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also cur.;
mai 3Liner-

bong miring it wire
chmn.
bd., 1937-; china. Corp.. pr.. to 1937,Hanger
bd., dir. Stir Service

Boston. 1939-42: member board directors
Calum
Co., Detroit Mounting Corp., L. A. Young Industries and Recta.
Incorporated. Fedders-Quigan Cm
of Can.. Bowen
Products Corp.: ret. Served in Potation, Maspetb. N.Y. Trustee Provident Institu
Simnish-Am. War. Republican.
lion for Savings. Boston. Director Medeira
School
Clubs: Detroit Golf. Detroit Baptist. Mason (32). Greenway, Virginia. Trustee.
Athletic: Surf
Beach). Home: 918 IV, Boston Blvd. Office:)Miami Boston. Knight First Class, Deaconess Hospital
9 2 00
Royal Order of St
u.ell St., Detroit Died Oct. 20,
'estern Bell
Olav (Norway). Republican.
1964; buried
Episcopalian. Clubs
milton Nat.
oodlawn Cemetery, Detroit.
Union (Boston): Country (Brookline. Mass.) ; Cosmos
Life Ins.
YOUNG, Owen D., lawyer and corp.
(Washington). Home: 41 Spooner Road, Chestnut
ores.. dir. Van Barnesville, N....
official; b. Hill 07. Mass. Died Dec. 31,
1960.
id. trustees and Ida (Brandow) Y.:Oct. 27, 1374; s. Jacob Smith
YOUNG, Smith Greshern,
A.B.,
ilining Con- D.H.L., 1923: LL.B., Boston St. Lawrence U., 1994.
merchant: b. West
U., 1396; LL.D., Union Milton. Saratoga Co.. N.Y., July 14, 13 6 6; s.
miustries of Coll.. Schenectady, N.Y.,
1922. Tufts, Harvard, Dart- Samuel mid Lucy (ITungerford) Y.: ed. dint. sch.
31ernber mouth, 1924, Johns
and Hartsvick Seen.. Otsego Co., N.Y.; grad. Master
Hopkins, Colgate, Yale,
'lona/ Assn. bia,
1925, Rutgers, Princeton, Lehigh, 1926, Colum- Accounts, Eastman
C.S. (dir.), II., Univ. State of N.Y..
Brown
Business Coll..
Poughkeepsie.
f C.. Amen- of Calif.,
1923. Hamilton, 1929. Univ. N.Y.; m. Harriet Baker, of Holland Patent, Oneida
1930, Wesleyan
(past dir., 1931, Notre Dame Univ., Univ.. Middletown, Conn., Co.. N.Y.. Apr. 11. 1994. Merrantile business.
1932, Queen's Univ., Kings- Lansing. Mich.. since 1895;
Republican. ton. Ont.,
1933. U. of Neb., 1934. Marietta Coll., Daley. The Ballantine Co., ores. Young Bros. &
Shriner', 1935, Syracuse Univ.,
Lansing Warehouse Co..
1940; Litt.D., Rollins Cull., Amid: Farms
onquin Golf. 1936; D.C.S., N.Y. Univ.,
Community Land Co.. Young
1927;
Co.'
Nashington)
falo. 1946; hon. degree, Boston Litt.D.. U. of Buf- Bros. Realty Co., di, Capital Nat. Bank, Lansing
U., 1945. U. of Community Hotel Corp. Mem. Administrative
Lake ('ty). Fla.. 1948. MiddleburY Coll..
Bd.
1948: m. Josephine Northern Rapt. CM),
22. Office:
(N.Y. City): trustee
Sheldon Edmonds, Jane 30.
1393 (dec.)/ Children- mazoo Coll., Daytona-Cookrnan Industrial KalaDied Dec. Charles Jacob. John
Inst.
(deceased). Josephine, Philip, IDas-tora.
Richard; in. 2d, Mrs. Louise Powis Clark. In practice. eampaigns Fla.). in charge of carious successful
for nromorion nf Y.M.0 A
Boston, 1896; stern. Tyler &
oil Rant. Chg.
Henderson,
Red Cro.
Young until 1913: instr.
Republican. Baptist. Mason.
Russell and common pleadings, Roston U.. 1896-1903; moved to ,irbs: Country.
Merchants Bureau. Home: 1720
if Tex., and N.Y. City, 1913. as counsel for Gen. Electric Co., v. Moores Ricer Drive,
Office: 225 S. Capitol Av..
ifman. Tex., P. until 1922. chmn. bd.. 1922-39. 1942-44: hon. Lansing. Mich.;
of
since chum. board R.C.A.. until 1929, chairman executive
(1911-21), committee until 1933; Class 13 dir. Federal Res. Bank
YOUNG, Stark, author; b. Como, Woo.. Oct. 11,
ember Sigma of N.Y.. 1923-27: Class C. dir.. 1927-40: deputy 1381; s. Alfred Alexander and Mary
(Stark) Y.;
cbmn., 1927-38; chmn., 1939-40. Served as
B.A.. U. of Miss.. 1901; MA.. Columbia, 1902; ungroups to fed. govt. on econ. affairs bothmem, adv. marned. Instr. English, U. of
domestic
Aquebogue.
Miss.. 1904-07; instr.
and internat.. 1919--;
Halsey and confs. on econ. matters.mem. delegations to internat. English lit.. 1907-10, prof. gen. lit., 1910-15. Univer9; graduated mn.. 1920-30. Stem. adv. including Reparations Corn- sity of Texas, and prof. English, Amherst Coll.. 1915groups
Law Sch., problems, such as labor, youth. U.S. Pres, on social 21; mem. editorial staff New Republic, 1921-24; assn.
R. Hudson, mem. bds. regents subs. and colls.unemployment. Past editor Theatre Arts Monthly. 1921-40; dramatic critic
Gold medalist Nat. New York Times, 1924-25; mem. editorial staff New
1890; dint. Inst. Social Seas.. 1923.
Roosevelt Meml. Assn.. Republic, 1925-47. Lecturer in Italy for Westinghouse
; justice Su1929; awarded Order of Rising Sun. Japan. 1921; Foundation, 1931. Mem, Sigma Chi, Sigma Upsilon,
916-Dec. 1, comdr. Legion of Honor (France).
1924: comdr. Order Phi Beta Kappa. Comdr. Order of Crown of Italy.
reapptd., of Leopold of Belgium. 1925;
LS. Supreme Red Cross, 1925: Grand Cross First Order of German Author essays, books and plays since 1906: latest
of Crown of Belgium. book: The Pavilion. 1951: Best Plays by Chekhov.
a. Mem. Phi 1930. Fellow of the Pierpont Morn.
Library. Stem. 1990. Address: 32B E. 57th St., N.Y.C. 1 002 2.
in, Williams bar and other prof!. assns., inst.
assns. and scientific Died Jan. 6. 1963; buried Jan. 6, 196 3.
ow Rochelle. hon. so.. and orgies. Mason.
Odd Fellow. National
YOUNG, Udell Charles, food mfg. exec.; b. St.
Grange. Clubs: Harvard. Manhattan.
University. Engi- Louis. Nov. 2, 1893; s. Charles Joseph and Nellie
"as exec.: I.
neers (hon.) (N.Y.): Tavern (Boston)
Home: Van (Udell) H." B.S., Mich. Sub. Mines. 1915. EM.,
lames .kndrew Hornersville, N.Y. Died July 11,
1962; buried Van 1915: m. Vrances Vivian Pinkerton. Feb. 23, 1929.
State Coil., Hornermille, N.Y.
1943-Dec.

iietals and
.
1944. rea Am. Zinc
Materials

.

.

7.. 1913; m.

Surveyor.

Cerro

de

Pasco

Mining Co.,

Morococna.
YOUNG, Plummer Bernard, newspaper
-James Doneditor. Peru, 19 15-1 7: ordnance engr. U.S. Army, Abermrd Aldrich. publisher: ta. Littleton. N.C.. July 27. 1884; s. deen Proving Ground. 1917-18: plant engr. Provih. 1918-29; Winfield and Sallie iAdarns) Y.; student St. Aigus- dent Chem. Works, St. Louis, 1913-21: sum. Calugen. mgr., tine's Coll., Raleigh. N.C.; LL.D.. Shaw U.. 1935: met Chem. Co., div. Calumet Baking Powder Co..
*.; di, Nat. L.H.D.. Va. Union U.. 1037: LLD.. Va. State Joliet. Ill., 19 2 1-29. plant mgr. Calum,
Coll.. 1940, Tuskegee Inst..

Soc., Am.
iiversity, St.
.

imas-01-

White, 11)06
Thnmcc Iv., (dee.):




1943: m. Eleanor Louise

Powder Co.. Chao.. 10'L°°'




SAMUEL W. REYBTJRN
434 FIFTH AVENUE
NEW YORK

December 3rd, 1_927).

Benjamin Stror, Esq.,

270 Par',: lorenue,
Yew York City.
Dear Governor:

Mr. Jay and I proceeded to .:ashinston on '.;ed-

We outlined a definite program. As 2a..

needay evening.

Case's answer had not been recei7e
home Thursday morning.

,

I called him up at his

His aneei wae that he liked the work

he was doing, was better suited to it, and that
to stay there

rather than take

the other place.

ever, if both the :Federal Reserve

mand that he do

Board and

he would prefer
He said, how-

our Board should de-

so, he supposed he would have to be drafted.
This enabled us to concentrate on Dr. Burgess,

and

at breakfast

we put do.,:m on pacer his qualifications as we

saw them and as we believed you and all the members of the Board

saw them.

I attach

hereto a copy of the

statement.

You see it is strong, but I believe it absolute-

ly; so does .ay; and

we felt sure you would endorse every word

of it and for that matter we beZieve the

other members of

the

Board will.

We then went to see Secretary Mellon.
promptly shown into his office and very

We were

graciously received.

His first question was to inquire about you and he was pleased




to J,,:et good news.

He spoku of the pleasure hJ enjoyed at

being with you in Europe.
eome down to report to th7.:

on the matter he

1::r. Jay informed him that he had

.:b7.rs

was considerin.-.

of the Federal l'.eserve _Board

Then I told the Secretary

that I was not only the representative of the Board but your

personal representative, in coming Co he with the problem
that would confront the Federal aesarve Board and our 2ak when
Mr. Jay resigned.

I told him that I had under

Harrison that he had asked for the information and that yoa and
the Board considered that we had an invitation from him to give

In the presentation of the case, I described the

consideration given by you

and the members of

the Board to the

three men in our organization that we felt were eminently qual-

ified

for the place.

Inasmuch as the members of our Board

looked upon the place as second in importance only Cc that of
Governor, it seemed proper to offer first to Mr. Case and then
to Mr. Harrison the Board's endorsement and recommendation for
This had been done and both of these executives

the place.

had expressed the desire to remain i4 their present places.
I told him that I

thought, and I knaw you did and I

felt that all

the other members of the Board thought this was a very
and wise thing for the Bank.

fortunate

I told him that I had said nothing

to Dr. Burgess and I didn't think anypne else had; that he had
-

been Mr. Jay's assistant and we thought there v'as

no question

in the world but that he would accept the appointment.




-3I handed the Secretary a

transariot of Dr. Bur-

tell-

gess' record and of

the rating" . Jay and

ing him that while

r. Jay and I had out down the'statements we

had done it carefully and deliberately and
our opinion but also yours.

they not only

reflected

He was apparently very much pleased

with the terseness but thoroughness with
been expressed

I hed prepared,

which our views had
Mr. Jay shoved

and asked a good many questions.

him a picture, which by the way was probably six y,-.ars old.

response

to

the Secretary's qunstion,

In

r. Jay told him that Dr.

Burgess had his, Yr. Jay's, unqualified approval.

Both Mr. Jay and I informed the Secretary as to what
we thought the up-State

bankers and the

New York City

bankers

would think of the appointment and as to the latter quoted statement made by Mx. Reynolds,

that

he thought it would

bankers to ask:

the New York

be

natural for

%Ito is this man?" -- but

that they would not be disposed to make any criticism and upon in-

vestigation he had no doubt they would all think it was a

very

splendid appointment.
- The. Secretary then said he would have no hesitancy in supporting him.

asked him the direct Question if

he would not

:take an active interest and use his influence to secure the appointment

for Dr.

Burgess.

