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“Shepard Morgan, Bank Executive.” The New York Times (New York, NY), November 18, 1968.




POST OFFICE Box 46

TELEPHONE 4901 RECTOR

WALL STREET STATION

TREASURY DEPARTMENT

r-N

1_1131,

SECOND FEDERAL RESERVE DISTRICT

LIBERTY LOAN COMMITAEE
THE LIBERTY LOAN COMMITTEE
BENJAMIN STRONG. CHAIRMAN
JAMES S. ALEXANDER
GEORGE F. BAKER

120 BROADWAY
NEW YORK

SEP

FEDERAL

CENTRAL LIBERTY LOAN
ORGANIZATION
1

,,EIFNJAMIN STRONG
CHAIRMAN

RI-.'.P4PIRD A. MORGAN
COMPTROLLER

ALLEN B. FORBES
WALTER E FREW
GATES W. McGARRAH
J. P. MORGAN
SEWARD PROSSER

5 December, 1918.

CHARLES H SAWN
JACOB H. SCHIFF
FRANK A. VANDERLIP
MARTIN VOGEL
JAMES N. WALLACE
ALBERT H. WIGGIN
WILLIAM WOODWARD

Mr. Beyer,
Governor Strong's Secretary.

Dear Mr. Beyer:

Attached is a check for $75.30, in partial reimbursement
for Governor Strong's payment to Delmonicoss in the amount of $96.50.
The unpaid amount is for cigars, etc. which are barred items, and which
I am sure Governor Strong. would not want us to/bill to Washington.
I spoke to Mr. Barrows the other day about this item and
the one for the Down Town Association which was partially paid the other
I believe Mr. Barrows has received from Mr. Emerson a number of
day.
non-reimburseable items which will be paid out of special funds to be
It seems to me that
collected from members of the Central Committee.
the unpaid balance of Governor Strong's two bills could be included in
that special fund. I suggest that you give the amounts to Mr. Barrows.

Please have the voucher receipted and return it in the enclosed envelope.

Yours very truly,

SAM :R




FEDERAL RESERVE BANK
OF NEW YORK

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Dear Ur. Morgan:

I wish time permitted me to reply to your note with my am

rist but I am. sacrificing that for promptness.
It is a very splendid and impressive thing to have the
evidences of regard and affection and confidence that have been shown
me by the members of our organization. It makes me feel my sense of

responsibility and at the sane tins gives me a feeling of humility

:/hich is quite difficult to describe, but nothing I can say can express the real pleasure and satisfaction that I have gained from it

all.
You have been a splendid right hand, have not tailed to

catch the idea that I was after which needed but slight expression to

you in order to be carried oat. That has been true throughout the
organization.

It explains its 81100034 and Is furthermore the explana-

tion why / al7Jays

reiterate that it is the organization itself as a

whole ana the spirit behind it that deserves the credit.
A thousand thanks for your letter and for all that you have
done so willingly and generously.
Sincerely yours,

n, Esq.,

Shepa.-

Feentil

_

New'York.
BS/MLB



.-ve i3ank of New York,

L 1 131V-AZY

JUN 7

Ing
DAN E

jiinTECIIEPMESER
1,

D3ar rr. Morgan:

The successful ionolusionatf 101lifItifth liberty lean, mere sac--

easeful in this district than in any other, means the disbandftg of our
great Liberty Joan irgamisation. "hero are certain rembera of the organization to Whom I am addressing this personal letter, although unable to de

30 to all of them, as I would most prefer.
The work which you and your associates have performed has been an

accomplishment of the very first order in finance and in patriotism.

The

pride Which I have personally felt in this orppnization is Justified by the
character of the men and women in it even more thin by the results which
they have acoorplitibed.

I law how diffiealt SOW of th9 work has been;

what a tremendous strain it has imposed. upon all the members of the or;pnization; and what sacrifices in rany oases the work has required, and by
men and women who were little able to afford than.

his letter is to qv:prose to you ny gratitude for the loyalty
which you have all shorn to

as the nominal head of the organization, and

particularly for your loyalty to a great undertaking, as that mes chiefly
responsible for an equally poet success.
ith many good vials, I am,

Aithilally yours,
hepard X2van, Espi,

163 -AsiVr5th




1O-77 Tawk, n Y

April 1, 192J.

