosed amendments
the Federal

to both the

Reserve

the

Note provisions of

Act are adopted simultaneously with

this amendment, it

Reserve provisions and

would be unwise, and possibly dangerous, to attempt




the

retirement of

3.
:December 22, 1916.

Retirement of Greenbacks.

greeneacks by this method.

I would in any event prefer to see the greenbacks retired by
having them all assumed by the Reserve eanka,be

ing the Deserve Banks

take over the trust feed and 496,000,000 of dove

'-nt bonds, and then
al Deserve notes

for

have the amendment provide that as secur

Federal Reserve banks might use at least the amount o

vernment bonds

issued to them ie retirement or

There are man, advantages in

having the Reserve Banks assuae

backs en bloc.

is in the acquisition of the en

und at

in their acquisition of the =Port'

e been lost and destroyed

and will never be pr

in the fact that the

sold; and still mother is
lag liability for the greenbacks,

nted for redem
eserve Banks as

the greenbacksAil1 t

after,

on

le

in

be secured by :.4% gold and 56%
whether thee ever ewe in for redemption

ring eovernme

interest

another is

F gold and government bonds for

enbacks

tee immense number of

one stroke;

One advantage

or not.
fixing of the,

should thi

that a

posed tax of 2e; is no doubt necessary, but I
1-1/2e:,

being the

on National Bank no es, would be sufficient.

equivalent of the present tax
Let ee illustrate by the

position of the Federal Reserve Bank of New York: Our capital is rouehly

2C

of the capital of the whole system

would, therefore, be assumed b;

and 20; of the greenback operation

This would give us ,30,600,000 in

mid and fe39,200,000 of government bonds, On which Our net income, out of

Alice the expense of the note issue 7ou1d be borne, eould be _392,000 per
annum.

meet



This would leave n considerable margin over the expense of menaee-

of the note issue of 430,600,000, but if our profit could be increased

4.

December 22, 1916.

Retirement of Greenbacks.

to 1-1/2%, or 0588,000 per annum, it -would be sufficient to meet the

expense of so large a note issne as to obviate the necessity for asking
Congress to make any appropriation Whatever in nnection with the cost
of issuing notes. Without a profit of this sor

I am inclined to think

that we would be justified in asking to have all

eral letserve notes

prepared free of cost, in Which case

On would go to the

Burean of Engraving and Printing an

ot directly to

-eserve Banks,

control" of the Reserve Banks

and the danger of so-called "a
by Congress would be measur

1 have always regarded t

e of applying various taxes to

x.tecsssary because surplus

the Reserve Bank as

profits 3o to the

ovision for a tax in this

matter sufficient

vernnent securities on substan-

tially the same b

est charge as the present 2's now
essary.

notes

secnri

o one believe4moFe strongly in the retirement of greenbacks than

I do

ut I woula prefe

o see the amendment accomplish this result b7

Federal ne

e notes, rather than ris the possible conversion

issues

of greetb

extent of ;196,000,000 into bond secured hank notes,

thus increasing and perpetuating an existing evil.
Let me also suggest that tie amendment co modified in its tax

provisions by directing that the amount of the 2,, tax to be paid to the
government shall be reduced by profits othoraise payable to the government




b.
Retirement of Greenbacks.

December 22, 1916.

by Reserve Banks out of earnings.

Needless to say, rather than to see no steps taken to retire the
greenbacks, I would infinitely prefer to see this amendment passed, even

though in some respects I feel that it miL;ht be




ved.

ITZIORAnDINI2La,r2ILALTZ el,a2,3=4A
A;

P.P.PITZY GOVEB:trYR 7.7rfig <vt. aorIT. t-tT-

0V7R TIT TTIPPinn AT 11:30 A. t!.. DECTMMal 26k

916.

much surprised in the ?edema

Mr. ?roman stated that we were very

Reserve 7ank of New York to have the anmouncerent made in the public press
this morning, making public the authorization of the eederal Reserve 3oard
for the New York reserve bank to enter into negotiatione with the Bank of
7ng1and lonking touards reciprocal banking relations ender which each will act
as cerresponeent and agent for the other bank in their regpective countries;

that these negotiations had, as we understood, been carried on by Governor

ngland

Strong in person during his visit to
dence;
dential;

that the o negotiations were to be considered an abso1ute17 confi-

and that in the memorandun furnished to each nether of the 2edera1

Peserve loard at reshington
-

and subsequently by correspon-

there was a clause which stated distinctly, "Ilo

announcement, directly or indirectly, to be mide regarding the contents of
this nemorandun without the explicit consent of both'inetitutions."
Then "r: Trenan asked Governor Ilirding if

Governor strong had been

communicated with regarding this announcenent being nade public

and whether

he had authorized its publication, ns he had conducted the negotiations, to
which Governor Tlerding replied, 'n,lo." that Governor Strong wan out in Denver

lnd that things were noving eretty rapidly in raehington and the 2ederal Re-

serve Board had a motive for their action, reasons having arisen suddenly
lloh made it seen expedient to nuke the announcement

at this tine; that the

en-ouncerient sine/y recited that the :ederul Reserve Board had authorized the
'nderalTieseree Bank of !Tee

verkl

appoint the Bare,: of

rngland as one of its

foreign correspondents under the tr,rms of the federal reserve Act, nod that

the action of the bard covered only the authorization.




"r. TrOssn replied that Governor Strong had enphasized at diff rent

times in his letters to Mr. Treman that it mg most important that these negotiations be kept absolutely secret and confidential, as otherwise it would
place Governor Strong in a most embarrassing position;

furthermore that we

had been very particular to guard the secrecy of these matters at New York,
to which Governor Harding replied that he knew that was so and that whatever
criticism arose as to this announcement, we should throw the /marden of upon
the Board at Washington.

Tremau told Governor Harding further that he thought that as a
matter of courtesy he personally should have been furnished with this information before it was announced publicly, the first intimation Mr. Treman having
received of the official action being what was recorded in the morning papers

and called to his attention at a meeting of the junior officers

this morning.

'r. Treman said further that he did not see haw he could continue to keep his

position in the New York bank unless he could be advised officially of matters
as they progressed, and to this Governor Harding replied that Secretary Willis
was instructed to communicate with Mr. Jay and a carbon copy was to be furnished
r. Treman.

Ho call Mr. Willis to the

phone and Mr. Willis stated that within

thirty minutes after the Board had adjourned he had sent a certified copy of
the resolution to Mr. Jay at New York and also a carbon copy to Mt. Treman.
Pt. Plreman answered that no such communication had been received for him by the

bank according to testimony of the officers this morning, and that the communication sent to Mt. Jay on Thursday last had come to the bank marked "Private"
or "Confidential," and so was forwarded to Mt. Jay at Aiken, S. C.