He said:

"I will do what I can."

:a die=ssed general conditions in the Bank and

in a way

the re-

lationship existing between our Board and the Federal Reserve
Board.

I told him I thought that inasmuch as I was there,




thought I ought to m:et the thr_e mombars ;.ho were in the city
and if I did I would have to talk abo'lt this reco.:Imendation.

He said that he saw no objection v,hatever to that; that it was

ao.

a natural thin:, to

As we left, he told us to tall you that

he would do what he could in this matter.

raj ard

I then went across the street to the

hotel and decided to telehene to Mr. Case to get Mr. 17ousv. or

Mr. Reynolds to join him in an interview with Mr. Platt and Mr.

Hamlin

to inform them of Kr. Jay's offer, of our recommendation

to the Board for the maa to succeed him, and too if he Pot the
chance to bring Governor CrissinTer up to date on what we had
done.

Yr. Jay did the telephoning

Mr. James and

Mr. Cunningham to notify them of his offer and of

to ask them to lunch with us, or if they

his intentions and

couldn't do
noon.

that, to ask for an engagement with me in the after-

Dr. Millar had

other two

and then called on Dr. Millar,

an engagement for lunch but we joined the

at one o'clock in their office and scent nearly two

hours at lunch.

Both of

the,..-e gentlemen were most

friendly and

considerate and as many V:esterners can do, I think the throe of
us got unusually well acquainted in so short a time.

As I was vary annious to pay my respects to Dr.
_liar, I took the initiative in breaking up the

luncheon

by telling them of the considerqtion we had given to
My story was that

being

party

Mr. Jay's

an executive in a holding com-

pany that.had a great n::.ny sush problems that as soon as Yr. Jay

tola us that

he

thought the opening was to

be offered

him and




- 5 that if it was, he believed it very likely that he would take it,

I naturally began to think about his succescor and that

other Direc-

tors did the same thing, and of course we knew he did not have either
the responsibility or the power to fill the place, but we also knew
from the way the Board had handled such matters that he would be consulted and probably asked to suggest one or more names.

That at

first in discussing the matter we all thought that first it might be
well to express our preference for men within the Bank.

The idea

of the desirability of a well-nown outside man was also discussed
and we considered the idea of -leo having a recommendation of such

a one.

But as time

we believed we

went on and we discussed it more thoroughly,

our-ht to be very frank end straightforward with

them

and concentrate on the one man that we believed would serve both

the Federal Reserve System and the Hew York Bank with the greatest
Jfficiency.

It seemed to me, I said, that the position was of
rtance only to that of the Governor, and that in considering thr,

men within the organisation, Mx. Case should be

considered

first and Mr. Harrison next, as both of these men were eminently
well qualified to carry on the ..ork.

thought the work

Some meabers of the Board

th2:2e men are now 'doing is so interesting and impor-

tant that they might not want to change, and we would then come to

r. Burgess, who in my reJoects was probably bettor qualified for
the place than either of the others mmtionsd.
r. Harrison

felt

Both lir. Case and

greatly complimented with the fact that the Board

-G -

of our Bank wonld offer to su,7;est their names for the place, but

thought for the interests of the Bank as well as for the reason
of following their own particular taste in the work,that they had
better stay where they were; and then I presented each one with a
copy of the sheet I have

enclosed.

James asked if we hal taken this matter up with
Governor Crissinfar and Mr. Platt, as they were the memb-rs of the
New York Committee and indicated that he was ready to back
recommendation if the man was qus:.lified.

thought

tfr'

Mr. Cunningham said he

30th said they were very glad to

James was right.

have our recommendations and each put the paper in his pocket.
They then accompanied me to Dr. :fillar's office, but the Doctor
was away, and 1:r. James volunteered to telephone him to see when
he would be back.

Then Dr. Millar was reached over the telephone,

he said he had a luncheon engafament with some British visitors
and it would probably be very late before he got doan, and unless

r.Reyura deemed it very important, he would not come.

2.t my

suggestion, Mr. James told him I only wanted to pay my respects
and I weuld do that next tire I was in Washington.

James I hoped to sea him

often

three days there sometime.

and I would like to spend two or

He said that would be a fine plan

and he and Mr. Cunningham would take me in charge
he

hoped I would CO=

I told :z.

any time, and

down before the 1Cth of January, when he

was making a trip out West.




It was now half past three, and I had to hurry to




-7set my grip packed and catch the Conressional Limited at four
o'clock. Yr. Jay remained and took the time to write a full report
of what had been done for Governor Crissirser, and he caught a

later train. He telephoned this mornins that his report to Governor
Crissinser was in longhand and he had no copy of it but that

he went

pretty fully into the matter and that he telephoned Governor
Crissiner this morning and everything seemed satisfactory. Er.
Case with Yr. Reynolds and Mr. Saunders had a talk with Mr. Platt

and he, I am told, expressed the opinion that the program was a
one and that he thought he and
Mr. Hamlin did not stop over so

fine

Governor Crissinser would recommend it.

Yr. Jay in his telephone message to

Governor Crissinger this morning asked him to go to see Mr. Hamlin
and tell him both 1Ir. Jay's story and our story.

Mr. Jay tells me that in his conference with

Dr. Millar

should be taken up

the Doctor

told him it would be a matter that

by the New

York Bank Committee, Governor Crissinger and

Mr. Platt,

and indicated that he would support their recommendation.
Respectfully submitted,




SAMUEL W. REYBURN
434 Fx.Frx AVENUE
NEw YORK

December 4th, 1926.
Governor Benjamin Strong,
270 Park Avenue,
Tow York City.
Dear Governor Strong:

Evidently from an asfda in a conversation
Jay and I ht,12ver the telephone yesterday, I did not make
I do not want tc take up all of your visitmyself
soil am writing this note.
ing

cleh

What I meant to say yesterday was that as
you were to leave here on the 9th for possibly four months,
and by the first of the year Mx. Jay would leave, and Dr. Burgess would in all probability become 2ederal -eserve Agent,
and ue mi-ht under the practice have to use Mr. Case or some
other Deputy Cover,lor as Acting Governor during your absence,
you ought to see Dr. ii-a_gesL Llaybt, once or twice before you
left; that before you saw him, possibly Mr. Jay should tell him
whato had done and if you v,antad to, send him to me so that
I could talk over the importance of the job and how he might begin to prepare himself now for it if it was offered to him and
.1so prepare himself to go to ,ashin-ton if the Board asked
_im to come therefor an interview.
In addition to this, what I had in min_ to suggest was that during your absence two committees nigh. be very
serviceable or possibly three committees; one a committee on
rate; another a comAitteo on foreign problems; and a third a
ewnittee on relations with the "federal Boserve Board at Washington. Each of thee committees would be composed of two
men and the Governor, or in hio absence the Acting Go%ernor,
would be an e::=officio member and Chairman of each. These committees should probably stand for the year, as I understand
some other committees you now hsA-e, for instance the Welfare of
the Staff, and there may be others that I do not know of.

It

sent

was not my thought that Dr. Burgess should be
that he would go only in case they
His rapid develooment in those six years of

by us to 7:ashincton but

asked for him.
course is not appreciated by anybody but those of 2.3s whO have,
0-4-,
been close to him. Even though Some of the memb6re,may have
'-elov:r_ him some years ago and been in casual

contact with him

_ince, they might want him to visit them a day or two that they
ight quis him a bit and if this does happen, we should not let
him go without having thought through on the plan and thoroughly




2

discussed the mattor with you.

In volunteering to interview him, I had in mind
to talk to him only about the general problems of an e::ecutive
and the necessity of knowing about the men he may see if he is
called to Washinfton, and helping him, if he wanted me to, in
gathering information about them.
The s-z4 cemr.Littees would be used in consultation

and I think would be especially helpful at all times while you
are away.
The discussion of the important problems and plans
for solving them with two members of the Board before the Board
meetin,. would in the long run save time.
Of course you know
that I realize it would never do to have committees try to perform executive functions. This responLibility must always rest
upon the chief executive, but to try out his ideas and perfect
his plans and have two members of the Board thoroughly informed

seems to me would be helpful.
This letter, like the one I tool: over to you yesterday, has been very hastily written and may net be clear or
complete so if you want to talk to me farther on the su:oject after
you have read it and need my "legs" and my "tongue", I will come
over and get your thoughts and start out to de. whatever I can to
help you..
It seems to me if the committee plan appears to be
a good ono, it might be taken up tentatively at the M91.:AK after-

noon meeting and possibly formal action be
if you expect to leave by next Thursday.

T
taken,-_
4

Yours sincerely,

Lord &Taylor
424 FIFTH AVENUE
NEW YO R

OFFICE OF THE PRESIDENT

February 4th, 1927.

Dear Ben:

This has been quite a busy week and I haven't had a
I was glad to hear yesterday that Harrison
chance to write you.
At Whitmarsh's request I have been trywas going down to see you.
ing to keep him posted and just to save a little time, I am enclosing copy of a letter sent him today.
Jackson Reynolds was right and when he and Owen suggested the little change in the by-law and persuaded Gates there
wasn't any doubt about your enthusiasm for his coming, he accepted
However, it is not to be announced until after he has
the call.
seen the Board at Washington and then presented the matter to his own
Owen told us yesterday that he would begin to work on the anBoard.
As I understand it, it will be just a simple matter-ofnouncement.
fact announcement from Washington and then a dignified statement given
out by the Federal Reserve Bank here that will cover the matter in a
way that will most help the Federal Reserve Bank, and at the same time
However,
give proper consideration to the individuals most concerned.
Harrison may know more about this than I do.
Please give my best regards to Philip, and with my
most affectionate regards, good wishes and good will to you, I am,

Governor ,:enjamin Strong,
Stuyvesant Road,
Biltmore Forest,
Asheville, N. C.

SWR/FG
Encl.




Copy to

Governor Strong.

February 4th, 1927.

Mr. Theodore F. Whitmarsh,
New

Hotel,

Palm Beach, Florida.
Dear Theodore:
We had a good meeting yesterday.
With Owen Young in
the chair to ask questions and bring out discussions in regard to gold
reserves, short time foreign loans in this market, discount rates, etc.,
our meetings are not only most interesting but very instructive. In my
opinion it is a very remarkable Board.

From the news Runkle and Jackson Reynolds had, it looks
as if Wooden would accept the call of the nomination to take the Directorship vacated by Owen Young. I have seen no announcement of this so you
must regard it

as confidential until you see it in print.

Owen Young told us Gates had planned to go to Washington
tomorrow and then notify Chase Bank Board at the meeting I think next
Wednesday or Thursday and sometime soon after that, notices of the appointment would be published, though it is not to be effective antil May 1st.
Owen had interviewed the leading officers of the Bank and they seemed quite
pleased with the new set-up.
As far as I can tell, it promises to bring
about a better understanding in the organization and with the Federal Reserve Board and increase the prestige of the Bank in the minds of the
bankers and the public.
I hope to have ten days or two weeks vacation before the
Spring breaks. My own affairs are in pretty good shape but I think a
trip to Washington on the Bank's business will he necessary before I go,
and I will have to find the men I want to see at home before I go down
there.
It may be the last of the month before I can get away.
My
recollection is that you expected to stay in Florida
about the 1st
of March. If such is the case, I ray pick you up somewhere.

until

Another thought I have had is to get Mrs. Reyburn to join
me and go to Asheville for ten days. She and I could play golf in the
morning and I could take tea with Ben in the afternoon.
I understand
the Grove Park Inn is an excellent place for such a sojourn, the golf
course pretty fair and the State roads and the drives through the timber
and game reservations most attractive.
Why wouldn't it be a good plan
for you to come up that far and stop a while and let us do a little playing there together?

visit

Woolley is going out to Arizona to
his family. I
do not think I told you but the doctor advised getting their little
daughter into a high and dry climate for the rest of the Winter, and Mrs.




Page 2.

Mr. Theodore F. Whitmarsh.

Woolley went West with the children about a month ago.

Yesterday afternoon coming up from the meeting, I told Mr.
Treman and Mr. Woolley that I was going to pay Mr.Saunders a call as he
was sailing for England today. They joined me and all three of us had a
delightful little visit with *. Saunders. We found him in good spirits
and good health, very much pleased at having recently received a splendid
letter from you as well as from many other of his friends, and looking

forward to a fine trip abroad.