A. Cotsworth, Jr. sq.,
General Passenger Office,
Chicago, Burlington & Quincy Railway,
547 Jackson Boulevard,

Ohicago, Ill.

Dear Mr. Cotawortht

This is ty way of giving you my personal thanks for

the kindly service you have undertaken to perform for us at
mr. Bowen,s request.

It is not the first time that you have

helped us mad I thank you very sincerely.

M, have found many

times that a railroad man like Mr. Bowen and Mr. Gowen's friendS

is a g,reat help in a bunk like ours.
With kindest regards,

Yours very truly,

31i

ard Morgan

Asst. Federal Reserve A6ent.

SMIR




FILING DEPT.
April 1, 1920.

FEDERAL RESERVE BANK
INSMUCTIONS TO PULLMAN CONDUCTORS

We very much appreciate your help in gettiiv this package quickly to
San Francisco for Mr. Strong, c.overnor of the Federal Reserve Bank of POW
York, ;ho is about to sail for Japan. The package contains annual reports
of thie bank which Mr. Stron is anxious t3 show to 80Mt.- of the bankers of the
Far Fast.
The package starts from New York on the Broadway Limited at 2:45 P. M.
Thursday, Aril 1, under the care of the Pullman conductor.
He mill pless
hand it upon arrival at Cnicago to Mr. A. Cotsworth, Jr. , axxXiAxligtra; lho
vill ::n11
or IL on the arrival of the 9roadway Limitnd at Chicago, takinL-;
a recsipt for it on Form No. I attached, which he will please mail to me.
will ,,lease see that the package gets into the nands of
Mr. Cotsworth
the Pullman condnetal an board the Overland Limited bound for San Francisco,
leaving Chicago at 7:10 F. Y. Friday, April 2. Hcill also L.lease take a
receipt on Form No. 2 .ittached and mail it to me:

The Pullrtn conductor on the Overland iimited upon is :rrivsl at San
Francisco mill please deliver it to a representative of the Federal Reserve
If suet repre.
dank of San Francisco, ho has boon asked to meet the train.
sentative s'iculd fail to ,eet the conductor he is requested to deliver it in
person to the Federal Reserve Bank of San Francisco. In any case he will
please take a receipt from the person to whom he delivers it on Form No. 3,
mailing it to ma.
All of these services are very much

appreciated.

SREPAhal MORGAN

f,saistant Fe,nral Roserve Ag,nt.

3M:R




Aril 1, 1920.

Received from Mr. i.
Federal nes:DIto Pank of

Bowen, one package of annual reports,

York, to he delivered on arrival at

-CMcago to Mr. A. Cotsworth, jr., who will meet the train.

conductor, Broadway Ltd.

Vail in enclosed stamped envelope to Shepard Morgan, Federal Reaerve
Bank of Now York.




April 1, 1920.

FORM NO. 1

Received from Pullman conductor Broadway Limited, one package

of annual reports, Federal Reserve Bank of New York, to be delivered
to Pullmail conductor, Ovrland Limited, leaving Chicago e,t 7:10 p. m.

Friday, April 2.

Mr. A. Cotsworth, Jr.

Mail in ,,nclosed stamped envelope to Shepard Morgan, Federal Reserve
Bank of Nem York.




A rii 1,

1-323.

FOA NO. 2.

ived from Mr.

,

A. Cotsworth, Jr., of tho C. B. & Q.

representing Yr.

lway, one iackage of annual

reports, Federal Reserve Bank of Nw York, to be delivered on

arrival at San Francisco to representative of the Federal Reserve
Bank of San Francisco.

Pullman conductor, Overland Limited

:1i in enclosed stamped envelope to Shepard Morgan, Federal Reserve
_nk of New York.




Aril I, 1920.

Received from Pullman conductor Overland Limited one packa-e

annual reports, Faderel Peserva Bank of New York, to be held at the
Federal Reserve Bank of San Francisco for Benjamin Strong, ;,:overnor

of the Federal Reserve rienk of lic*

Aoral Reserve Dank of San Francisco

nil in enclosed stamped anvolo2e to Shearl 7Forgan, F*Aderal Ress-irve Bank
of New York.







FIFTEEN NASSAU STREET
NEW Yo R K
August 27, 1921.