Governor

Harding further explained that he would have written him personally but that he
had been confined to the house by an attack of grippe, from which he had not
yet recovered.

Mt. Treman stated that the announeement had come as a very great surprise in New York, w44 the bank was



besieged by newspaper

correspondents

seeking

information in explanation;

that the officers in New York were not in a nosition

to explain any of the reasons for this action and were simply taking the position
that they had no comments nor explanation to make, to which Governor Harding replied that the Board had only authorized the New York bank to begin negotiations.
Mr. Treman replied that one of the New York papers quoted Governor Harding as
making a supnlementary statement concerning same.
Mr. Treman repeated that the announcement seemed a breach of confidence
in view of the agreement made by Governor Strong in England, and we in New York
could not feel otherwise than that it would place Governor Strong in a most embarrassing position officially with the officers of the Bank of England, in view
of the explicit agreement entered into by both parties that no announcement was
to be made without the wfitten consent of the parties.

Governor Harding then stated that if he could see (or when he could
see) "fr. Treman personally, he could make explanations which he could not make
over the phone,

which

he thought would explain their action more satisfactorily.

The conversation then ended but the above is substantially what was
said.

RHT/CEP




December 29, 1916.

Pear Governor Harding:

I trust you will pardon the delay in answering your favor of December
26th in the matter of foreign banking correelbendents of the Federal Reserve
sank of new York, an it line been a most strenuous week here, owing to a com-

bination of matters, so that rqy correspondence has been necessarily much delayed.
In answer to your communication, I note with regret that you were

ill last weak and barely able to attend the Ineeting of' the Board on 7:ednesday

afternoon when the action was taken, and I trust that by this tine you have
entirely recovered.
First, let me assure you that I accept unreservedly your assurance

that there was no intention of treating no with any discourtesy or of withholding the information from me, and I trust you will give no farther consid-

eration to this aspect of the natter, as far as I am personally concerned.
In order that you may more correctly understand my position in

this matter, I beg your indulgence to an account as brief as possible of

the facts connected with it.
This bank made formal application to the lederal Reserve Board in
August, 1916, for permission to coMplete arrangenents for reciprocal banking
relations with the Bank of "Ragland, the receipt 3° which was duly acknowledged,

and in answer to our inquiries, both oral and 7Jritten, at different tines we
were advised that the matter was progresAng as rapidly as existing conditions
would permit.




On

cember 21st 1 received a personal letter from Mr. Yarburg

2.

Honorable

P. G. Harding.

2/29/16.

dated December 20th, from which I quote as follows:

"As to the foreign agency natter, it was
disposed of to-day and I think in a nanner that
will be perfectly Pleasing to Governor , ,',trong.
expect that Governor varding is goine to write to
yen direct and I have to-day confidentially written
to 71r. Strang."
after which paragraph

Warbure interlined in his awn handwriting this

eentence:

"Treat this as confidential until you
bear officially."
which sentence I assune nr. Varbures clerk did not include in the infornation he rave you.

Aside fran the above, the first information I had, or that this
bank had, of the action of the Federal :Reserve Board taken on 'ednesday,
lember 20th, was what we learned from the newspapers published Tuesday
morning, Deceriber 26th.

In these newspaper articles wore printed the reso-

lntion adopted by the ?fulcra' Reserve !exiled and a&ed explanations, pone of

Vetch were attributed to you, an to the effect of the same, the individual
interpretation of which on the part of mono of the eewsnaners was that the
arrangenents had alreadr been completed.

After anr officers' meeting on the eorning of Tecenber 26th, I
immediately telephoned you to ask if you would do ne the courtesy of advising

ne why this had been made public in violation of the confidential agreement;
and further whether you had secured Governor 3trong's consent to this public
announcement, he (Governor strong) having iipressed upon ne at various time

In writing and orally the very greet inportence of secrecy and the very embarrassing position in which he would be placed with the Bank of senglane offi-

cials were the facts of our negotiations to leak out in any way.
After you had explained the action that had been taken and had
stated that there were reasons whioh seemed sufficient to the Board to justify



Honorable e. P. G. Herding,

12/29/16

this action on ita part, you stated that you, being 111, had asked Dr. Willis
to convey the information to the Tew York bank and you called Dr.

to the

phone, who stated that he had sent a copy, duly certified, of the resolution
to -r. "ierre

Jay,

say that he had

Federal Reserve Agent at !Ter York, and I understood him to

included a carbon copy for the bank.

In answer

stated that

no such resolution or copy had been received be the bank, as I had evade inquiry

previoue to telephoning, but that a connunication had been received by the
bank on Thursday, 14menber 21st, addressed to -r. -lierre Jay, eedern/ rtesc-ve

Agent, narked 'Confidential" and being so narked had been !:orwarded by ny
instruction to

Dr.

'Ulna

stated that the commuJay at Aiken, 3. G.

nicetion had not been marked "Confidential" nor "Private,

but that it was

merely addressed to !Ir. Jay as eederal reserve agent--at ]east I so under-

stood binbut ee received on 'ednesday, lieceeber 27th, fron

r. Jey the let-

ter which had been sent to bin, on the bottom of which he wrote, "I have eent
copy to eovernor Strong.
Dr. '

Dais

'2his cane in envelope marimd. 'ConfidentIals."

later read to no the words of the reaolution, after

which I pinned you further as to the emberrassing position in which the officera and directors of this bank were placed by this action, and called attention to the fact that in the memorandum

furnished

to each meeber of the iederal

-eeerve Board at "eshington, the last clause distinctly stated:
"Teo announcement, directly or indirectly,
to be made regarding the contents of this nemorandum
without the explicit consent of both institetione."

and eou relied that the Board, while regretting the neceseity of it, assumed
all reseonsIbility eed whatever criticisn night arise.
then stoted that I could not but feel that as a natter of courtesy

the deputy governor who had, in

behalf of this bank, nada the format

applica-

tion for this authority, should have been informed directly ana not through the

medium of the reserve went as to the action



taken, and that if

such important

4.

eonornble' . P. G. earding.

12A9/16.

matters wore not to be conveeed to bin promptly and he have in each natters the
confidence of the Board, I did not nee how any self-respecting man could attenpt

to fill the oosition, as it would be untenable.