With best regards to you and Mrs. Whitmarsh, I aM,

Tours sincerely,

SWR/FG







,a6e.4441

7fLitta,..t.4644

11-9-70
1117-)-6

August 27, 1921.

William L. Saunders, Esq.,
11 Broadway,
IngersollRand Company,
New York, N. Y.
Dear Mr.' Saunders:

Governor Strong requests the pleasure of your company
for dinner on Tuesday evening August 30 at 7:30 p. m. at the
Metropolitan Club this city, Fifth Avenue and 60th Street, when
the directors will meet Governor Norman and Sir Charles Addis.
It will be rather informal, dinner coats being worn.

Governor hopes that you will surely be able to attend.




Sincerely yours,

The

INGERSOLLRAND CO.
11 BROADWAY
EXECUTIVE OFFICE




NEW YORK.

1-1
e,
Allg.29,1921s ,/

AUG 3

421

S. A. M.
J.Herbert Case,Lsq.,
Deputy Governor,
7ederal Reserve bank,
15 Nassau St.,
New York:
Dear gir.Case:-

I accept with pleapuretGovernor Strong's
Q*

kind invitation, extended to me in your letter of
the 27th, for dinner on Tuesday evening, August

!

3u. at 7 :30 p.m. at the Metropolitan Club, when
the directors of the kederal Reserve bank will meet
Governor Norman anc Sir Charles Addis.
Cordially yours,.
43-

INGERSOLL-RAND CO.
II BROADWAY
EXECUTIVE OFFICE

NEW YORK

Sept.26,1921.

Governor Benjamin Strong,
Employment Conference,
C/o Hon.Herbert Hoover,
Secretary of Commerce,
Washington,D.C.

Dear Governor:
I Sent you last week some papers from the Superintendent
of our Works at Phillipsburg,N.J., and baston,Pa., giving figures
on the subject of unemployment.
I have just received further information from Mr.F.W.
Parsons, General ivianager of our 1Norks at kainted Post,ii.Y., and
Mr.Parsons says:
Athens,Pa.




"I have talked with a number of the
manufacturers in this section and the general opinion
is as follows:
The shops are employing about 50% as many
men but in most cases the hours are less.
Of the men that are laid off 50 to 75% have
secured work of some kind elsewhere.
Taken altogether there seems to be a small
percentage, who do not have some work.
There will be many more idle men later in the
season when farm- building and road tork slow up.
Most of the shops expect the present dull
period to continue until next spring."
Yours very truly,

viVERED--

PHILLIPSBURG, N.J.

September 22d, 1921.

Saunders, Esq.,
c/o Ingersoll-Rand Co.,

New York City, N. Y.

Sub: UN.MTLOYIEMT.

My dear Mr. Saunders:

I herewith attach copy of report on
the above subject about which you wrote me on Sept. 16th.

I trust that this will give you the information which you desire.

Yours very truly,
G1E/EFS

Enc.




,07
General Superintendent,
INGERSOLL-RAND COMPANY.

September 22, 1921.
To-

Mr. G.M. Forrest, General Superintendent.

From-

Employment Department.

Subject-

The Unemployment situation.

In accordance with your instructions to submit data on this

matter, the writer has searched our own records and made numerous
inquires elsewhere in Easton and Phillipsburg, as a result of which
he submits the following.
Total number employed by I.R.Co. Oct. 26, 1920 peak in 1920)
3507
Total number employed by I.R.Co. Sept. 17, 1921
1526
Difference in number employed between these dates
1979
We can definitely account for, when leaving here, to take
other employment, leave the town or country, or physically
unable to work,
589
(

Leaving a total indefinitely accounted for, of,
(The three foregoing paragraphs pertain to the Phillipsburg,

1390

Easton and Cameron plants of I.R.Co. )
As far as we are able to determine former I.R. employees
found employment as follows. (Approximate, based on vague

--- -----

statements in reply to inquires)
In metal industries including local Railroad shops-Railroad work, outside of shops'

_

Outside Contractors
Silk and Hosiery mills
Paper mills -Farms_
In business for self and acting as agents---Total number securing employment after leaving I.R. Plants
Leaving a total of former I.R. employees without employment.
(

Approximately

)

Respectfully Submitted,
TLC/R.




Employment Department.

80
--- 100
175

300

7--

25

30

860

530

=,:optegiuor 26* 194.

Der-.4. 194'.

a:aalacrgi
TbAnic ;Ana vry =Loh 111::

eon WA' corr.

r/ 3si

your n ote a the 26thcr,11

cry int er( u Liu, inf orrli ti ort* E.thovJh only an

k;if optai

tart 0.612t a n..vo 'Jaen

e4,eatly tbo line
turning .

Very truly

..mder

q.,

4..iroaLeauy, Lou I.

is/Rat




'your

on ,Nb.1




August 27, 1921.

Charles Smith, ESq.,
Citizens National Bank,
Oneonta, H. Y.
Dear Mri.Smith:
Referring to my

telegram of to-day Governor Strong

is giving a dinner to Governor Norman and Sir Charles Addis

to meet the

directors of

the bank on the evening of Tuesday

August 30 at 7:30 p.m. at the Aetropolitan Club this

oity,

Fifth Avenue and 60th Street. He desires me to exoress his

hope that you will
rather informal,

surely be

able to attend. It will be

dinner coats being

worn.

Sincerely yours

R. S. V. P.







Form 1201
SERVICE

SYMBOL

,ter

Blue

WESTEklaNi UNION
AM
,

N.

Nite

Night Letter

NL
If none of these three symbols
appears after the check (number of
words) this is a telegram. OtherNise its character is indicated by the
symbol appearing after the check.

CLASS OF SERVICE SYMBOL
Telegram

Day Letter

Nita

NL
If none of these three symbols
Night Letter

-114

NEWCOMB CARLTON, PRESIDENT'

Blue

Night Message

I WESTERN UNION

Message

Wears after the check number of
words) this is a telegram. Otherwise its character is indicated by the

GEORGE W. E. ATKINS, FIRST V10E-PRESIDENT

symbol appearing after the check.

,E0 TO

RECEIVED AT

9H0 SF 18

AUC

S

ONEONTA NY 9A AUG 29 1921

192i

M.

011

J HERBERT CASE
'

DEPUTY-GOVEKNuR FEDERAL RESERVE BANK NEWVORK NY
TO

MY COMPLIMENTS/GOVERNOR STRONG AND ASSURANCE IT WILL BE A PLEASURE

TO BE WITH HIM TUESDAY EVENING
CHARLES SMITH

910A

SHOWN
TIME OF REOEIPT
ON T1.4113 difiellAGE
TOW_
4441111.11M

STAIWASIJ

CHARLES SMITH, PRESIDER',

GEORGE B.BAIRD, VICE PRESIDENT.

M.C.HEMSTREET, CASHIER.

8920.

TTENDED

Cithrtio Nation al 16 unit of O*1921

1%)
id

S. A. M. 4110
Ortranta, N.V. August 29th 1921.
Hon. Benjamin Strong, Gevernor,
.

Dear

Federal Reserve liank,

New York City.

Governor Strong:-

I beg to acknowledge through the hands of Mr. Case, the
receipt of your kind invitation to dine

evening at seven
the Bank of England, and also Sir
pleawure to accept the same.
Club, on Tuesday




with you

at the Metropolitan

thirty, to meet Governor Norman of
Charles Addis, and assure you it is a

Very respectfully yours,
Gz

A

;



M.C.HEMSTREET, CASHIER.

GEORGE B.BAIRD, VICE PRESIDENT.

CHARLES SMITH, PRESIDEN,

N9 8920.

Citiz rtt

ntiatud g unit. of Ottrol-tta.
- ATTENDED TO

Ott ratatt,ZgAttgytt 1th
Mr. J. Herbert Case,

Deputy Governor,

Federal Reserve Bank, New York City.

S. A. M.

1921.

it

My Dear Governor Case:I beg to acknowledge the receipt of your telegram of
of invitation from Governor Strong to dinner on Tuesday evening, and
also your
regarding the same, and replying to them would say
at nine A. M., this morning I sent you the following telegram,
"My compliments to Governor Strong

letter

and assurance it will be a pleasure
to be with him on Tuesday evening."

I think this explains the whole situation and while thanking
you for the interest you have taken in the matter,
must assure you
it will be a real pleasure to meet these gentlemen.




Very respectfully yours,

o




"44

/
40"-\

cifrt%
14 z

9
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-191.1",

26)




August 2'7,

19.-'1

Charles A. Stone, Esq.,
c/o American International Corp.,

120 Broadway,
New York, N. V.

Dear Ur. Stone:

Governor Strong re luests the pleasure of your
company for dinner on Tuescxay evening August 30 at 7:30

p.m. at the Eetropoliter Club this city, Fifth

AveAue and

60th Street, when the directors will meet Governor Norman

and Sir Charles Addis.
coats being worn.

it will be rather informal, dinner

The Governor hopes that you will surely

be able to attend.
Sincerely yours,

R.S.V.P.

CHARLESAUGUSTUSSTONE
b




I &NOE') TO

ROADWAY

AUj2t

NEW .Y0 R K

1111)

fly

August 29, 1921.

tzar'

J. H. Case, Esquire,
Federal Reserve Bank of New York,
120. Broadway, New York.

Dear Sir:

In the absence of Mr. Charles A. Stone, I
beg to acknowledge receipt of your letter of August 27th,
inviting him, at the request of Governor Strong, to the
dinner to be held at the Metropolitan Club on August 30th
in honor of Governor Norman and Sir Charles Addis.

Mr. Stone left New York on Friday last for
a three weeks' vacation in New England, and it will, therefore, be impossible for him to attend the dinner.
Very truly yours,

1, C77

10)s,-u-)

Secreta y to Yr. Stone.




(-

foLeo_zwigig?
ft,

1,1,f--




March 22nd, 1915.

My dear Mr. Towne:

I cannot begin to tell you how pleased I am

with the certificate of stock of the Bnolr. of the United
States of America, which is a souvenir to be most highly

prized.

It is interesting as to the bank, of course,
but I presume that It has occurred to you that there is
an additional intereA in the fact that you grandfather
was a stockholder in that institution and you are now a

director in this one.
I could not think of letting you have it mounted,

will do myself right away and have it hung in

the office.
With many thanks for your generosity, I am,

Very truly yours,

Henry R. Towne, Esq.,

9 Bast 40th street,
New York City.
BS Jr/VCM

THE YALE
OFFICE OF

TOWNE MANUFACTURING COMPANY
9 EA.sr 40Tf. ST. NEW YORK

HENRY R. TOWNE

May 13, 1915.

PRCCADENT
CHAIRMAN OF THE BOARD

Mr. Benjamin Strong, Jr., Governor,
Federal Reserve Bank of New York,
62 Cedar St., New York City.

4.8

-19,,

Dear Mr. Strong:-

This Company has an account in London with the National Pro-

vincial Bank, where at present we have a balance of about 43000.
As we do not need the money at present and as it would cost us about
2% to transfer it here, we propose to leave it there until needed.
It is probable also that the present moderate amount may considerably be increased.

Our London Manager informs us that the bank is not willing to
accept this amount on deposit with interest unless we agree to certain formalities as to its withdrawal, which it might be difficult
for us to comply with under war conditions.

Knowing your familiarity with matters of this kind, I write to
ask if you can suggest any other and better way for us to arrange
for a time deposit in London, subject preferably to cable transfer
on 7 to 10 days' notice, or to withdrawal by draft on like notice.
Any information you can give me on this matter without undue
trouble will be much appreciated.
Yours very truly,

HRT:AH




Chairman of the Board.

--' ...

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May 18th,

1915.

Dear Mr. Towne:

Reply to your letter of May 13th has been delayed on account
of my absence last Friday and Saturday.

The situation in regard to interest on current balances in
the London Joint Stock Banks is briefly as follows:

In ordinary times,

by agreement among themselves, the principal barIrs allow interest on balances which justify the payment of interest, at a rate Which is
below the minimum discount rate of the Bank of England.

This arrange-

ment prevails, of course, only When the bank rate is effective.

present time, the bank

rate is 5

%, and

IL%

At the

is very much higher than the mar-

ket rate for discount, and I am informed that the joint

stock banks, by

agreement among themselves, are now allowing interest at the rate of 3 %
below the bank rate, viz: 2 % per annum on accounts which justify the
payment of interest.