AT TENDED, TO
16, AUG 2 9 1921
41F

A.

Shepard Morgan, Esq.,
15 Nassau Street,
New York, N. Y.
Dear Mr. Morgan:

Governor Strong desires the pleasure of your company
at dinner on Tuesday evening August 30 at 7:30 p. m. at the
Metropolitan Club this city, Fifth Avenue and 60th Street, given
in honor of Governor Norman and Sir Charles Addis, at which our
directors will be present.

Dinner coats will be worn.

Also, he desires that you will keep your luncheon
engagements next week free so that all may lunch each day with
our guests at 1 o'clock in the Officers' Lunch Room.

You, of

course, understand that no publicity should be given to any of
the above.

Sincerely yours,

ej4di/

eAeAr .7/

FIFTEEN NASSAU STREET
NEW YORK

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August 27, 1921.

TENDEP,TU

a,

AUG 2 9 1921

1V. 4. A.
Shepard Morgan, Esq.,
15 Nassau Street,
New York, N. Y.
Dear Mr. Morgan:

Governor Strong desires the pleasure of your company
at dinner on Tuesday evening August 30 at 7:30 p. m. at the
Metropolitan Club this city, Fifth Avenue and 60th Street, given
in honor of Governor Norman and Sir Charles Addis, at which our
directors will be present.

Dinner coats will be worn.

Also, he desires that you will keep your luncheon
engagements next week free so that all may lunch each day with
our guests at 1 o'clock in the Officers' Lunch Room.

You, of

course, understand that no publicity should be given to any of
the above.

Sincerely yours,

eAlr

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Art:Z. Art.

!

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-'.AUG 3 0 1921

M ET R 0 PO L ITA N Cit3
mEwrc,,

S. A. M.

August 29th 1921

Sheppard Morgan, Esq.,
Federal Reserve Bank,
New York, N. Y.
Dear Sir:-

Pursuant to your request we beg to confirm your
dinner order of this morning as follows:

Hors d'oeuvres
Golden Queen Melon
Essence Tomato

Filet of Sole, Bonne Femme
Breast of Chicken, Metropolitan
Cauliflower au gratin
Souffle Potatoes
'Alligator Pear Salad

Assorted Cheese& Crackers
Fresh Peach Bombe
Fancy Cakes
Coffee

To be served at the Metropolitan Club, on Thursday evening
August 30th 1921. at 7.30 o'clock for 15 perso9s, table to
be decorated, and charged to Mr. Banjamin Strong,




Respectfully yours:

Manager.

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SHEPARD MORGAN
BARBARA SPOFFORD MORGAN

-P

Poste et Telegraphe

Au Cret de Maubec,

ACKNOWLEDGED

La Tronche,

FEB 1 G 1924

Isere, France

Ft S.

Cable

Shepard Morgan
Farmtrust, Paris

January 23, 1924
Dear Mr.Strong:

I have been hearing recently in scattered and quite too infrequent
letters from the bank, and also from some of our friends in London and Paris, that
you are in fine shape. I am glad of that; and I hope that all the things that
off too many times

are going on at home and here won't make you take your c
a day. I realize the resistance you must be setting up if

Youiltlir 64111.

I suspect from the look of the figures and from*i eer4nce a
//

eI9

:year ago, that you and Mr. Jay are keeping your weather IKAps open for a renewed

i"ERAL h"--MVE INA'

expansion. With the unceasing flow of gold, the stability of prtclftva-Wipme

during the last year is a marvel; and when people with whom I have talked in
France and England speak of it, they express astonishment and invariably ask,
"How much longer will it last?" I gather that the astonishment is tinctured with
some disappointment. Keynes in his new book (which Mr. Norman sent you, but,
I understand, without his endorsement) attributes the whole performance to a
currency managed by the "Federal Heserve Board". 1 imagine that the most the

System would claim would be some successin adapting the volume of credit to the
Physical Volume of Industry and Trade-- to use the phrase that worked so hard
last spring. In any case, it has been a unique accomplishment and is generally
so regarded over here, and an accomplishment which reflects creditably on those
n charge of the direction of the System.
Last week I had two very interesting talks with Mr. Norman in London.
We have only just returned to Grenoble, and I am moved to write you as best I can
the substance of those conversations//He told me that he had scarcely expected to