You then expressed your re-

gret that It should have occurred and stated that you had. ietended to have
written me, had you not boon ill, and that when you could ace as you could explain more in detail than you could over the phone and yoe thought that I would

then better understand the 3oardis action.

ravine explained in detail the events, I bee now to reiterate my

belief that whoever attenpta to direct the affairs of this bank as its head
must 112,ve the confidence of the meebers of the Easerve Board to the extent

that vill permit them to send all communications pertaining to and affecting
the operation of the bank and its nanegenent to Mn, sending very properly

to the 2edera1 reserve. agent such natters as pertain to his functions.
In regard to the remaining portion of your letter, in which you remind no

that the eoard is a governmental bode, that its acts are of a public

oharacter, and ferther "that the eoard could not have been justified in sup-

pressing in this report a reference to thin feet," and again ferther "az anfficient tire had elapsed for the Ietard's fornal notice to have been received
and digested by the aethorities of the :lee York Pederel reserve bank, it
seemed inexeedient to delay any further making a public statement regarding

the Board's action," I beg to state that while I cannot concur with you with
regard to the propriety of the position thus taken, it SCQYIS to no that there

are certain principles involved in this matter afrectieg the position of the
/federal Reserve Bank of ';ew York so vitally that it is better that the subject

be referred to the board of directors for them to state their position as to
this portion of your letter rather than for me to commit the board in any way
In ny official ponition by an expression of ny individual views.

I have,

therefore, referred that portion of your lettcr to the executive ommittee of



5.

Venerable 7. P. G. Harding.

12/29/16.

the bank who w11 bring It before the boord of directors for its action at
the regular rneeting on :Wednesday next, January 3rd.

Agin expressing to you my regret at your illness and eiv sincere
hope that you have entirely recovered, I remain,
Very truly yours.

Deputy Governor.

Honorable 7. P. G. Harding,
Governor, ?edema? Reserve rotted,

ashington, D. C.

RHT/CFP




FEDERAL RESERVE BOARD
WASH IN GTO N

September 21, 1914.

SEP Z.
Dear Mr.

1914

Strong:-

I hand you herewith receipt of the Warrant
Warehouse Company, Birmingham, Alabama, for one
bale of cotton duly insured and all charges paid
to September 1, 1915.
I am sorry there should have been so much
delay in closing this matter up, but the receipt
did not reach me until this morning.
Your moral support of the "Bu,y a Bale" movement is very highly appreciated by the Southern
people, and I desire to thank you personally also.

Sincerely yours,

kr. Benjamin Strong, Jr.,
c/o Bankers Trust Co.,
14 Wall Street,
New York City.




FEDERAL RESERVE BOARD
WAS H IN GTO N

October'14th 1914.

Deaf Mr. Strong:

I have your letter of the 13th instant enclosing temporary receipt covering purchase of bale of
cotton for you some weeks ago.
you have donated

the

I am glad to know that

cotton for the charitable object

as suggested by Mrs:Ttoss Smith of Birmingham.
With kindest regards, I am,
Sincerely yours,

Mr. Benj. Strong, Jr.,




16 Wall Street,

New York City.

Jecomber 31, 1914.

Dear jr:C

Receipt is heroby acknowledged of

proxy appointing Ur. Benj....Areng, Jr. to

act in the place and stead of Er. W. P. G.
:ding in connoction with the Cotton Loan

Very truly yours,

Secrotary to 7,1r. Strong.

L. aidy, Esq.,

Assistant Secretary, Cotton Loan Fund,
Treasury 3,ai1ding,




Washington, D. C.

PMIN

)11

BELN

J.

ST130

Jr.

AI, .

PERSON

KNCW ALL MEN BY THESE PPESENTS, That I, W. P. G. Harding,
daving been duly appointed a member of the Cotton Loan Committee, pur-

suant to and by virtue of the provisions of a certain completed plan
for the creation of a fund of approximately

1.35,00O3000 for making

loans on cotton in certain states of the Union, which plan was ap-

proved by the Federal Peserve Board on November 30, 1914, do hereby
constitute and appoint Benjamin Strong,Jr. my true and lawful attorney
in fact or proxy, to act in my name, place and steed as a member of

said committee in any matters which may require action by me at any
meeting at which I am not personally present, or at any time when my said
proxy may be called upon to take any action in my absence from the City
of Nev; York, in connection with the provisions of said plan.

Any action

sc taken, or act done, in my absence from the city of New York, to have

the same force and efect as if taken by me personally.




WITNESS MY HAND AND SEAL THIF-74AY 0Filet,---h,/ 1914.

ritnese.

4




FEDERAL RESERVE BOARD
WAS
June 21st, 1915.

Personal
dot

4(4
-8 1915

My dear Mr. Strong:

I hand you herewith for your perusal a letter
which I will ask you to return to me after you have
finished with it.

It seems to me that if the people

that are behind the Gulf States Steel Company could
acquire the Pratt Consolidated, they would have just
about the most attractive proposition in the South.
Sincerely yours,

Mr. Benj. Strong., Jr.,
C/o Federal Reserve Bank,
New York City.




FEDERAL RESERVE BOARD
WASHINGTON

October 13, 1915.

Dear Governor Strong:-

I have your letter of the 11th

instant

that you are sending me a sample
of your apple crop.
advising me

I thank you very much for your

kind re-

membrance and assure you that my daughters

and I will enjoy the apples very much
With kind/regards, I am,
Sincerely yours,

w

Mr. Benjamin Strong,
Federal Reserve Bank,
New York City.

indeed.

FEDERAL RESERVE BOARD
WASHINGTON

of, 0 -

_es'!
'-1--June 15, 1916.
,19

My dear Yr. Strong:I was very sorry indeed to learn from Messrs. Warburg
and Delano that your health has become impaired, but with

your strong vitality I feel sure that a complete rest for
some months in another climate will restore you. You must

not, on any account, think of severing your connection with
the Federal Reserve Bank of New York, but you should avail
'




yourself of leave of absence, which can be extended from
time to time, and restore your health. You can no doubt during your vacation keep in touch in a general way with some
of the larger problems with which we are all confronted, and
escape entirely all of the nagging details and worries incident to administrative duties. If you will study your own
physical needs as,closely as you have the financial require-

ments of the country, there can be no doubt whatever of your
winning your fight for health.
With all good wishes and warmest regards,
Sincerely yours,

Mr. Benjamin Strong, Jr.,
903 Park Avenue, New York.

I am,

FEDERAL RESERVE BOARD
WAS
August 30, 1916.

Mr. Benjamin Strong, Jr.,
Estes Park, Colorado.
Dear Governor Strong:

I note what you say in your letter of the 25th instant re-

garding the effect of certain provisions of the Clayton Act upon
prospective applications from some of the larger State banks and
trust companies in New York City and elsewhere, for membership in
the Federal Reserve System.

It seems a pity that the proper develop-

ment of the System should be hampered in this way; and I would be very
glad to have the outline of an amendment to the Clayton Act which I
understand you are preparing.

We have recently succeeded in getting several amendments
through Congress,pretty much all, in fact, that we asked for, except
the one relating to the issue of Federal reserve notes against direct
deposits of gold, etc.', and the one giving National banks the right to
establish branches.

This last amendment has been introduced as a

separate bill, and will probably go through during the short session
next winter; and

I have hope

that we can get favorable action upon

your proposed amendment to the Clayton Act at the same time.