The bank which is named in your letter has the reputation of
being most punctilious and rather exacting in its requirements, and as
conditions at the present time make it difficult for the joint stock
banks to make a profit on accounts which bear 2 % interest, I can fully
understand their reluctance to convert your Company's account into an

interest-bearing balance.

In ordinary

times, some of the joint stock

hanks are willing to allow special rates on money at short notice, say




-2-

To

May 18th, 1915.

Henry R. Towne, Esq.

subject to withdraws/ on seven days notice.
yuld, also, make

accounts of that character

Present conditions
unprofitable.

I have never had any direct dealings with the National
1.ovincial Bank, and am unable to suggest

any means for effecting

the arrangements which you have in mind directly with them,

If,

however, you rould care to make a special deposit ':ith the Landon

City and Midland Bank, Limited, of -Allich Sir Edwin Holden is a manaintr, dire,-tor, this could be done by paying whatever amount you

wish to transfer to that bank for credit of the Bankers Trust Company,
in which event it would carry 2

on that amnant, or whatever rate

was currently allowed by the London City and

Midland

Rank, Limited,

until mach time as you would care to withdraw it.
This is the only suggestion T. am now

course, it would involve

able

to make, but Of

reducing your ace:ount with your regular

bankers, which you may prefer not to do.

My surmise is, that the

National 2rovincial Bank is reluctant to make the arrangement because of the vary b:.'

for money in the
Very truly yours,

.Lienry R. Towne, Esq.,

Chairman of the Board,
The Yale & Towne Manufacturing Company,
9 East 40th Street, New York City.

BS Jr/VCM




London money market.

THE YALE & TOWNE MANUFACTURING r,
%.,OMPANY
OFFICE OF

9 EAsTAOTI! ST. New YORK

HENRY R. TOWNE
CHAIRMAN OF THE BOARD

VITTW; DIUMMay/722,

1915.

2FEDERAL RESERVE
Mr. Benjamin Strong, Jr.,
Federal Reserve Bank,
62 Cedar St., New York.

NK

Dear Mr.Strong:-

Your letter of 18th inst. was
for the very complete informatio

uly received, and I thank you
therein given in response to my

inquiry.

We are still in corresp.!' dence with the National Provincial

Bank, in the hope of makin

satisfactory arrangements with it.

If unsuccessful in this e fort, I may be glad to avail of your

suggestion concerning t

London City and Midland Bank, Limited.
Yours very truly,

ffr,

,Zeri,J-14.41

Chairman of the Board.

HRT:AH







r.

January 17th, 1916.

Dear Ur. Towne:

Turner, who writes me the enclosed let or,

is a first rate fellow, quite a friend of Mr. Treman's
and a very good friend of the Federal Reserve Banks,
have asked my brother, who is with Mr. Stet-

tinius to lot me know if there is any opening that he can
suggest for Ur. Turner and I thought possibly you might be
able to make some suggestion.

-,111 you be good enough to return the enclosures

after reading?
Very truly yours,

Mr, Henry Rt.323"1-4a,

9 !est 40th :',treet,
Nan l'ork City.
BS/Jr/VCM

THE YALE 8c TOWNE MANUFACTURING COMPANY
9 EAST 40T1.4 S T. NW YORK

OFFICE OF

HENRY R,TOWN E
CHAIRMAN OFTHE BOARD

January 21, 1916.

Mr. Benjamin Strong, Jr.,
62 Cedar Street,
New York City.

Dear Mr. Strong:Your letter of 17th inst. was duly received, and the papers
enclosed therewith relating to Mr. R. T. Turner, Jr., are returned
herewith.

The latter were so interesting that I referred them to

the executive officers of this Company to ascertain if we have any
position in which Mr. Turner's services could be utilized.
advise me, however, that this is not the case at present.
Yours very truly,

HRT:AH

Ends.




They




Jnnuary 24th, 1916.

Dear Mr, Towne:

Your favor of the 21st inst., enclosing
Mr. Turner's letter nnd memorandum is received to-

day, and I

most !Appreciative of your interost

in the matter.

Should anything develop later on

in this connection, it goes without a4ing that I
shall be very glad to hear from you.
Very truly yours,

Hr. Henry R. Towne,

9 East 40th Street,

7Tert York City.

HENRY R.TOWNE
LITCHFIELD, CONN.

23, )1((o.
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-647 c,
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k,at
c.

November 8th, 1916.

Dear

Towne:
S...rwmate5.00.,

am divided between a feeling of saticfection and guilt
in the matter of your renomination and undoubted election as one of
our directors.

If my persuacion hae had anything to do with

your

continuing with uz, I am glad that it had that result even though,
as I know is the case, you are making a sacrifice of your personal
plans and inclinations for the good of the bank.

One matter in that connection,
fer to in my former letter.

1 purposely did not re-

During the pest two years you have

repeatedly heard me say at Board meetirge that the iederal Reserve

particulady the eew York bank will not establish itself
with its members and with the country generally until it has met
There are a great many evidences accuthe test of a real crisis.
mulating every day thet such a situation will inevitably arise in
the course of the readjustment following the conclusion of the war.
System and

een the time does coke, the Federal Reserve Bank of

eew York will

need seasoned and experienced directors who will not be swept off
their feet by lack of courage or lack of knowledge of the affairs
of the

bank.

You will then be a great aid to us in our councils.

During the trying period of

organization, most of

our work was nec-

essarily annoying detail and therefore unintereeting.




1 will feel greatly relieved in knowing that you and

oodward will remain on our Board during the next three years,

To

Mr. Towne.

Nov. 8, 1916.

particularly as long as there is an uncertainty in regard to my
return. I am, therefore, writing this letter to express my personal and very warn thanks to you for responding favorably to our

urgent solicitation.
With kindest regards, believe me,
Very sincerely your

Henry B. P2one, Esq.,

9 Last 40th Street,
New iork Gity.

3S/VCM




THE YALE & TOWNE MANUFACTURING COMPANY
9 EAST 4O ST. NEW YORK
OFFICE OF

HENRY R.TOWN E

January 17, 1917.

CHAIRMAN OF THE BOARD

Mr. Benjamin Strong, Jr.,
4100 Montview Boulevard,
Denver, Colo.

JAN2 5 1917

Dear Governor Strong:-

While you have doubtless heard from others concerning the result of the visit of our Committee last week to Washington, I think
you may like to hear briefly from me also.
The Committee consisted of Mr. Peabody, Mr. Woodward and myself
as Chairman.

We were heard by the full Federal Reserve Board, in-

cluding Secretary McAdoo, who presided, and Comptroller Williams.
The hearing lasted nearly two hours.

I began by proposing to review briefly the antecedent facts concerning the Bank of England matter, stating that my purpose was to
see if both parties had a similar and correct understanding as to
the facts.

Very soon J was interrupted by the Secretary, who said

that if I was preparing a basis for complaint or criticism of the
Board, the latter would decline to entertain any such charge.

In

reply I assured the Board of oar purpose to show all proper respect,
and to recognize its responsibilities under the law, but that we

hoped that the Board, on its side, would recognize our duties and
the fact that we are responsible for the running of the New York
This discussion was slightly warm, but helped to clear the

Bank.

atmosphere.

The first hour was occupied in discussing the Bank of England



,/. Benjamin Strong, Jr.

122'latter, and something more than 50% of the talking was done by the

Secretary, with occasional comments from Governor Hamlin.

Of course

this prevented a smooth presentation of my argument, but we all feel
satisfied that our position was made clear, that, without admitting
it, the Board realizes that a mistake was made, and that we are fairly safe against the occurrence of a similar mistake in the future.

At the beginning the Secretary sent for a stenographer, stating that
it was desirable to preserve a record of the meeting, but my impression is that it was chiefly to preserve a record of his own explanations and arguments in defense.

It was made Quite clear that Gov-

ernor Hamlin was a sick man at the time of the incident, that he was
acting under pressure from above, and that he did not fully realize
the effect of what was done.

The latter part of the meeting was devoted to presenting our
plea that correspondence from the Board to the Bank, relating to the
executive work of the latter, should be addressed to its executive
head, and not to the Federal Reserve Agent.

In presenting this plea

I stated that I had permission to quote Mr. Jay as concurring in it.

Again there was considerable sparring in the way of explanations and
excuses, but again we felt satisfied that we had made the desired
impression.

As to both matters the Secretary made no decision or

announcement, but stated that the Board would "take them under advisement".

As to the second, Mr. Treman informs me that since our visit

to Washington, all letters relating to executive matters have been
addressed to him.

On the whole, therefore, the Committee feels satisfied that its



3- Mr. Benjamin Strong, Jr.

vit was useful, and hopeful that it accomplished the desired results.

We were entertained at luncheon afterwards at the Metropol-

itan Club, where both subjects were again reviewed, informally and

pleasantly, and our confidence strengthened that we had been successGovernor Hamlin especially assured me of his regret at the

ful.

handling of the Bank of England matter, and that it would not have
occurred if he had been in his usual health.

While alone with him

in the Club, I showed him his last letter to Mr. Treman (which was
very curt, and highly improper), and suggested that he might like to
have me hand it back to him.

He was a little surprised at first,

and hesitated, but on my renewing my statement that if he so desired
I would leave it with him, he replied "Well, perhaps I had better
take it", whereupon I handed it back to him.

We all miss you greatly at our meetings, but wish you to realize
that our chief concern is that you devote yourself to getting well.
and do not concern yourself too much with the affairs of the Bank.
Trusting that you are making steady progress towards recovery,
and with kindest regards, I am,
Yours very truly,

14-1An
HRT:AH




R.,




Denver, Colorado,
January 25, 191

Dear Mr. Towne:

Your kind letter of January 17th

reached m

leaving for Colorado Springs for a few da s' visit
consequently, my acknowledgment has bee

Nothing has afforded me so g

tisfaction dur

y absence

arrangements in England, and

almost as

though I

you

various difficulties

and,

rectors took up this matter

announcement of our pro

I think I can understand

th a friend

e aye.

as the promptness and vigor with

of the

ust as I was

had been

present the

iates encountered when the
Pr

matter was discussed

Washington.

Much as to the futur

It also helps

surmised and of which

had been ver

that the

tire was ve

rather a

ions situation

fled the

oard in pursuin

r

4

make clear the fact which 1 had
autiously advised by others --

0 make, this announcement and that a
ast have arisen in other matters to have justi-

Dart icular'

the principle

r le ter relieves my mind very

he course it did.

lighted that you succeeded in establishing
/I

cations respecting the business of the bank

should be addressed to the officers of the bank and not to the Federal
Reserve Agent.

This will greatly help our work in the future.

You, I am sure, realize that a great deal depends upon the success of these foreign negotiations.
portance to the whole system.

i regard them as of the utmost im-

The fear that they had been jeopardised

by this unexpected announcement was a great shock to me and almost




2.
January 25, 1917.

- 2r. Towne.

tempted me to return home at once for the purpose of taking the subject
up with our

correspondents abroad

even thou,gh it necessitated an im-

mediate trim, but I am sure now that that will not
look foraard to concludin the arrangements succe
eventually,

be necessary, and

ully in London and,

in Paris.

ane feature of the matter has anno
have developed some irritation and
a great sacrifice for

the bank and

is discouraging to him I cannot
Beyond everything, he is concilat
episode has not in any way

y.

It seems to

criticism of Mr. Tre

o

me

:orally and an hing Which
is a personal misfortune.

nsiderate and I hone this
nation to continue his work

so long as it is neces
Thank you most

return. 2y progress
summer will see
Yiit

expressions in regard to my
ctory and I am hopeful that

back

rmest regards an many thanks for your /otter, I am,
Very truly yours,

Henry R. To

The Yale & To

9 :,ast 40th St.,
New York City.

BS/CC

this




August 22, 1917.