-2-

be in London at this time; that he had hoped to go over to see you, and in de-

Rult

of that, to take a holiday in the South of France. But conditions in

London, particularly those surrounding the election and the advent of a Labor

05
Government, had kept him at home. He looked extremely well and his mind worked as
usual like a trap.

Of course the conversation very shortly got on the question of gold,

and here I shall compress the substance of short talks on both days. I asked him
what he thought of Keynes's book; he said he had not read it and would not tead
it; he knew the substance of the argument, and was well aware of Keynes's object, in the main inflationary. But assuming a state of affairs in England

making it possible to detach sterling from gold and to substitute for gold
and its influences a currency managed by the Bank of England, his position

2
would become intolerable. The pressure from informed opinion would be too se-

I vere,

and he would not be able to stand it. Keynes's plan took no account of

politics, which in .a sense is human nature. He would rather keep to the traditional

forces, proved by experience, which gold and its movements exercise. In England
this would be the safeguard that would make an executive position such as his
endurable.

As for us, he thought the case somewhat different. From our own
point of view, the maintenace of stable ptices was highly desirable, and if he
were in charge in America he would try to do what the System has so far done.
At that point, however, he developed a thought which was entirely new to me, at
least in the conclusions to be drawn from it. He said that the development of

the world in an economic sense had largely taken place through the power of
central banks to create credit out of the gold they had; that in the beginnings
of commercial development, Kansas and Illinois as well as

Brazil and the Argen-

tine had been supplied with funds for growth out of credit created largely
through the agencies of central banking.
At present in the United States new gold was sterilized upon arrival.



-3-

-In other words, it was not permitted to follow its natural course, and credit

/'

was not permitted to expand in proportion to the gold received. I asked him
if one was to deduce from that, that the United States if it were really interested in the financial reconstitution of the world ought to proceed to
expand on the basis of its gold, at least to the point where the dollar and
the pound stood again at parity.

He did not reply directly, beyond saying

that there was no "ought" about it; nor did he reconcile the conclusion with
what he had said before about following the course of sterilization if he were

in our boots. He merely repeated that economic experience showed that expansion
in proportion to gold was natural and had played a most important part in the
development of the world.
So much for that.

I had not thought before that a moral issue, as Mr.

Hughes used to say, was secreted in stabilization; or, if it was there at all,
it worked the other way around, and prompted one to attain it rather than prevent it. I am sure that Mr. Norman would be the first to deny that we had any
moral issue at all; merely the long-run benefit to all concerned, possibly.
I gather that there is no immediate prospect of Switzerland, Holland
or Sweden, to say nothing of Great Britain, going on the gold standard again.
In any case, one will not go on without England, and at the present it seems
a long way off for England to think of it, certainly unless we proceed to
expand. Responsible opinion in England is apparently as far as ever from artificial stabilization, in spite of the readily recognized benefits of getting
CAA

back to gold on some basis or other. The rub is not only wt,dah the relations of
A

England with other nations, but with the colonies; and it is the knowledge of
of

colonial resentment eS any step toward devaluation that seems to offer the chief
deterrent.

They cannot help having their eyes on us, hoping that we will lose control of ourselves and of our gold, and let nature take its course. That for them




-4-

is obviously the easiest way out, for'we would go to their basis instead of
irieir coming to ours. But in my eye, the dominant
moral issue is for us to do

the right thing by our own people, to whom only we are responsible, and so
maintain the principle in so far as we are able, that credit should remain in
fairly constant relation to business. So more strength to you:
On our return through Paris I saw Mr. Young for a moment. He looked

a bit worn, but assured me that "the weight of the world was not resting on
him very heavily".

Thus far they seem to have had no interference. I suspect

the fall in the franc has something to do with that. Of course the real obstacle has not yet been met, at least openly,-- that is, how to make a budget
for a country when one highly important part of it is an unknown quantity. It
would be easy enough to make a budget for Germany with the Ruhr either in or out;
but how to make the budget without knowing which, will baffle anybody. If that
question can be miraculously settled, Mr. Young thinks the committee will finish
up within sixty days. But however it finishes, the result should be good, either

producing a constructive report for future action, or a thunder-storm clearing
the atmosphere.