With kind regards, I am,
Sincerely yours,

FEDERAL RESERVE BOARD
po.

WASHINGTON

SepteMber 9, 1916.
.11

if
Dear Governor Strong:-

I have received your letters of the 4th initant and have read with a great
deal of interest copy of your letter to Collgeessman Glass on the subject of the

gold amendment which we failed to get on account of Er. Glass's opposition.

Your arguments seem to me to be unanswerable and I tope that we may yet be
able to bring enough influence to bepr on Mr. Glass to get him to cooperate with
us in this matter this winter. Whi/e he appears to be unalterably opposed to the
idea, I do not believe that he hp.s realized as yet the importance of it and that

he has allowed himself to be cjtroiiea by his first impressions and has rather
fought against being convinced.. I do not think, however, that he is by any means
a hopeless case.

Warburg is looking forward with much pleasure to his trip to Colorado to
see you, but I am afraid that this pleasure will be denied me as far as the near
future is concerned. I had intended to go to Kansas City, but it looks now as
though I will be unable to leave here during the present month.

Hoping that your health will continue to improve steadily, I am, with
warmest regards,
Very sincerely yours,

Mr. Benjamin Strong,
Estes Park, Colorado.




0.




FEDERAL RESERVE BOARD
WAS
September 22, 1916.

Mr. Benjamin Strong,
Estes Park, Colorado.
Dear Governor Strong:I have your letter of the 16th instant ex losing five

copies

of the brochure issued by the Bank o

mending the use

of checks instead of the

I am a little rusty on my French,
able to interpret the meaning of the

France, recom-

LOS notes.
t think I will be

oklet, which I will

study with much interest.

Warburg left at two o'clock
and I understand that he will

you. I am very sorry that I

r

esterday for Cincinnati,

from there to Denver to meet

s not able to make the trip with

him, but my new,duties her

keep me pretty closely occupied.

I hope, however, to be

to leave here Monday night for

Kansas City, so as to
the Convention.

e there during the last three days of

I

With warm reftrds, I am,
Sincerely yours,

11.

October 5, 1916.

Dlr. W. P. G. JI-krding, Governor,

Federal Reserve Board,
Washington, D. C.
Dear Sir:

The statutory provisions of Section 13 provide that any
member bank may accept drafts or

bills

of exchange for the purpose

of furnishing dollar exchange as required by the usages of trade
in the country in which the draft is drawn.

Generally speaking, the usage of practically all commercial countries is to draw bills at long sight; only, however, for
the purpose of meeting the requirements of individual customers and
not as a matter of market custom.

In the important South American countries, such as Brazil,
Jnile, Peru, and practically all of the Central American countries,
foreign exchange quotations are, as a rule, based upon the selling
value of 90 day sight drafts on London and this valuation is the
measure of appreciation or depreciation of the currency of the respective countries, and thus has grown up the practice of settling

all exchanges on the basis of the rate for 90 day sight drafts on
London; and as remittances in settlement of those exchanges are demanded, it naturally follows that a 90 day sight draft will be used.

Where a remittance is asked for on a different basis, the amount remitted is curtailed to the extent of the interest involved.

Why a

90 day sight bill was selected as the basis of exchange quotations I



Mr. W. P. G. H.

-2-

10/5/16.

am unable to determine, nor can I find any reason given therefor in
any of the standard reference books.

Hence, it must be assumed that

the practice has grown up through conditions which existed at some

former time and it is needless now to attempt to discover the raison
d'etre of this usance.

A draft remitted to a South American country

for collection, if drawn in sterling, is generally paid for by a 90
day sight bill on London, if the text on the item does not stipulate
to the contrary, and payment on the part of the drawee in any other
manner would be strongly resented.

Dollar exchange is an innovation

in the Central and South American countries and as long as the pay-

ment of items is not subject to the rate of exchange covered by

gt,

90

days sight bills, dollar exchange will always be the least preferred
of all other exdhanges; and in course of time, undoubtedly the American merchant will mark up the price of his commodity to meet this
situation, in order to avoid friction with his clients in those
countries.

So that it can be naturally inferred that the rule of

90 days sight remittances in dollars will be the practice just the
same as it is now the practice in connection with London drafts,

and unless this facility is granted, the London remittances naturally will be preferred to the detriment of dollar exchange.

Even

now, in Brazil, payment of a draft drawn in dollars takes place by
a remittance of a 90 days sight draft on London, and any other method is an expensive one.
In the Argentine -Republic, conditions are quite different.

die the exportation of their merchandise; such as wool, hides, linseed, and quebracho, has practically all been on the basis of confirmed credits in New York against a 90 day sight drafts, this con


Mr. 71. P. G. H.

-3-

10/5/16.

dition has prevailed to its present extent only since the beginning
of the war.

Before that period the custom was to pay on the basis

of 90 day drafts on London as in the cases of the other countries
above mentioned.

All drafts drawn on time on an American bank, whether
by banks or firms, should be construed as drawn under the provisions
of the law permitting acceptances where the importation or exportation of merchandise is involved, for the following reasons:-

Drafts are drawn in one foreign country on another mainly
for the purpose of paying a debt owing to the country on Which they
are drawn.

The debt undoubtedly arises out of some transaction or

series of transactions covering the exportation of merchandise, and
may represent a liquidation of a balance resulting therefrom.
The general understanding is that only in this way can a
'edit in a foreign country arise, as a rule.

The purchase of sec-

urities or personal transfer of funds in their relation to the whole
bear such a small propOrtion that, according to my opinion, these
features might be safely considerad a negligible quantity, or not
considered at all, particularly at the present moment.
Consequently, would it not come within the meaning of the
statute that, in the event of a foreign banker desiring to remit to

a client in a country not his own, he be permitted to draw upon a
National Bank at usance- that is, at any tenor within six months

and could not this transaction, without in any way stretching the
meaning of the law, be considered as one involving the exportation
or importation of merchandise?



It is pretty safe to assume that

-4-

Mr. W. P. G. H.

10/5/16.

any credit against which such a draft would be drawn was created by
the vary thing that the law desires to encourage, and, that being
the case, could not any foreign banker draw a ninety days sight, or

four months sight, bill on a National Bank in the United States, and
should not the Federal Reserve Board consider this as coming within
the meaning of the statute?
The case that I have in mind at the present moment

is

a

credit arrangement with a foreign bank, properly secured, desiring
to draw on the National City Bank of New York, the funds being needed in the United States by clients of the foreign bank only for one
purpose, and that is for the purchase of American merchandise.

And

in making proper preparation for this purpose the foreign bank deposits securities with the mutual understanding to protect the draft
at maturity.