Dear M. Town,:

This will introduce to you Mr. W. T. Chapman

of -;ashingtou, D. C., whom I know very well and wto is

secretary to Mr. Warburg of the Federal Reserve Board.
I understand that Mr. Chapman has invented a

lock which he wishes to present for your consideration,

and will grently appreciate the courtesy of an interview.
Very truly yours,

Henry H. Towne, Zsq.,

9 East 40th Street,
New York City.




ch 5, 1018.
Dear Mr. Pparce:

Permit me to introTuce to you the bearer
of this letter, Mr. Henry R. Towne, Preeident of
the Yale & Towne Manufacturing Company, 9 East 40th

Street.
Mr. Towne wishes to confer with you about

a business matter, and I take 7reat pleasure In intrortleing him not only aa a personal friend for whom

I have a high regard, but also as one of the directors
of the Federal Reserve Bank.
Thanking you In advance for your courtesy,

in the mator,

lieveme,
Very sincerely yours,

Covernor.
*2--C44--Eak.W.C44.Esq.,

Preoldnnt, Arnrican DrfLke
hoe a70 Foundry Company,
30 Church Ctree't,
Nei York,' N. Y.

March 5, 1018..
Dear Jr.1 Cutler:

OIL

Permit me to introduce to you the beater
of this letter, Mr. Henry R. Towne, President of
the Yale & Towne 7,:anufacturing Company, 0 East 40th

Street.
Mr. Towne wishes to confer with you about

a business matter, an'. I take great.pleasure in introducing him not only aa a personal frien1 for whom
1111111111111111::




have a high regard, but also as one of the direetors of the Federal Reserve Bank.
Thanking you in advance for our courtesy
in the matter, believe me,
Very sincerely yours,

Governer.
Otia H. CRI1144_,Esq.,

natr77:5Board of Directors,

American Brake Shoe & Foundry Co.,

30 Church Street,
mt York, N. Y.




March 5, 1918.

Dear Mr. Tosna:

was sudlenly called to'"Ushington yesterday anl did not have time before leaving to

zitc for you the letters of introduction to
era. Pearce and Cutler. T have written them
here thi morning, ana you will fihd them enclosed herewith.
Tin.7.sting that you may be sueco3ful in
your mission, -,elieve me,
Very truly yours,

Governor.

Esq.,
Prcoil.ent, Yale t, Towne Mfg. Co.,
2.2aat 40th Street,
New Yor, N. Y.
Henry R. To




sil

karoh 25, 1918.

Lear Mr. Towne:

The enclosed letter from the American Brake
Shoe & Foundry Company will explain itself.

Sorry the effort did not yield better results.
Very truly yours,

Jovernor.
Henry E. Towne, Esq.,

9 East 40th Street,
New York.

Eno.

1111111111111111111111111111111111

September 19, 1921.

Mr. Henry R. Towns,
Yale & Towne!lfg. Company,
Stamford, onn.
Dear Sir:

Inorder, if possible, to get a somewhat clearer view of the
present situation as regards unemployment, I am anxious to secure some information as to the extent to which waiters no longer reported on the payrolls of the industrial concerns found work in some other lines.

lj

Several of our directors and one or two others hove volunteered
inquiry in their several concerns into just this question
and to trace out as far as practicable just what has become of the men they

to institute a brief

have hod to let go, just what they are doing and what percentage of them are
now definitely or nearly without means of livelihood.
There is a great difference, of course, between this and just counting up how many Inlve betn dropped from employment rolls.
1 should like, especially, an idea as to what percentage of factory
employees have gone back to the farms, or to domestic-service, or returned to

.

foreign countries.
This information is for the conference on unemployment which is to
be held in Washington next week and I should be very grateful if you could give
ma some sort of an answer by Friday of this weak.




Believe me,

Very sincerely yours,

BENJMIN STRONG,

Governor.

MIIII1010111

.4

THE YALE

8c

TOWNE MANUFACTURING COMPANY
9 EAST 40114 ST. NEW YORK
Sept. 23, 1921.

OFFICE OF

HENRY R.TOWN E
CHAIRMAN OF THE BOARD

Federal Reserve Bank of New York,
Mr. Benjamin Strong, Governor,
15 Nassau St., New York.
Dear Governor Strong:-

Your letter of 19th inst., addressed to me at our works at Stamford, Conn., reached me here on the 20th inst., and I had it telephoned at once to our President, Mr. Walter C. Allen, at Stamford,
in the hope that he might be able to respond to your request.

When

here yesterday he informed me that he was unable to do this for the
reason that, except in a few cases; we have no record of what has become of the employes we were compelled to lay off because of the present conditions of business.

I appreciate the purpose for which you

desired this information, and regret that we are not able to furnish
it.

Of course it would be of no value unless accurate and fairly

complete.

With kind regards, I am,

Yours very truly,

.1414A,
JV




.74_,,frtiv.
Chairman







RECEIVED

W. TAM.
M 7-28
FEDERAL RESERVE GIANK,d,..
OF NEW YORK

9.,Dr
,

L)

-

ATTENTION

t-- 1-4

.RE TRANSFER
DIVISION

TELEGRAM
LIO)AMERCIAL WIRE-INCOMING

TRANSLATION COPY

JECODED
CHECKED
COMPANY

i0OINU RV 12 BR PALMBEACH FLO 150P JAN 25
G L HARRISON

YOUR EXCELLENT

DcCUMENT HAS MY HEARTY

APPROVAL HOPE IT PRODUCES DESIRED RESULT

T. F. WHITMARSH
207PM

Q94 .tL

ti)-11AA.,

9)-AAJW-4




kvo12-1




c441-977

22
-212_

-

August 27, 1921.

Richard H. Williams, Esq.,
c/o William ec Peters,
1 Broad wa.y ,

New York, N. Y.

Dear Mr. Williams:

Referring to my telegram of to-day Governor Strong is
givin0 a dinner to Governor Norman and Sir Charles Addis to

meet the directors of the bank on the evening of Tuesday, August 30

at 7:30 p.m. at the Metropolitan Club this city, Fifth Avenue and
60th Street.

He desires me to express his hope that you will surely be able to attend. It will be rather informal, dinner coats
being worn.

Sincerely yours,

R.S.V.P.




WASHINGTON BUILDING

I BROADWAY

New York City,

C>

Au1240;01.1:.:,

tv
0'1

AUG 2 9 1921

).01-

S. A. M.

7511
S',4` 101
J. H. Case, Esq.,
15 Nassau Street,
New York City.

V

Dear Mr. Case:

I beg to acknowledge receipt of your kind
favor of the 27th, as well as your telegram, which was
repeated to me at my home on Saturday evening.

I have

just this moment reached my office, almost twelve, on
account of an important errand uptown.
I will be delighted to be present at the

dinner tomorrow evening, and look forward to it with
much pleasure.




Sincerely yours




January 11th. 19156
-131-!Wjr.

k3T1207vG
Dear Mr. Woodward:
24.

We are expeot143 to dine to-nit

at 7:30 at my kvartment, 903 'ark Avenue, and if
you return from Boston in time, I nope you will be

able to dine with us.

If you are not in time for dinner,

we will be delighted to BOO you after dinner.

Ibiry truly yours,

9 East
New York City.







August

191

dear Mr. "':',Codward:

I an enclosing with this, copy of
letter addressed to Secretary McAdoo exact-

ly as mailed to him to-day, and hope that it
fully meets with your approval.

The only

change consists in the addit:_en of one para-

graph on the last page with which I feel certain you quite agree.
Very truly yours,

Governor.

liam TCodctard, Esq.,

"The Cloisters,"
Ochre ?oint,

'Newport, Rhode Island.
BS Jr/VCM-1

Dict-ted by Ur. strong but
signed in his absence.
1111

immaINEI

'ice-147

1.2

ffrvi7+7/ce-7
7

fa7

eaiaa(

te-z-zz:cW

4.olie Ye peze4,,P,




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/r.

41-5,

e)t20,22/

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1

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ave p2;c-3

/tax teei




elazz,t,

xez
ez444evi_

irez-eX

Aug. 10, 1915.
Dear "Gov":

You can't work that title an me without taking the consequences for,
as you know, we share it
Thank you for your note.

I envy you the loaf; in fact, two days of

last week, after a hot trip to 'llshington almost broke down all of my resolutions, I was tenptod to cut loose for a few weeks.
I sinceiely hope that the nemorondum met with your approval.

It

has already done the trick as I saw Secretary McAdoo yeeterday and there as

no doubt whatever of his attitude. The Federal Reserve Board is holding a

meeting here to-day to take action finally on this question of foreign
credits and I believe the action will be absolutely favorable to our contention.
Our guarantoe of Mexican debts, as you.put it, is Mely to prove
one of the -lost interesting develepments in dollar diplomacy yet witnessed

on this continent. Circumstances alter cases and I presume that, if an
administration and a good obligor is furnished for that poor distracted

country, it will be up to us to furnish the money. How have the mighty

fallen:
Thanking you again for your note and for no end of help on numberless ma#ters, 1 Cm,

Very sincerely yours,

llia

eewport, R. I.
Bc3t7r/PE



Estes Park, Colo., July 22. 1916.
Mr. William Woodward, Personal,
Hanover-litatienal_1;ank
liew York City.
Dear Lir. Woodward:

This is mu first opportunity to write you since getting settled on account of the restrictions imposed upon me
by an exceedingly conscientious Doctor. I have only been
allowed until recently one-half hour a 46- ram correspondence.
of c in one of
After some arranging we now have a
fnd I am adually
t
the cottages conneced with the hote I
litP'tke
catching up with mail. The combined Influence d a rather
hard trip, hot weather and the change in clima e and altitude
set me back a bit but I thinkairipther week o two I will
le to take a
melNte ,
be pretty well readjusted t
most \:3 uti-, part of the
This is
little exercise.
country I have ever visit d The el Ication is about 7500 ft.
and it is surrounded y pe ' that r.04 all the way from 10000
day'4.t Is wairth except in the shade
to 14000 ft. On su
als aiways cool at night and
and when there is a b
e ate-unknown. On the whole I bedust and perspiration a
to a better place and in all likelieve I could not hay;
X here.
lihood will spend t
e are keeping me posted generally
men at e o
-Maing and I gather from their letters
as to hatters --eaMfortably an an old shoe. Had you and
that Tre afita as
he not bee* ,aval:lab-le to relieve me between you, I either
would not ave left or else would have left with such uneasiness that I would probably have gene back again.

I hire almost completed a memorandum in relation to

It proves to be a more formidable
When the draft is complete, I
subject than I anticipated.
hope that you, Treman and Curtis, as well as Jay if he has returned, go over it with a good deal of care and criticism and
display no hesitation in making necessary changes. It should
be submitted to the Board in Washington at as early date as
the Bank o England matter.

convenient.

Observing the rather violent fluctuations in both
reserves and interest rates in ilew York, I hope this period
may prove the opportunity for us to demonstrate our real
usefulness. It gives us an opportunity by maintaining a
differential between endorsed and unendorsed bills to educate
member banks when they are short of money or under in their
reservesto endorse some of their bills and turn them in to us.



2.

Adle one-eighth under ordinary circumstances may be a fair
differential with rates Where they now are, I do not believe
We can accomplish much with our members in these early days
of development at les than a differential of one-quarter of
When rates advance that differential will not
one per cent.
be out of line.
Treman wrote me of the decision in regard to purchasing

the one year 3 per cent. notes that werp,-e-flred. I think it
was wise. In the course of a few yearfLour-lot, blem will be to
dispose of excessive holdings of gove,,ilent b
unless I am very much mistaken.

It would be a great pleasure to hear
and then.
I would particula,r/YA,rite to

s and notes,

you now
fr4benefit of

your experience in dealins/Wh tiitOioardLat-liashing-ton in
connection with the Amendme40 to thd0;layton Act. That was
your handiwork and I am won4ering whOther after all it can

be made cover the H4ver Vank-Uniorill,Prust Company situation.
In any event, I hope
Ou wal,writs/me when the spirit moves
you and it will give m
graat-OfaI of pleasure.

With very bes

and friendship,




ids and many thanks for your help

//

//Sincerely yours,

FEDERAL RESERVE BANK
OF NEW YORK

-November 8, 1914;

Dear Mt. Woodward:

Mr. Jay Just writes me that there seems no doubt of

your reelection, as well as that of Mr. Towne, as members of our
Board of Directors and no news from the office has given me such
satisfaction as this.

Let me respeat what I have just written Mr. Towne:

The

first two years of service in the bank were naturally annoying and
,uninteresting, and much time had to be devoted to matters of organization and detail.
cleaned up.

That part of the work is now pretty well

What we have ahead of us nobody can prophesy with

certainty, but every day seems to accumulate further evidence that
the next few years will see readjustments of tremendous importance
which may throw heavy burdens on the system.