While there is general talk in France about the high cost of living, we
here on the verge of a provincial city, have not seen any recent important
changes. Food is unquestionably high here even in terms of the dollar. Eggs, for
instance, are about the same as on Lexington avenue. I get two explanations: one,
that the winter has been sonsevere as to limit the farmers coming to market;

the other, that the French workingman upon receiving higher wages has changed
his manner of living in only one respect, namely the amount and quality of!his
food. In almost everything else gold prices are very low, and franc prices, aside
from things directly affected by the seasons, do not appear to have changed
much since we came three months ago.
Leonard Ayres dined with me in Paris the second day after he arrived.




-5-

He gave me an interesting confirmation of something I had heard in London earlier

In) the
.

week. An English friend of ours, formerly an officer in their regular

establishment, had recently come from Berlin where he had been living for about
a year. He said that last November "the Jews" were saying good-bye to one another,
remarking that they would soon meet in Paris. They were the some crowd that played
the Austrian crown, the Polish, and then the German, mark, with brief excursions
to Hamburg and other points of disturbance. Ayres said that a large part of the

Majestic's passenger list was made up of that kind of vultures; they made no
bones discussing on deck and in the smoking rooms how the job was to be done. Of
course they could do little if the conditions were not ripe; but they are a sign.
1 did not see anybody in Paris who thought the franc was near the end of its
drop; maybe that furnishes the prospect of its recocsry!

his is quite enough of a letter. Please do not trouble to reply; though
I would be most happy to have a word from you. When you see your brother Arch
please give him my kindest remembrances; knowing him was one of the main pleasures
of. the summer. We had endless discussions about everything!

We are having an extraordinarily happy time of it, under very delightful conditions. But that belongs to another letter.
my very best regards to yourself.

Yours sincerely,

ALL,i,2
AetaiL(.4
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February 16, 1924.

Dear Mr. Morgan:

Your fine letter of January 23 was a little delayed in reaching me because
I took a little holiday at Falm eeach, and then shortly after my return had ten
days in Washington; but I have finally gotten around to answering it. I can confirm what you heard in Loudon and Paris by saying that I really do seem to be in
fine shape. Time will not permit my commenting at length upon all the interesting
things in your letter, which deserve extended discussion.
You are right that
we have "weather eyes" upon the gold problem; and you are quite right in your

interpretation of the thoughts - conscious or uncoeecious - of conic of our Lnglieh

critics, especially thoeo who are pious church goers, when you suggest their disappointment that we have not suffered inflation.
I think a fair comment upon
Keynes' attitude is that he believes in a "managed" currency; he would like to
manage cure; he has expected to introduce a certain species of management through
excess gold holdings; but so far we have succeeded in 'Reneging our own currency
with reasonable euoceee, and the reply to Mr. heynts should be - mange your oen
currency and we will manage ours.

My prediction would be that in course of time there will be a new
philosophy about credit develop which will not be inconsistent eith reasonable
regard for the old quantity theory. That is in my mind may be briefly comprehended by stating that an existing volume of credit changes in character in
part - and the part being a varying proportion of the whole - from static to
dynamic end beck egain.
In other words, while volume of credit is an influence,
and possibly a major influence,upon prices, the attitude of the mind of the public

is also an important influence. If a spirit of enterprise and optimism prevails,e
more credit becomes dynamic, and Consequently reacts upon prices, than is the case,
when the pablic ia eeethetio OT apprehensive, when 5 greater proportion of credit
becomes stetic and the effect upon prices is lessened, if indeed it may not have
the effect of reducing prices.
I am glad that you had a talk with Governor Norman, and that he is well.
All that you write is what one would expect of him in the present situation.
We are having a wretched time here over the disclosure of what appears
to be some secret underhand and possibly corrupt practice in connection with
leasing of the Government's oil reserve lands in the West.
It is too early yet
to comment upon it, but the rumors &Rich are flying around are worse than
startling, they are disheartening, and even the disclosures so far made are in
themselvee




shocking.

2

February 18, 1924.

The outstanding development, however, gives some comfort.
President
Coolidge is undoubtedly undertaking to clean up the mess by every means at his
command; he can do a good job of it in short order if Congress will leave him alone.
The result, I am told, is a wave of reaction throughout the country most favorable to
his candidacy to the Presidency.
But public opinion changes pretty rapidly in times
like these, and one wonders what the next day's newspapers may not exhibit in the
way of corruption or wretched bad judgment in these matters, and who the lightning
will strike next.