On the face of it, this appears to be a finance bill,

but in reality it is not, inasmuch as the total amount drawn for

will probably be distributed among a great many merchants desiring
to secure a remittance'in United States Dollars through the United
States and the bank adopts this method to provide the necessary facilities to its customers.

It stands to reason that the foreign

merchant will make use of the funds created by these long drawings
only in payment of mercantile debts in the country to which he
mits same.

London has achieved a success as a financial center mainly through the granting of facilities such as

are referred to in

the foregoing exposition and its bankers have been able in this way
to mobilize their credit standing in a way that practically controls



Mr.

P. G.

-5-

10/5/16.

the commerce of the world, and it would seem rather a hardship that
New 'Cork should not be placed in a similar position in order to at-

tract to it business operations that naturall7 -ould come this way.
The requirements of the regulation setting forth the usages of trade
in the respective countries, etc., is a difficult one owing to the
generel character of the practice which it is now sought to invoke,
and it eeems to me that la; a liberal view of the matter a great good

can be accomplished.

The Board in its ruling of September 7, 1915

practically covers the ground under Sub-Section (c) of Division III
of Circular

o, 18, to the effect that bankers' acceptances must be

drawn by a purchaser or seller or other person, firm, company or cor-

poration directly connected with the importation or exportation of
the goods involved in the transaction in which the acceptance originated, or "by a banker."

But whether this ruling is not supersed-

ed by Regulation C, Series, of 1916, I am at a loss to determine,

and I vould therefore respectfully suggest, if I am permitted to do

so, that in lieu of the specificrequirement of Regulation C. the
ruling No. 3 of September'7, 1915 sub-section C. be permitted to
stand.

Respectfully yours,

Vice President.

(AMP)




COPY
FEDERAL RESERVE BOARD
Washington.

October 9, 1916.
1.1r, John E. Cardin,

Vice-President, National City Bank,
New York, N. Y.
Dear Sir:

Your letter of the 5th instant addressed to me officially was duly
received and will be brought to the attention of the Federal Reserve Board
What follows in this letat its next meeting on Thursday, the 12th instant.
individual opinion and must not be
ter is therefore merely an expression of
construed as being in any sense a ruling of the Board.

Regulation C, Series of 1916, was not intended and should not be
construed to revoke or curtail the existing right of national banks to accent
drafts growing out of transactions involving the importation or exportation
amendment to the
of goods. 1 It is a regulation made necessary by the recent
banks under regulations preFederal Reserve Act which authorized national
scribed by the Federal Reserve Board, to accept drafts for the purpose of
furnishing dollar exchange as well as drafts growing out of transactions involving the importation and exportation of goods.
The general subject matter of Regulation R of September 7, 1915, to
which you refer in your letter is covered by Regulation 3, Series of 1916,
which is printed on pp 5 and 6 of the Board's new pamphlet of regulations.
You will observe that there is nothing in that regulation, which deals with
the eligibility of bankers' acceptances for rediscount by Federal Reserve Banks,
which further restricts the existing right of national banks to accept drafts
growing out of transactions involving the importation or exportation of goods.
The Board has previously considered the question discussed in your
letter and has ruled that, though there is no necessity for requiring that a
draft should be connected with'some specific exportation or importation of goods,
nevertheless, the accepting bank should be sure that the proceeds of the draft
a draft might
That
are to be used for the purpose contemplated by the Act.
law even though the particular contract which
come within the provisions of the
the
it is to finance has not been entered into at the time of acceptance, but
furnished with suitable assurance that
accepting bank should, in such case, be
the proceeds of the draft will be used for the purpose of financing some transaction or transactions involving the exportation or importation of goods and
Probability that the will be employed for that purfor no other purpose.
the
pose is not the opinion of the Board, sufficient, because, in such case,
accepting banla is aware that some, if not all of the proceeds of the draft
There
which it accepts might be used for a purpose not authorized by law.
that the customer of the accepting bank deshould be some conclusive evidence
contracts for the
sires the funds for the financing of a bona fide contract or
Whether or not such contracts are in existence at the
Shipment of goods.
the funds
time of the acceptance is Ammaterial so long as it is assured that
will ultimately be used for that purpose and no other.




is,

-2-

The Federal Reserve Board and the Comptroller of the Currency contemplated just such a situation as this when it made its ruling, published on
page 208 of the September, 1915 Federal Reserve Bulletin, to the effect thata
national bank may enter into an agreement obligating itself for a specified
period of time (not limited to six months) to accept drafts drawn upon it, provided such drafts grow out of transactions involving the importation or exportation of goods, and, provided further, that the individual drafts have not
If a national bank entering such an agreemore than six months' sight to run.
ment is assured by the terms of the agreement that the credit afforded by it
will be used only for the payment of transactions involving the importation of
exportation of goods, that is sufficient; even though certain of the transacIn this contions to be covered are not existent at the time of acceptance.
printed on
nection your attention is also directed to a ruling by the Board
page 405 of the Doer 1915 Federal Reserve Bulletin.
It should be remembered, however, that national banks may, under
the terms of the recent amendment and Regulation 0, Series of 1916, also accept drafts drawn by banks or bankers located in foreign countries or dependencies or insular possessions of the United States, for the purpose of furnishing dollar exchange, though such drafts must not have a maturity of more
than threemMuths' sight, exclusive of days of grace.
You will be advised in due course whether or not the Board concurs
in the foregoing.




Very truly yours,

(Signed)

P. G. Harding.

COPY

FEDERAL RESERVE BOARD

Washington

October 12, 1916.

MY. John E. Gardin,
Vice President, National City Bank,
New York, N. Y.
Dear Sir:

14r personal letter of October 9th, replying to

yours of the 5th instant was adopted by the Board to-day,
and you may therefore consider it official.




Very truly yours,
(Signed) W. P.

G. Harding,
Governor.




P Y

FEDERAL RESERVE BOARD
Washington

'

tober 25, 1916.

Mr, John E. Gardin,
Vice President, National City Bank,
New York, N. Y.
Dear Sir:

Referring to our recent correspondence I hand
you herewith for your information copy of letter that was
sent yesterday to a national bank which had made application for the privilege of accepting drafts running not to
exceed three months sight, to be issued by banks or
located in London and Paris.

bankers

Very truly yours,
(Signed)

W. P. G. Harding,
Governor.

0 o

y

October 24, 1916.

The Board has considered the application contained
in your letter of October 17th for permission to accept drafts
running not to exceed three months sight to -Le drawn by banks
or bankers located in London, England, or in Paris, Franee.
Under Regulation O, Series of 1916, member banks, desiring to accept drafts drawn by banks or bankers in foreign
countries for the purpose of furnishing dollar exdhange, are
required to make application to the Board setting forth the
usuages of trade in the countries in which the foreign banks
or bankers are located, and the Board grants application only
when it determines "that the usages of trade in such countries
* *
require the granting of the acceptance facilities applied
for.