Those are the years

where we will need experienced directors who will not be swept off
their feet or lose their courage or lack the experience necessary
for the bank's security.

It would really be a great misfortune if you and Mr. Towne
retired at this juncture.

So please understand that I am very much

relieved and very much delighted that you both have been willing to

sacrifice your personal preferneces and consent to another term of
service.

With warmest regards, believe me,
Very truly yours,

William Woodward, Esq.,
Hanover National Bank,
New York City.

BStVCM


FMF


a5

Strevt.

44,

New York, November 13th, 1916.
4

11'9/6

Dear Strong:

Yours of November 8th is at hand, and I appreciate
and thank you for all that you say.

I am still of the opinion

that Class A. Directors, especially in Group 1, should rotate,

but after much thought and considerable pressure I have agreed
to run.

I do not know how the election is coming on and have

not asked, but naturally hope that it will go through all right.
I was guided principally in my decision by my wish
to be of service to you at a time when you

are not in the best

fighting condition, and the fact that I felt that the suggested
changes might not be wholly agreeable, or tend to maintain the
organization which we have been building, and the ideas towards
which we have been working.

This is, of course, in full confi-

dence to you.

I hope that you are doing well.

Vanderlip reports

that he was very much pleased to find you gaining rapidly as he
thought, and I sincerely hope that it is continuing that way.
Things are dull here in a sense.

There is of course

the almost customary speculation and some very large loans every
now and then.

Then there is the working out of the contracts

for shipments and some new orders, but from the routine banking



Ata5

Strvrt.

-2-

business the Banks are only "rolling" their money.

I do not

think it will be as active a Winter as last Tinter, but the reason
may be that we are more accustomed to it this year, and so it
The gold situation is a most interesting

rolls more easily.
one.

Some people talk of being alarmed at too much gold; I am

not alarmed at that.

The point to be alarmed at is the taing

of too much credit by our own people.

It is impossible to travel

Without seeing almost every mile the additional plants being
erected; even the smallest plants are adding one or two sections,

_id on top of all of this they are crying protection on the
inflated basis..

It may be wiser to place an export tax in order

to reduce matters to a basis where we can safely protect, but
this is all in the problems of the future, and we must not worry
about them too much as yet.
time.

et me hear from you from time to

Treman is running along very smoothly and so are things

in general at the Bank.

With best wishes, as always,
Yours very truly,

Benj. Strong, Esq.,




4100 Mountview Boulevard,
Denver, Colorado.

t

November 17th

Deal

1916.

.00dward:

/our letter of NovelLber loth has u t reached me and
has given me a great deal of pleasure.

Your decis on to continuee
great relief to me onG 1 believ

has been a

be shared by

tile new

York banker° who F2re gradoal

confid.ence intthe tew

York bank end it

return is still too un-

ur!nagem

certain for me to build uith u
I had s d
and it was a weld

ence on its ac.-;omplisnmert.
Vanderlip an0 Trunbull
and

.ation vi ingrowing con

templation.

id situation expressos in a
th
nold. The danger lies en
expending our domestic credits as a result of the gold
it ip a gre satisfaction to get this view from you

Whnt y

few word

tirely
impar

for

these for

it means

you surely appreciate the importance of
s vnich some day can be handed back with

thanks.

ings go along about the same with he and 1 am put-

ting in the laziest Kind of a time. The now house welch I was
fortunate eneuz4 to get is delightful in every way.




To

Nov. 17, 1916.

Mr. Woodward.

I am spending some of my spare time with my twelve

year old daughter taking French lessons. She has always
spoken French very well and I must say that my struggles affcrd her a tremendous %mount of amusement.

The doctor continues IL, make go.

gross but as yet is unwilli_ng to commit hi

reports of my pro-,
31f in any way as

to a possible data of return East.
Treman writes me that he hears ter. 9 a plan on
foot to issue 0 gold certif a s, 'Ibis is jus oout the
if it looks serious,
wrest thing they could dc
would you feel disposed

jections and whit the consequ
ship some hundred

scatter it from
Nith

Till

Hanov
New 'to

PS/Ver




doo and point out the obmight he

1iov, can we

back to :-.urope if we

ultr, to the other?

Nazo

Strevi.

JAN 1 2 1911
New York, December 27th, 1916.

Dear Governor "Ben":

Your Christmas card has just come in, and
I send you in return my very heartiest good wishes, but it is
I hope, needless to send them at this time, as I think you know
that you always have them and will continue to have them.

We have had a monkey and parrot time here for about
three weeks, and every time things get to be better the F. R. B.
at Washington seems to moisten a blanket and place it upon us,

then when we get cold under that process they light a fire under
us to warm our posteriors.

It is ridiculous!

The paternal

attitude, coupled with the fear that someone will get ahead of
them, does not set well and will ultimately bring them to grief
if continued, because everyone will tire of it, not only those
closely associated, balt others as well.

This last fiasco and

breach of confidence was an outrage, and cannot be excused as
far as I can see.

We are to have a meeting this afternoon, and

my general feeling at the moment is to put ourselves on record
and protest.

I think others will feel the same way, and I do

not know just what the result will be.

This will all be past history by the time you receive
this letter, and its sole object is to send you Greetings, but I
diverge, as I know that you are interested in hearing various



0
:\,Taozau
-2-

points of view.

The markets have sobered down and will undoubtedly
come back from their spasm.

Of course it has affected many

specialties and will continue to do so, as the boys are finding
out that some of the wars brides will not have any children this

year after all, and what may come in the future is speculative.

We are likely to see a slight reduction in the price of commodities, not that the demand is not here, but in the wild uprush
they probably have over-reached themselves to some extent and
people are counseling a slowing down, which may result for a
while.

Of course it is impossible to estimate what may be the

final values, in just so much as it is impossible to estimate
the final destruction on the other side.

Jay is away and has not been well, but he will soon
come to himself.

Bronchitis has been rampant all over the City,

I had it myself earlier in the year, and now everyone seems to
have a touch of it.
things.

Treman is getting more and more used to

We are having a little dinner to-night, which seven

or eight of our neighbors are attending, and together with Treman
and Curtis we are going to talk over various phases, particularly
in regard to the amendments.




With best wishes in ev

7

I am,

ncerely,

Otadc

Denver, Colorado,
January 12, 1917.

My dear Woodward____±_.

Your letter of December 27th just reaches ma and I am so
y is now a little

sorry that it was delayed, although possibly m

written

more temperate than it would have been

two weeks

ago.

4: Federal

We are just bow at a point in th: development of
Reserve

be required t

System Where tact and Ski

oid the

eserve System

dangers of paternal and
Washington on the one
pollfrom

harmonious management of th
ren

independence in the

honest enough to realize

d and of a postle disruption of the
System as a Who

ts on th
there

by reason of too great

I thinA I am

her hand.

s as much denser to be apprehended
tam as there is from a political

if New Yoric should dots&

domination in .ashingt
ut this Banc of

matter, is a personal one

to some

t involve the broad question of policy of control.

Which doe

been in New

extent

Had I

en h Board violated confidence on December 26th, I

Y

would certain/

ve resigned and would not have hesitated to state my

reasons for doi

so.

confidence how serious

In explanation of this, let ma explain to you in

was the embarrassment to me and how nearly

the

action of the Board came to defeating what i believe will prove to be a
great achievement.

it

In my conversations with Lord Cunliffe

had been

explained to him that our complicated machinery would necessitate the
following procedure:




1st.

An amendment to the

Federal

Reserve Act b

Congress;

2.

Januar: 12, 1917.

To - Mr. Woodward.

2nd. Approval of our Board of Directors;

3rd.

Consent by the Federal Reserve Board;

4th.

Action by the directors of the other eleven Reserve Banks;

5th.

Some consultation with and an opinion from the State DePartment.

All of this before we could act.

not to

A lette

doing so.

regress on this

anfidence unti

take his own directors into hi

side justified his

ore, determined

Lord C

Cokayne, re-

from Deputy Gove

iffe had de-

ceived some months after my return, stated that Lord

m that we were

sion un

termined to adhere to this
ready to act, consequentl

unprepared, all but throe

f his directors

ound Lord Cunliffe entirely

he announcemen

you can realize

t was that

ho4Q,eib

had been jeopardized.

complete ignorance, and

result of all of my

work

t to feel that he had been very
.rely unreliable and

badly treated and that

irresponsible.

us of m:y negotiations

Another consideratic

Fran

a

Those Frew

with the

Bank of

I was unwilling

re timid and suspicious.

as far with them as with Lord Cunliffe and have all along felt
that

the sp

rrangements
lt-Dr-t71;;;7

concluding
ment was made
France.

You

with Lord Cunliffe

contemplated first

*tors with the Bank of rngland and then before any announceoffer a substantially similar arrangement to
11 realize

ings We arranged, unless

that

in no other Any could identical understand-

of course all throe institutions

at the same time and place.

the Bank of

were negotiating

That was the reason for the clause in the

Bank of England memorandum, expressing the hope that a similar plan would
be arranged between New York and Paris.

Announcement of the London ap-

pointment before an offer was made to Pallain therefore jeopardized



3.

January 12th, 1917.

To - Mr. Woodwazd.

arrangements in Paris just as it did in London.
Of course I want to be loyal to the System and finish the work,
if my health permits, but I am not willing nor will I over be willing
to accept the position of subordiantion and lack of independence which
is implied by this action of the Reserve Bo

nothing In

su ,

strongly a

dent that you and the others would fee

have done

,

direct protest

the way of makin

and will not do so, at any rate without first consulti

serve Board, I do not thIs

0 can afford

depa

the hank.

from the principle

tockholders.

directors and office

So long as we

oard's regulations, keep them informed of

what we are doing and

has

the Board

must be monaged by the

member banks of our distr

in fact of self-sac

cO

bank is owned by the

for which we have always

comply with the law and

do about it, I

the Federal Re-

relations

Now as to the whole ques

feeling so confi-

the

bank

in a spirit of cooperation -

e welfare of the Whole system, the Board

ound for comp

how much we shall invest, What our rates shall
be, What

kiss

of bills we shall buy, what bills are good and what are bad,

rests with t1ke directors of the bank.

is an tnvasio

Any attempt to interfere with that

f the rights of the directors and I think must be resisted

at all cost, so long of course as we are complying with the law and with
the regulations based upon the law.

The difficulty Which has developed during the past few weeks is

due to the

intrusion into the policy of the System of other considerations

than those having to do directly with the wellfaro of the Reserve Banks




4.

January 12, 1917.

To - Mr. Woodward.

This must have led the Bogrd to overlook the fact that

themselves.

without exception the policy of the New York Bank has been to make every
This applies

sacrifice in order to strengthen and develop the System.

to our gold policy, to our policy in regard to the collection system,

the Clearing

to our relations ,litht

ish division of

House,

rly to the sa

ifice of time

bank matters in

rder to aid

Investments of all kinds and more parti

which might have been devoted to stria

in the preparation of regulations and the formulation of
So I hope the Board wi

hoe

i

oral policies.

ear to the Federal

aeserve Board that they ca

expect good

to serve as directors or

officers of the Federal Re

e Bank of New

k if their judgment and

freedom is to be ove

led,

their conf

violated and if they ar

e a lot of school boys.

system, let me thank you most heartily

bioa that this is 0

for the nice things yo
back,

y in yo.

ving that unfo

I fear

es are to be ignored and

etter.

I a

literally pining to get

rment which thrives on

scrapping.

Rows

ess Treman, whereas, to my Shame, they generally stimulate ne

and make li

here before v

Possibly someone from the bank will be out
long and I can get

in

closer touch with what has been go-

ing an.

We are cèftainly going to have easier money for a time and I think
you may count with certainty upon a further expansion of the bank position
in New York and probably elsewhere throu,hout the country.

Large loans in

solo form to the allies are inevitable and just as inevitable the result
is a larger deposit and loan account, so 1 hope the program of amendments

will be conservatively shaped




and carried through and enable us to

double

5.

January 12, 1917.

To - Mr. Woodward.

our stock of gold ready for later use.

I am getting along pretty well just now, gaining a little in
weight right along and the Doctor tells me that he wants me to play golf
just as soon as the weather permits.

conclusion that I might be able

He also is gradually coming to the

to go abro

another Whirl at the western climate on
Again, thank you many times for

une,

return.

r letter, your

and for your constant consideration of ug wellfare.