I would write you a longer letter, but some matters have come up which
make it almost impossible for me to give any more time to mail than a bare minimum.
Kfiry oonfidentially, I may sail for London in a few days for a very short stay, but
quite possibly will not getOve1the Continent at all.

ohildren

My best to you as always.
are in fine feather.

I hope that both you and Mrs. Morgan and the

Very sincerely yours,

Mr. Shepard Morgan,
Au Cret de Maubec,
La Tronche,
Iser6, France.

BS.MM




SHEPARD MORGAN
BARBARA SPOFFORD MORGAN

Poste et Telegraphe

Au Cret de Maubec,
La Tronche,
Isere, France

Cable

Shepard Morgan
Farmtrust, Paris

July 1, 1924

-11-

Dear Mr. Strong:

I have only just now returned to our hone in France after as
interesting a three weeks as I ever put in. I covered a good deal of ground, saw
many of our friends and made some new Ones, and got a thousand impressions. In
Paris I called briefly on Mr. Robineau, with, as might be expected, rather negative
results; in London I went again to the Bank where I had another half hour with
Mr. Norman; in Amsterdam I had two altogether delightful sessions with your
friend Dr. Vissering; in Brussels I talked at some length with Mt. Hautain, who
had a message which he wanted me to send you; and in Vienna I saw many people,
including the officers of the new Austrian National Bank, Dr. Zimmermann the

f"

Commissioner General st the League of Nations, and Dr. Schwarzwald, the stabilizer

^

of the Austrian crown. And while I was in England I went out to Cambridge to spend
fternoon with Mr. Case who gave me news from home. You will see him almost
as soon as this letter reaches you, so that I need not tell you how well he looked;
it was the very greatest pleaiure to see him.
Mr. Hautain's message had to do with his stabilization loan, the
arrangements for which I understand are going badly. Arthur Anderson, whom I
ran across quite by accident the next day in Paris, told me that the original
proposal of the Belgians was that the Government should issue bonds to be held
by an especially constituted corporation, that this corporation would issue itt
bonds to be sold to the public on the security of the Government bonds held by
them as collateral, and that in addition to this security would be a guarantee
only an indirect
from associated Belgian industrialists. Thus the offering would be




-2-.

ibligation

of the Government. To this the bankers objected, and both (J. P. Morgan

& Co. and the Guaranty, who have been fiscal agents for Belgium) threatened to

0

resign their agencies if their advice was not observed. There the matter rested
when Arthur came away early in May, and he was not aware that any change had
taken place since.

Yet Mr. Hautain anticipated that the loan would be placed, but whether
directly by the Government as the bankers proposed, or indirectly through the
corporation as the Belgians proposed, I do not know. He asked me what the Reserve
\//

Bank could do to help him sell the bonds. I explained, as he already knew, that
the Reserve Banks were not empowered to buy the bonds of foreign Governments. He

Vasked

if the Reserve Bank could advise the member banks to buy them. As to that,

I pointed to the precedent of the Advisory Council's very general recommendations
about giving aid to Europe, adding f==r my personal view that general rather than
specific recommendations were desirable. He responded that Belgium was quite a
different thing from some of the new countries of Central Europe:
Pursuing the question of Federal Reserve Bank aid to him, he asked if,

12in

case he placed United States Government obligations with the Reserve Bank,

}e.

could obtain loans on them as collateral. I said that of-course I was not em1

/

itTyAi

powered to give any assurances whatever, but that possibly an arrangement could
be worked out whereby the Reserve Bank should purchase such bonds from him on

.

his agreement to re-purchase them at a given time. I also referred to the agenc
1---

agreement now in existence, and the possibility of using the Reserve Bank as a

-

depositary for funds and as an agent acting entirely on instruction for the
purchase of/bills for his account in our market.7

It was at this point that he threw out his very

general:1=g=

"Please

ask Mr. Strong how he can help us." When I told him that I did not expect to see
you until autumn, he asked me to write.