.




The purpose of this Act and the Regulation made pursuant thereto was to enable the American banks to provide dollar exchange in countries where the check is not the current
means of remittance in payment of foreign debts, but where the
three months bankers' draft is generally used for that purpose.
The Board is of the opinion that this custom does not
If any one in either of these
exist in England or in France.
countries desires to make remittance to the United States in
payment of a debt or obligation, it is not customary, according to the information of the Board, to send a three months
draft, and there should be no difficulty in securing in London
The
or Paris cable transfers or checks on the United States.
Board is informed that the bankers' custom of selling three
0Onths drafts in preference to checks originated in countries
where the mail conhections were irregular and the foreign exchange market was a limited one and where it would have been
difficult for the drawing banker to be certain that he could
find a cover against the checks drawn by him in time to forward it by the same mail, whereas, in drawing a three months
draft, he would feel assured of being able to forward remitSuch conditions do
tances before his obligation fell due.
not exist in relations between England and Prance and the
United States, and after consideration of all the circumstances the Board does not feel justified in granting your
application,

Cs-OP Y

FEDEAL.L B.E6ERVE Bola])
Washington

October 25, 1916.

Mr. John E. Gardin,
Vice President, National City Bank,
New York, N. -Y;
Dear Sir:

On my return to Washington to-day I discussed
with Governor Harding the explanation which you made to me
of your desire in connection with acceptances and he has
sant you to-day copy of a letter addressed by him yester-

day in response to an inquiry which seems to be "on all
fours" with yours.




I trust that this will cover the matter.
Very truly yours,
(Signed) Sherman Allen,

Assistant Secretary.

fz,7

tht1.5/ /// G

ft;

Pear Sir:

On October 23rd a telegram was sent you in referaice to an acceptance
credit approximating '100,000,000. drawn on _Anerican banks and trust companies.
Yot't were advised that in the opinion of the B,oard banking prudence and obliga-

tions towards general commercial interests of the country required the 2edera1
reserve banks should not acquire acceptances of this character beyond a conservative amount.

For your information I would add that the total amount of this credit
will in no event' exceed ''50,000,000. and that the extent of participation by

member banks will not be more than .20,000,000.

There has been sent you to-day

under separate cover copy of an address to be made by the writer in New York
to-morrow evening, which contains quite a full discussion of the rTub.lect, pages
9 - 18.

The text has been submitted to each member of the Board, and while it

is not intended as an'Official statement, it may be fairly regarded as indicating
the views of the Board, particularly the discussion of policy which you will find
on pages 9 and 10.

The sum7estion may also be added that the reserve banks will find that
they are possessed of an ef'esctive means of regulating transactions of the char-

acter in question by the establishment of a Proper differential in the case of
such acceptances, namely 1/4 to 1/2 of 15 over the rate for pure commercial
credits, which are self-liquidating in the highest sense.




COPY

FEDERAL RESERVE BOARD
WASHINGTON
November 16, 1916.

Dear Sirs:Your letter of November 14, 1916, Ineking application
months
sight to run, drawn by banks cr bankers including branches of
the National City Bank of New York located in all Central and South
American countries for the purpose of furnishing dollar exchange,
has been duly received.

for the right to accept drafts having not more than three

You are hereby advised that, reserving the right to modify
or revoke its aoproval on ninety days notice, the Board has decided
to permit member banks to accept drafts drawn upon them by banks or
bankers located in any country of South or Central America.
It IA understood that such drafts must be drawn for the
purpose of furnishing dollar exchenge as required by the usages of
trade in the respective countries. Notice to this effect will be
published in the next isaue of the federal Reserve Bulletin.

Whether or not the varioas branches of the National City
"banke or beakers," within the meaning of Section 13 which
authorizes the acceptance of drafts for the purpose of furnishing
dollar exchange, is a matte.: which the Federal Reserve Board has
taken under consideration and about which it will advise you in due
course.

Bank are

Very truly yours,
(Signed) W. P. Gi Harding
Governor.

Natio:Al City Bank,




New York, N. Y.

FEDERAL RESERVE BANK
OF NEW YORK

"""

THE NATIONAL CITY BANK OF NEW YORK

New York, November 1,, 1916.

JEG

. W. P. G. Harding, Governor,

Federal Reserve Board,
Washington, D. C.
Dear Sir:

With reference to the Act passed by Congress at its latest session
and approved by the President under date of September 7th, 1916, reading:
."An Act to amend certain section of the Act entitled *Federal Reserve Act,'
ap:roved December .3, 1915," and to that particular portion, authorizing
member banks to accept dra:ts or bills of exchange, drawn under regulations
to be prescribed by the Federal Reserve, Board by banks or bankers in.foreign
countries or dependencies or insular possessions of the United States for the
purpose of furnishitt dollar ekchange as reouired by the usages of trade insthe
respective countries, etc., we hereby make application for the privilege of
accepting drafts drawn by banks or bankers, including bran4es of the National
City Bank of New York, located in all Central and South American countries,
for thepurpose of furnishing dollar exchange.
Practically the only usance bill in these countries is the 90 days
sight bill, and consequently all drafts drawn in foreign currencies, without
stipulation as to method of payment, are covered at the rate of exchange for
As I am reliably informed, the tender of
90 days sight bills at maturity.
an approved ninety day bill in li,uidation of any collection or any debt at
The practice
maturity of same constitutes a legal liquidation of the item.
has therefore been established and has become the usage of the countries to
This custom has
draw bills of this tenor in order to create proper exchange.
arisen from the fact that mail connections, as a rule, are irregular and that
the foreign exchange market in subject to certain limitations dependent upon
the seasonal movement of the.crops.
.

Respectfully yours,
(Signed)

John E . Gardin,

Vice President.
JEG/CFZ
JLT




wry.

th t

leesd

a tempomr:i

oxpla

ale
November 14, 1916.

taullor nQtes is acoomplishe'

A discussion of a plan for the establishment
of a Federal Reserve
Silver and Legal Fund as proposed by Mr. R.
M. Gidney, of Washington, was

held at the New York Athletic Club
on the evening of November 13th.

There

were present Messrs. Sailer, Hendricks, Renzel,
Higgins, Jefferson, and
Cann,

This plan was gone over with considerable
care and the consensus
of opinion was

practically

as follows:

The general plan as outlined was approved,
but several modifications
of the details were suggested.

This fund,

it was

thought

wise, could not be permitted to exceed

20% of the lawful money reserve of
the Federal reserve banks.

The expense of shipment of the legal and silver
currency should
not be made a general expense but should be borne
entirely by the
bank ordering the shipment.

This fund should be under a joint control of the
Feder,a1 Reserve

Agent and the bank.