-

William Woodward, Esq.,.
11 Nassau St.,

iff _New York City.
BS/CC




sibly taking

wishes

14 Nazsau Strert.
1

.

If

New York, January 17th, 1917.

JAN251917
,

Dear Strong:

At the Board meeting yesterday we had a long talk,

and the Committee appointed to look up the Deputy Governor matter
made a report.
and myself.

As you will remember, it consists of hr. Peabody
We recommended that Gov. Aiken, of the Boston Bank,

be approached and offered the Deputy Governorship.

'

This of course

in friendly relationship to you and to Mr. Treman, who expressed
a wish to retire, as he considers that he has fulfilled his mission and it is now time to organize definitely.

Personally, I think it would be a very satisfactory
solution of our problems and your problems if Aiken would take

the Deputy Governorship at a substantial salary, you to remain
Governor, and with the strength that he would add to the Bank
you would feel that you could come and go as you wished, and
remain with us and serve the system and carry out the ideas and
dreams, which you have had and which all of us have had from time
to time.

This seemed entirely agreeable to all members of the
Board (it being a full Board meeting) with the exception of Mr.
Palmer, who has no objection, but as he felt that it was somewhat
new to him he reserved his decision.



He is to speak to me inside

au

trvvt.

-2-

of a day or so, and if you do not receive a telegram by the
time this letter is in your hands, you will know that Mr. Palmer
is entirely agreeable to the suggestion.

We all of us thought that it would be much more
satisfactory from every point if you, yourself, would take the
matter up with Mr. Aiken.

He is your personal friend, and: in

a sense he would be coming at present in friendship to you, and
you will work along together satisfactorily I am sure.

So will

you approach him and carry through the programme if it meets with
your favor.

It might be well, after you have mentioned it to

him, to get him to speak to me or to Mr. Peabody, who are still
authorized as a Committee.

I have just received your nice long letter about the
B. E. matter, but as the above is the subject of this letter and
I do not want to complicate it, I will stick to my text in a some-

what formal way.
With best wishes, I am,
Yours very sincerely,

Benj. Strong, Esq.,




4100 Montview Boulevard,
Denver, Colorado.

Denver, Colorado,

January 25, 1917.

My dearQeld_i_..iwar,,--

Yours of the 17th reached me on Saturday before I left for
eard nothing

a few days' visit at Colorado Springs, an
further as to Mr. Palmer's views, I ass

e that he is is

cord with

the other directors and, consequently,

am writing Gove

Aiken

as per enclosed copy of my letter, which

I hope fully

s with

your

VieWS.
Ou have come to a very

Let me say quite f

wise decision indeed in

netter and one

th

my awn future in the bank.

have been reached ev

e certain, as I am improving

Undoubtedly every day
steadily and to the entir-

with me, however,

eh I would hope might

that

You will agree

etion of the Doctor.

-

ef fee.

management of the bank's affairs
ficers, and that will certainly be im-

depends upon the healt

entinue to be impaired if we do not build up

paired

pressure of

so as to avo
So I am

both as to the

our

organization

the last two years..

e you will understand Inv pleasure and satisfaction,

cision arrived at and

the

evidence of

this further con-

sideration of ur own welfare.

You will notice

that I

have said

nothing very definite about

when changes should be effected and my reason for that is because of
uncertainty as to your views and those of the officers.

following appeal to you?

How would the

Arrange that Mr. Treman remain at

the bank

until the first of August, if he is willing to do so; have Aiken spend



2.

To - Mr. Woodward.

January 25, 1917.

as much time as is convenient in New
the first

York between now and then; about

of June have him go with me while he is

ill Governor of the

Reserve Bank of Boston to London, Faris and possib y Amsterdam, to com-

plete the arrangements with our prospective corresp

familiarizing himself

with the subject o

officers of the banks.

This would put

tients there, thus

being conducted by a Committee ins
ing from abroad have him elect

at

meeting the
r negotiations
*vidually by me.

of

uty

On return-

or and take up his duties

the Bank.

The plan of sendin
cussed at our conferen

about it. He is

by

a

has been frequently dissome

entative talk with Aiken

to go and i see many dvantages

in the arrangement.
ich I deeply appreciate.

Very truly yours,

William Wood

Hanover National

11 Nassau St.,
York City.

New

36.CC.




form of

'grit yrUNION
WESTE,,

CLASS OF SERVICE SYMBOL
Da,

Day
N

sage

Blue

..er

Aessage

WESTERNUNIOti

Nile

TEL,!-AM

NL
If none of these three symbols
appears after the check number of
Nig!

dter

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

N EwC0M B CARLTON. PRESIDENT

symbol appearing after the chock.

CLASS OF SERVICE

SYMBOL

Day Message

Day Letter
Night Message

Nit

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

symbol appearing after the check.

RECEIVED AT 17 E. PIKES PEAK AVE., COLORADO SPRINGS, COLO.

3D HS 70 BLUE

5 EX

CO NEWYORK CITY JAN 30 1917 VIA DENVER COLO JAN3 1
BENJ STRONG

a
ANTLERS HOTEL COLOSPGS COLO

AM GREATLY EXERCISED OVER PROPOSALS

ON ONE FEDERAL RECEIVABLE AT

IMMINENT AND THIS IS THE

IDEA AND

I

AM GOING

A SECOND FEDERAL ACTION SEEMS

SUBTLE FORM OF CREDIT THAT

WE PROTESTED AGAINST MORE THAN

BE DO^E TO PREVENT THE

TO PAR MEMBERS CHECKS DRAWN

A YEAR AGO SOMETHING SHOULD

PUTTING INTO EFFECT OF THIS

TO DO MY BEST BUT

Tl'AT IS OF LITTLE AVAIL




&)
Answered. from Colorado
Springs aind retained

no coity,
WILLIAM WOODWARD

BS.

944AM

40




$c2rieo,c,

Denver, Colorado,

Marg*23, 1917.

w.

11,31,41

PERSONAL.

\

\'0\
SAINI;

My dear Woodward:

,

I should have written you earlier

in

visit with me in Chicago but, to tell yo

rega

Alfred Aiken's

the trutb

for the moment I

overlooked the fact that the matter of our personal

been referred to a committee, and
It will be impossible fo

Mr. Treman.

s to co

rate for some little time to co

would feel justified in makin

zation had

u
I wrote Treman, I doubt if he

the a.

'nal sacrifices that would be in-

volved except it were

ticularly in case I were

unable ever to rat
The increasi
and others to
manent b

ank will undoubtedly cause you
p the organization upon a more per-

ob

and of course

as Doss

e and would pa

On the

or hand, there

d like to see that done just as promptly
cularly like to assist in bringing it about.

not the slightest doubt in my mind but 1 will
If you and your associates
=Miner

be back t

feel willing an

Treman is about to run matters along without making

definite arrangements until my return, I believe it will be by far the
best thing to do.
should

Failing that, if the directors are positive that we

so ahead or if Mr. Treman finds it impossible to continue, I think

the matter is of sufficient importance to justify our having a meeting at
the nearest convenient point, say Chicago.

nection with the organization




There are many things in con-

which I think should be very clearly stated

To - Mr. Woodward.

larch 23, 1917.

to you before any plan reaches an advanced stage, either for getting someone outside of the organization or for rearrangi,_ the present official
I am sure that you and the others are co.

staff.

need that I have no

thought in mind except the real interests of the

and whether I return

in June or later, or not at all,sure 11mayN.e
you
my recommendation
will be the same in either case.

Mr. Delano is here just now
this matter at some

length.

iscussed

a
in Washington before very

long and I, therefore, take the

decision be arrived at with
matter with him, even

urally, we ha

urging most earnestly that no
OU

pportunity first to discuss the
cago does not prove to be

practicable.

You may be s

talk with Mr.elano
fident t

when he return

and rest in elthminating

this opportunity to have a frank
recent difficulties and I am conashington it will have some good effect
ome of the difficulties that have recently

arisen.

they are about as usual except that I have
joined the Country Club, bought some golf clubs and next woes hope to start
playing golf - all under Dr. Setall's directions.

As the best indication

of my behavior, I always report my weight which is

MOW

about 155 nounds,

and means that I have gained 26 pounds since coming West; the fact is that

I have reached that stage where my clothes are no longer comfortable and
I am seriously contemplating buying some larger size collars.




3.

March 23, 1917.

To - Mr. Woodward.

This noon Delano and i are meeting the local National Bankers
at luncheon and I suppose we will engage in mut

ulation and quite

a little brag.

Once more let me take the opportun ty of tel

I appreciate

your personal interest and devotion to t

ng you how deeply
ffairs of the

bank during my absence and your -0

my personal a

concerning which I

f having inconvenienced

feel oppress

everybody.
With warmest regards

Esq.
William Good
ank,
Hanover Na
y, N. Y.
New York

BS/CC




gements,

1\Dtatt StrM.
New York, March 27th, 1917.

Dear Strong:

Your letter of the 23rd has just come in, and I
I only hope that

heartily reciprocate everything you say.

your improvement will continue and that you will be well
enough to come on, even though it may be temporarily or in
whatever way you and your Doctors see fit.

Don't forget that

the descent from the high altitude should be as carefully made
as the ascent.

Mr. Peabody and I are both for letting the matter
rest until June--June is nearly here.
haste that I can see.

There is no reason for

Financial matters are very quiet.

body is waiting and strengthening themselves.

Every-

There have not

been many new undertakings for a long time with the exception of
the various Government loans, and there is lots of money around.

The organization is in condition to take care of whatever may
come up from its members' point of view; and I am quite sure

that Treman is willing to stay on until June or thereabouts, but
of course it is a problem that we must settle, and you doubtless
want it settled more than anybody else does.
There is little to add at the moment.
waiting for the 2nd of April.

We are all

Everyone is turning over in their

mind just what they are to do, and wondering how and where they



aecu Strut
-2-

can be of service, but by the time this reaches you we shall
all know more than we do at the moment.

This is merely to

acknowledge your letter, and to repeat the hope that you will
constantly grow stronger and more able to undertake what you
are planning.

With very kind regards and best wishes, as always,
I am,

Yours sincerely,

11:L44, "16(
Benj. Strong, Esq.,




4100 Mont.view Boulevard,

Denver, Colorado.




June 29, 1917.
Dear Mr, Woodwardt

Many thanks for your kindness in sending

me that fine picture of yourself, and my assurances

that it is greatly appreciated.
Very truly yours,

13144ax4low0A404.144

11 Nassau Street,

New York City.

WILLIAM WOODWARD , Presrdent

E.HAYWARD FERRY, Vice Pres.

00,004

SAMUEL WOOLVERTON , Vice Pres.

GEORGE E.LEwis.AsSt Cash

,&gicri&OFIrrs,,a4

JOSEPH. BYRNE ,Vice Pres.
Chi;

J. NIEMANN, As-t Cash.
WILLIAM DONALD, Ast Cash.

S 3.0,00 )000

.H.HAMPTON.Vice Pres.

Foreign Department

,42)

Wm. H. SUYDAM, Manager

f4,

P.TURNBULL, Vice Pres.

ROBiNEILLEY,Ass't Manager

Wit..it!Am E.CABLE JR,Cashier




_

TH-

HANOV

E3) N

OFTHECITYOFNEANYORK.

szs.
ArAssite

61/

N EW YO RK

September 23rd, 1918.

Dear Gov. Strong:

This is to say that I will take

pleasure in meeting you at the Hotel

21aza on

the

evening of September 24th to have dinner with the
Secretary, and to

attend the mass

meeting thereafter.

Thanking you, I am,

Very truly your,

Gov. Benjamin

Strong,
Chairman Liberty Loan Committee,
New York, U. Y.

November 18, 1919.

Dear Mr. Woodward;

The first thing that I did on reacning

-Washington vas to develop a persistent hemorrhage of the nose

which lasted about thirty-six hours, and made it quite impossible
to think of le,iving 71anhington, or in fact to get very far away
from the .fioctor's office. He finally stopped it, but only after
heroic teatment.
I tried to rePch you by telephone at Bowie,
but was told that there was no such number as the one you ga ma,

and . fter a nunber of fruitless efforts I was obliged to call my
secretary at New York and as him to vt word to you through your
office.