For my own part, I am not entirely satisfied that a loan for stabiliza-




/

,

-3-

tion purposes would be an unmixed blessing for Belgium,
even if it were success-

fully placed. The Belgian purpose is to divorce the Belgian franc from the French

franc;,indeed, Mr. Hautain developed a good deal of Gallic intensity when he
described the dependence of the Belgian on the French franc. But the fact is that
it is dependent, whether desirable or not; conditions both financial and political
conspire to make it so. Consequently, unless the two currencies were stabilized
at some reasonable figure by the same agent at the same time, Belgium would be
in a fair way to lose some or all the proceeds of her loan. I heard in Vienna that
Fred Kent had been trying to work out a plan whereby there should be a general
stabilization carried on simultaneously among several currencies. It was inferred that the obstacles had proved too many.
Another aspect of the stabilization idea presented itself to me during
my conversations in Austria. They are immensely proud there of the stability of
the crown during the last year and a half. The

Anglo-Austrian Bank, for instance,

has circulated a big chart showing the course of several exchanges during 1923,

with the remark that "the American dollar and the Austrian crown have been the two
most stable currencies in the world." But the stabilization has not been without
its penalties. During the winter they had a very active stock speculation and
stocks appreciated about seventy-five per cent. At the same time credit expanded
largely, the issue of currency increased correspondingly and commodity prices
rose. Nevertheless Austrian exchange remained firm, partly because funds were
attracted to the Vienna market and partly because the League of Nations loan
was still largely available abroad. One fairly authoritative estimate given me

was that it had cost Austria "only about $2,000,000 to keep the crown stable"
$2,000,000, that is, of the proceeds of the loan.

Further, had support been with-

drawn and had the crown been permitted to run its course, while no doubt speculation would not have been disccuraged, real values might not have been wiped out
to the extent that has been the case. Vienna is now in the midst of a severe crisis,
and stocks are down forty to fifty per cent. One big bank closed the morning before




-4left.

All this does not have much to do with Mr. Hautain's message

lh

you.

fact, for an isolated adventure in stabilization I have not much to suggest,

particularly as to the Reserve Bank's part in it. I conjecture that once his
bonds are sold, he will want to keep as small an inactive balance as possible.
Obviously it would best satisfy theoretical requirements to have this balance
kept with the Reserve Bank as gold under earmark; practically a deposit balance
would do as well. Probably he could count either as reserve if he uanted to. But
I conjecture that what he wants is to invest the proceeds of the loan in United
States Governments, borrow against them as occasion requires, and use the funds
so acquired for stabilization purposes.

If you have in mind any more ambitious programme which you would like
to have carried to him otherwise than in a letter, I should be glad to go up
there again and talk it out, leaving all conclusions for your determination.
Perhaps, however, all that is necessary is a letter to him, showing how the present
agency agreement would apply under the new conditions of. a successful loan.

I ought to add for the sake of the record that I made it entirely
clear to him, as to all the others with whom I have talked; that my visit was wholly
personal and that my conversation was my own and not the bank's.
I am looking forward to seeing Mr. Jay in August. I narrowly missed
seeing you on the Majestic last May, for I was all packed up and ready to put
my mother-in-law aboard that ship on her way home after a couple of months with

US. my very best regards to you and my good wishes. Also Dr. Vissering's.
Yours sincerely,

ita6a,ut,

62AA.

gov.t.4)

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171

July14 10'4.
Dear Mr. Morgan:

I hope you will pardon the long delay in replying to your fine letter.

I wae most interested in all that you write end especially to learn that you
ere well.
Mr. Jay le just now broad, and you have doubtless heard from him.

I have no doubt that you will find the means to see him before hie return.
I am sending him copy of a letter receutly addreeeed to kr. hautain of the
National. sank of Belgium, and doubtlese Mr. Jay will be able to give Mr.

Hautein all the Information he needs about what the Federal Reeerve Beak could

do for him in this country.

It is not as much ea he needs to have done, and

/ think both 4r. Jay and I feel that there is very little which he ought to
attempt in the way of stabilization traneactions until after the whole subject
A' reparations and inter-allied debts has been in come way dealt with.
Things here are very quiet,

Money is tremendously easy,

Gold

84ill coming in at a great rate and we are all wondering how soon its
poimmov effect may be felt.
Ifirolot ',Neu good wish to you, and meny thanke for your letter,

Yours sincerely,

_r. Shepard Morgan,
Au Cret de Vaubec,
La Tronche,

Isere, France.

2D.ZM




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