-2-

1e recommend that this be a temporary expedient until the retirement

of the legal tender notes is accomplished, and a distinctively dif-

ferent distribution of denominations is determined.

The suggestion is that withdrawals may be made in amounts of 400,000.

or multiples thereof.

In our opinion, any issue of small denominations of gold certificates

as is intimated would defeat the purpose of the issue of Federal

reserve notes, and that instead of issuing f.35. gold certificates, the

issue of lOs and 20s and possibly 50s be stopped.

The other details as outlined in the plan were considered wprthy of

trial.

It seems very necessary that this fund should be established at once

and have the general plan ready for use should occasion arise, and not wait

until it is forced upon us although the probabilities are that it will not be

used in the immediate future.

LHH/JGC




Dear Sir:

On October 23rd a telegram was sent you in reference to an acceptance
credit approximating

100,000,000. drawn on American banks and trust companies.

You were advised that in the opinion of the l'R)ard banking prudence and obliga-

tions towards general commercial interests of the country required the Federal
reserve banks should not acquire acceptances of this character beyond a conservative amount.

For your information I would add that the total amount of this credit
will in no event exceed t50,000,000. and that the extent of participation by
member banks will not be more than !!20,000,000.

There has been sent you to-day

under separate cover copy of an address to be made by the writer in New York
to-morrow evening, which contains quite a full discussion of the subject, pages
9 - 18.

The text has been submitted to each member of the Board, and while it

is not intended as an official statement, it may be fairly regarded as indicating
the views of the Board, particularly the discussion of policy which you will find
on pages 9 and 10.

The SugRestion may also be added that the reserve banks will find that
they are possessed of an ei*fective means of regulating transactions of the char-

acter in question by the establishment of a proper differential in the case of
such acceptances, namely 1/4 to 1/2 of 1% over the rate for pure commercial
credits, which are self-liquidating in the highest sense.




FEDERAL RESERVE BOARD

Washington
October 31, 1916.

Yr. Pierre Jay,
""'"""'"4"tfrarrraan of the Board and Federal Reserve Agent,
Federal Reserve Bank of New York.
New York, N. Y.
Dear Sir:

On October 23, a telegram was sent you in reference to an acceptance
credit approximating one hundred million dollars drawn on American banks and
trust 'companies.

You were advised that in the opinion of the Board banking

prudence and obligations toward

general commercial interests of the country

recuired that Federal reserve banks should not acquire acceptances of this character beyond a conservative amount.
-

For your information_l may add that the

total amount of this credit will in no event exceed fifty million dollars and

that the extent of participation by member banks will not be more than twenty
million dollars.

There is being sent you to-day under separate cover copy of an address to be made by the writer in New York to-morrow evening, in which there is
quite a full discussion of acceptances (pages 9 to 18).

The text has been sub-

mitted to each member of the Board, and while it is not intended as an official
statement, may be fairly regarded as indicating the views of the Board, particularly the discussion of policy, which you will:find on pages 9 and 10.
The suggestion may also be added that the Reserve banks will find that
they are possessed of an effective means of regulating transactions of the charin the case

acter in question by the establishment of a proper differential

of such acceptances (say from one-fourth to one-half of one per cent) over the
rate for pure commercial credits which are self liquidating in the highest sense.




Very truly yours,
(Signed

W.

P. G. Harding,
Governor.

Jo

FEDERAL RESERVE BOARD
WAS
November 16, 1916.

Dear Governor Strong:I thank you for your letter of the 10th instant, from

which

it

seems that we are not entirely in accord in our views as to the proper
course to pursue in our financial relations with foreign countries.
In spite of all the optimistic talk given out recently by our friend,

Henry P. Davison, I cannot help feeling that there is danger of the
wax continuing to a point of absolute financial, as well as physical
exhaustion on the part of all participants.

I think that we are

treading on very dangerous ground in the matter of our credits to

Every loan is soon

belligerent nations, which seam to be cumulative.
followed by another for a larger amount, and the
volving credit

20,000,000 Brown re-

which we favored in August 1915 was soon followed by

another issue of

25,000,000;

then by the Schneider credits and then

by the pending French industrial credit for 400,000,000.
loan to Great Britain of

Our last

300,000,000 is, I understand, soon to be fol-

lowed by an unsecured loan, and I am told that our bankers are soon to
have an opportunity to subscribe for a Russian loan.

Of course these

loans keep our export trade going in fine shape, and the greater our
expansion of business the more we fear the inevitable reaction.

You nay remember about twenty years ago the Tennessee Coal, Iron
and Railroad Company was on the ragged edge, and that on two or three




-2-

occasions it escaped receivership almost by a miracle.

When I first

went with the First National Bank of Birmingham I was surprised and
shocked at the volume of T. O. I. paper that it had under discount for

merchants and ore contractors, but when I raised the question as to the
wisdom of carrying so much of that particular paper, I was told that

unless these continuing credits were granted the operations of the company would cease and it would be thrown into bankruptcy, and if the company went broke the whole community, including the bank, would be broke,
so the only thing to do was to "take a firm grip on the tail of the bull
and run along with it."

I fear that we are beginning to drift into a

similar position in the matter of our foreign credits.
There is another view that I think we ought to take and that is
this:

The carnival of death and destruction has gone far enough.

ought to be stopped.

It

I cannot escape the conclusion that the united

States has it in its power to shorten or to prolong the vex by the at.

titude it assumes as a banker.

belligerent powers by giving

If we decide to finance one group of
it

unsecured credits, we assure in large

part a burden which another group of belligerents is carrying on its
own account, and the possible complications
policy are frightful to contemplate.

which may core

from this

On the other hand, if we sell

on a cash basis, our foreign trade will be confined to more reasonable
limits and will fall off gradually, as the ability of foreign nations
to pay diminishes.

If the Federal Reserve Banks and all large member

banks make up their minds to lock up the excess gold that is coming



-3-

to UB by carrying abnormally large reserves, they would, I think,

provide the best insurance against the post-war period which some of
us fear so greatly.

For the life of me, however, I cannot see how

Europe is going to draw gold from us after the war, except by giving us
good value for it, and I believe that a large stock of actual gold in
our possession is certainly

as good insurance as unsecured obligations

of countries who are reputed to be spending .75,000,000 a day.
I have never expressed these views publicly, and do not intend to,
but the foregoing represents private opinions and convictions

which

have been crystallizing for several months past.

I trust that your health continues to improve, andnay have the
pleasure of hearing from you frequently during the winter.

With assurances of my appreciation of your good wishes, I remain,
with kind regards
Sincerely yours,

Mr. Benjamin Strong,
4100 Iontview Boulevard,
Denver, Colorado.




j

0

L RESERVE BOARD
'WASHINGTON
December 5, 1916.

Dear Governor Jtrohz.:-

Your letter of :ovellper 20th was duly received but an unusual pressure of
I presure of course that

routine natters has prevented an earlier resronse.

you have read the Board's statement that appeared in the press on 7ovember 20th,
I an in entire

but I will not embarrass you by asking your opinion of it.

The members of the Board

accord with that you say on page 3 of your letter.

have had several conferences recent17withT'r. Glass and we are moving to get
rid of about :;200,000,000 of national bank notes within the next tree years.

WarbUrg has doubtless written you fully of the plan, and if

r.

lass gives

us the support that he now seems disposed to I think that -e can get the le,l-is-

'here has been a considerable improvement recently in

lation throuj,h.

the

Board's relation to the %:hite rouse and I believe that in many ratte-s where
the L')..

'

Itself can reach a harmonious agreement we can enlist the

synrathy

and cooperation of the :resident.
The 2ederal

Reserveents

are in conference

with us

next week the Governors of the Eederal Reserve Banks

Will

here this week and
cone.

I an extremely

busy and haven't time for a longer letter today.
I ar delighted to learn that your health continues to im:orove, and remain,
with warm2 reards,

sincerely yours,
Or.

Lr. Benjamin strong,
4100 Ilontview Boulevard,




Denver, Colorado.

A,

FEDERAL RESERVE BOARD
WASHINGTON
December 23, 1916.

Dear Governor Strong:I wish to acknowledge receipt of your telegram of the 21st instant
Which has been read to the Board.

We feel that the

Federal Reserve SysteM is now firmly established

and desire to express our appreciation of/the excellent work that has
been done by each Federal Reserve Ba

'and the loyal support that has

been given to the efforts of the Boatd by the entire organization.

We sympathize with you in

yofr

that your health is being built/Up
can,

in

clue course of time,

which you are so admirably

enforced absence, but sincerely hope

on such

a sure foundation that you

r6sume the discharge of those duties for
quipped and in the performance of WhiCh you

have already rendered sulK distinguished service.

With cordial good

ishes for the new year, I am,
Sincerely yours,

Mr. Benjamin Strong,




411 Llontview Boulevard,

Denver, Colorado.

ir

FEDER/L1RZOER'V: BOARD
14444..

WAMINGTON

December n6, 1916.

Mr. R. H. Troman,
Deputy Governor, Federal Reserve Bank,
New York.

Dear Mr. Treman:

Referring to our conversation over the telephone tt;is morning I
wish to say that the Board's resolution authorizing the Federal Reserve Bank
of New York to eonstitute the Bank of England as one of its foreign Correspondents and agents was adOlted by the Board at a meetine' on last ednesday

afternoon, and notice of the fact was sent by mail, over the signature of
the 6oCretary of the Board, to Mr. rierre Jay, Federal Reserve 44gent.
Mr. 7i1lis is writing you toe-day exnfirming what he said over the

telel-hone about this notice.

I was suffering last week from quite a severe

attack of grippe and was barely able to force myself down to attend the meeting Wednesday afternoon.

But for this fact I should have written you fully

regarding the Board's action.

It is greatly to bo regretted that neither

you, nor the directors of the Federal Reserve rank of New York, knew anything

of the action taken by the Board until the statement relating thereto appeared
in the press this morning.

Mr. ,:arburg's secretary, however, calls my atten-

tloe to the fact that Mr. Warburg wrote you on the 20th a personal letter in
which he stated that the Board "had disposed of the matter in a manner Which

would be satisfactory to Governor Strong," and we assumed that an official
letter addressed to the Federal reserve agent at New York would have been
opened before being forwarded to him.

I ensure you that there was no inten-

tion whatever of withholdine the information from you or of treating you with

any discourtesy, and I regret very mach the unfortunate combination of circum


2.

stances which tended to place the Board in an unfavorable lieht In this respect.
As far as the :eress statement itself is concerned, I mast remind you

that the Board is a governmental body, that its acts are of a public character;
that either house of Congress can at any time demand the right to insrect its
minutes, and that the Board is now eroparing its annual report to Congress and

of coarse it could not, in any event, have been justified in suppressing In

this report a reference to the fact that it had taken stops looking toward the
ostabliehment of foreign agencies, as provided under the Rederal Reserve Act.

This report will no doubt be in the hands of Congress nefore all the details of
Governor 3trong's arrangement with the Rank of ngland can have been ,erfocted,

and as sufficient time had elapsed for the Board's formal notice to have been
received and digested by the authorities of the New York Federal Reserve Bank

it seemed inexpedient to delay any further making a public statement regarding

the Board's action. No reference is made in this statement to any tentative
contract or agreement with the Bank of England and only by inference can the
conclusion be reached that the Federal Reserve Bank of Now York hail requested

authority to eetablish the agency.

The Board has reelected the injunction as

to secrecythdch was imposed as far as the details co: the arrangement are con
cerned, and the announcement made is only that the Federal Reserve Board has

authorized the Federal ReServe Bank of Now York to appoint as one of its foreign
correspondents and agents the Bank of neland of London, ngland, under the

terms of the Federal Reserve net, etc.

eureiy it will not be contended that

either Governor Strong or the authorities of the Bank ofITeagland sought to en-

join. secrecy upon the Board in a matter relating to the exercise of its own
authority.




Very truly yours.
(Signed)

W. I. G. Harding,
Governor.

)

,?,clard in 4A uTAlavurablaItla VA-

fttatement its4

coocurnok, I c-klet

auts a.rv et aA
Reserve Bank of New York be

authorized to appoint as its corresiondent and went the Bank of
land of London, England, and that it be farther kuthorized to
open and maintain

bankin.; accounts with and for said corres-

pondent and agent for the 1._url-oe of purchasing, ei1in and col-

lectIn- bills of exehaas.e, in accordance with the provisions of

,tion 1_ and othor irovisions of the Federal Reserve act, as
amended: and for such other purioses as may be remitted under
said Federal Reserve Act, as amended.

I hereb7 cert:.* that the above
is a true extract fron the minttes of

the meeting of the Federal Reserve

Board held on Tuesday, ..)ocember 19,

191.




(Signed) H. larker

.ecretary.

Pir'n

o
g

rEDERAL RESERVE BOARD

Washington, Decenber 30, 1916.

ear 7r. Treman:

I have received and noted your letter of December 29th
from which I understand that the subject of our correspondence

will be discussed at the meeting of your board of directors on
January 3rd.

Permit me to say thnt in my judgment the Federal Reserve
oard will be much more interested to learn what steps are being

taken to consummate the proposed arrangement with the Bank of
England than it will be in any expression of opinion on the part
of your board regarding the propriety of the press statement
that appeared on the morning of the 26th.
Very truly Yours,
(Signed) W. P. G.-Harding,
Governor.

Mr. R. H. Trenan,
Deputy Governor, Federal Reserve 7ank,
New York.




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