Won't you express my regrets to Mrs. Woodward,

and particularly that I was unable to send you word more promptly
and directly. Possibly you will be good enough to invite me some
other time.
Very sincerely yours,

Mr. Wm. Woodward,




c/o Hanover National Bank,
New York City.

44..:XVc

ztzt

JUN 1 5 1921

June 14th, 1921.

Benjamin Strong, Esq.,

Governor, Federal Reserve Bank,
New York City.
Dear Gov. Strong;

Yours of the 13th instant is at hand, and I
enclose to you my check for 023.55 as requested.

No

acknowledgment is necessary.

Will you kindly inform me at your convenience
whether this amount is deductable under the Federal
Income Tax Law Blank Heading, Section K, Sub-division 13,

or whether it should be placed under Line 23 of Section Q,
and if neither is correct, should special application be
made on Blank Form No. 52313 (H--L).




Yours very truly,

June 13, li/21.

PERMAL

My dear mr. Noodwards

Ve have only within the last few cocks been able ta conclude the

final accounting of the expenses of the vtriour Liberty loans, and determine

to rhat extent, if sny, expenditures made by the organization could L.t be
reimbursed by the Treaeury under existinz lax, or ru2es of the Deartmeat.
We find tioA the total amount of suoh it
Of thit suird

that cannot be reimbursed LE,

the Federal Reserve i-)nk is able to absorb t M.74.

The remainder, t.5oe.E.F.,I have ;aid persomally.

The Liberty Loan Committee passed a resclutiab, agreeing personally

to assume certain charges, u to a limited amount, which as I recall Waa5

If the members of the comrdttee care to pay their reapectivs shares of this sum,
the amount of each committeemants proportion till be t23.55.
Had these operations been conducted since the passage of the liolatead
Act, it wou'd not have been necoosary to ask the cammitLee tu make any contribu-

tion.
Yours very truly,

William WoodTala, Enc.,

5 I.ILLau St.,
1..

BS:MY




T.




June 15, 1921.

My daar Wr. Woodward:

thank you for the remittance of $21.55
enclosed in y:)ur favor of June 14.
Youre very truly,

William Woodward, Fso.,
11 W4esau 3L.,

Neq fork, A. i.




February 9, 1922.

Dear Mr. Woodward:

My friend, Mr. R. L. Van 7andt, who was formerly
Governor of the Federal Reserve Bank of Dallas, is looking for

a position with some New York bank.

perience

in country banking.

He he had a wide ex-

All of the circumstances

surrounding his leaving the Federal Reserve System, I can

explain to you in case you are looking for a man of his type.
I em led to write

to you because some time ago you mentioned

that you needed men of just that type in the

may be an opporiunity to

get the man you

Yours very

William Woodward, Esq.,

President, Hanover National Bank,
New York,

N. Y.

Hanover, and this

want.

truly,

COLLINO T ON

.D
BE LAIR
t3OWIE
MD

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October 11. 1922.

Dear Mr. Woolley:

I am enclosing
by the New York City

the admission card to the Testimonial Dinner being given

Committee of the National Budget Committee, to General Dawes.

Mr. Case, who is acting as

have three of

our

substitute for Governor Strong as host, had hoped to
A

directors present

at the table of twelve

which Governor Strong,

Today, however. I learned from the two others than yourself, that

has engaged.
they would find

it inconvenient

to attend.

Messrs. Case, Kenzel and Sailer, and

eight of our senior officers will be present, however, and we are all looking
forward with a great deal of pleasure in having you sith 115.
I would let you know

pleasure of

have another engagement

not hesitate

dining with some of your fellow directors, you

'311 you would prefer to accept.

to let me Know.

Vey truly yours,

Mr. Clarence M. WoolleY,
104 West 42d St.,
,;ew York, N.

P. S.




however,

how the party was shaping up as, in view of the fact that

you would not have the
might

I thought,

Y.

Mr. Case suggested

that dinner jackets be worn.

If so please do

0




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COPYFor
.

Ben Strong

Nr.:RAL ELECTRIC COMPANY

DATED LONDON, MAY 17, 1924

YOUNG
GENETRIC

GIVING US MUCH PUBLICITY AS POSSIBLE YOUR STATEMENT WHICH HAS
STOP

CREATED GREAT INTEREST HERE

RE BANK HAVE SEEN SCHACHT AND

AM SENDING AUDITOR AND LAMER BERLIN TO EXAMINE NEW LAWS STATUTES
AND ACCOUNTS

STOP

SHALL FOLLOW PERSONALLY AS SOON AS MATTERS

SUFFICIENTLY PREPARED

STOP

CAN YOU SUGGEST ANYONE TO SE#VE AS

AMERICAN MEMBER OF BANK BOARD
AMERICAN RESIDING PARIS

STOP

IF NOT WILL ASK JAY IF HE KNOWS SUITABLE

PRESUME AGENT REPARATION PAYMENTS WILL

BE AMERICAN AND THEREFORE BANK COMMISSIONER MUST BE OF OTHER NATIONALITY

KINDERSLEY

Dear Mr. Yourg:

Have you any suggestion?

Owen D. Young.

p(1.4Cikr'!-,)\




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Auguet 27, 1924.

My dear Mi68 KOrli8011t

I would very greatly appreciate your courtesy in sending
tne following meeeage in code to our Kr. Pierre Jay in care of Mr.
Owes D. Young:

Shral reply after consulting Criesinger and committee
tomorrow.

Hope to arrange but suggest riming date of

return more definitely."
Tnaaking you in anticipation, I am,
Yodra very truly,

Mies L. V. Morrison
Secretary to Mr. Owen L. Young

General Electric Co.,

120 Broaoway, New York City.




'LONDON AUGUST 5, 1924.

STRONG HAVE TALKED WITH MONTAGUE NORMAN WHOFRELS SUCCESS OF PLAN IS AS

UNCERTAIN TODAY AS TWO WEEKS AGO BUT FOR DIFFERENT REASON PRINCIPALLY

DIFFICULTY OF LOAN UNDER EXISTING CONFERENCE AGREEMENT ESPECIALLY BECAUSE

TOWER STILL LEFT IN REPARATION comassION INITIALLY TO DECLARE DEFAULT STOP
BY APPEAL GERMAN

HE THINKS AFTER SUCH DECISION EVEN THOUGH

FINANCIAL DISTURBANCE WOULD BE SERIOUS STOP PERSONALLY I AM /UCH MORE

OPTIMISTIC BECAUSE I BELIEVE MOST OF DIFFICULTIES WHICH MONTAGUE NORMAN

NOW OURSELVES CAN BE TAKEN CARE OF WHEN DEFINITIVE LOAN IS NEGOTIATED WITH

THE GERMANS AND REPARATION COMISSION STOP PRESSURE PUBLIC OPINION EVERYWHERE

WILL THEN BE VERY GREAT BOTH BANKERS AND COMMISSION TO REACH SATISFACTORY

AGRMENT SITUATION HERE WILL BE MECR.ILTLUENCED BY ATTITUDE OF GERWWS

ViHICH WILL PROBABLY BE DISCLOSE TOMORROW STOP ASSUME YOUR CONDITION(S)

TODAY MORE URGENTLY JUSTIFY(IES) ACTION THAN TWO WEEKS AGO STOP iF BOARD

THINKS HOME CONDITIONS REQUIRE IMMEDIATE ACTION

I

(VIE) AGREE ALTHOUGH

CONDITIONS HERE ARE NOT AS GOOD AS I HAD HOPED OR AS SUPERFICIAL ACCOUNTS

INDICATE




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August 4, 1924.

Dear is Morrison:
would very greatly appreciate your courtesy in sending
the following dispatch in code to Mr. Owen D. Young:

looks as though the gction whioh we have postponed

for two weeks should be taken this Thursday.

Have you any

Strong."

views.

You will, of couree, realize the corfidential nature of
this communication and safeguard it from becoming known in your

office.
ThEmking you in anticipation, 1 am,

Yours very truly,

Miss L. V. Yorrison,
Secretary to Mr. Owon D. Young,
General Electric Co.,
120 Broadway,
New York City.

DS.117




1g1, "2- g,e0,
0 ovri''

120 BROADWAY, N EW YORK
ROOM 2058

OWEN D. YOUNG

July 21, 1924.

ACK NOW t .EDGED
JUL 2 1 1924

R
Benjamin Strong, Esq.
Federal Reserve Bank,
15 Nassau St., New York.

Dear Governor Strong:

I quote below message from Mr. Young
which came in code on Saturday too late for transmittal to
you.

"Private and Confidential for Ben Strong.
I am in favor o rate reduction as suggested
but I urge that no action be taken earlier
than the thirtieth The situation here is not
hopeful Stop We should know within a week
whether we face a constructive program or a
breakdown.
Have seen Montague Norman who is
sending you direct his message which I have not
yet seen'"

Yours very respectfully,

LVM




Pob-m4

July 17, 1924.

Dear rise Morrison:

would very greatly appreciate your courtesy in sending the following

dispatch in code to Mr. Owen D. Young:

*Frees dispatches give impression of undercurrent of
divergent views between two principal parties which might defeat

or delay adoption of plan stop

Conditions here as to credit and

public feeling are most favorable we have had since armistice for
successful loan and subsequent cooperation looking to return to gold

standard along lines of our recent discussions

stop

Speaking

only for myself I feel that those conducting negotiations should
realize that these favorable conditions may be jeopardized if disputes
and delays throw doubt upon the good will with which the settlement
is undertaken whatever its form may be stop

We are contemplating

recommending another rate reduction next or following week which is

justified by local conditions but would first like your own views as
to outlook on other side stop

Suggest talk with Norman.
Strong "

You will, of course, realize the confidential nature of the communice
tion and safeguard it from becoming known in your office.
Thanking you in anticipation, I am,
Yours very truly,
Mies L. V. Morrison,
Secretary to Mr. Owen D. Young,
General Electric Co., 120 Broadway,
New York City.


http://fraser.stlouisfed.org/
BS.211
Federal Reserve Bank of St. Louis

1 etr7.2

WIR.ZLESS

July 10, 1924.
Young

Thanks for message-

Please consider following

The integrity of the plan in the last analysis depends upon
maintaining the value of new currency and this in turn depends upon the kind of
control exercieed over the general operations of the bank and the management of

transfers so I attach great importance to the character of the appointments
controlling those matters and to the maintenance of the principle that the
currency system shall be established as soon as possible on a gold basis and
from the outset maintained at parity with gold

if any technical points

arise in this connection I hope you will cable me and I will burn the wires
The discussion of the supremacy of dollars and sterling is liable
to confuse the main point and breed dissention

That subject will solve itself,:

by the return of sterling to par which is rapidly becoming an obvious necessity
If England and Germany accomplish that the way is than prepared for a program

along the line of our Washington diecussion
Appointments to important positions should give regard both to

the security of the loan and to political prejudices in Europe where antagonism
against the so-called money interests should be minimized
principal egggestione

Success to your efforts




Strong

These are my




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Irlicate

service desired:

Date,--March 12, 1924._

CABLE DEPARTMENT:

URGENT

Please send the following ielevam to:
cable

STR,a.,HT
WEEK" END

DAY LETTER

This message should not be tested
should

NIGHT LETTER

141.
Confidential

PA-

ovsl*

Owen D. Young,
Ritz Carlton,
Paris.

I understand Dr. Schacht is in Paris Is it not important
to point out to him importance of resting his credit bank
on stable gold instead fluctuating sterling Incidentally
it would be invaluable advantage for AmericFT: discount
market if as a result of Americas entering the field now
substantial portion future German gold reserve were invested
in dollar acceptances England realizes that and makes sac. -.

rifices to preserve predominance Sterling market. Could not
fllerica be brought into the first line right now pan i passu

with British banks? Pardon this cable but am frankly alarmed.
at thought that we may miss this unique ppportunity for. putAvv,
/Aq. ,h(.414,E,144
/ting America's discount market on the map,4Kihdest regards

CHARGE TO:



Paul M.

rburg.

G EN ERAL ELTCTRIC COMPANY
120 BROADWAY, N EW YORK
OWEN D. YO U N G

bLbruary 29, 1924.

CHAIRMAN OF THE BOARD

ro,




pept).1

Mr. Benjamin Strong,
Federal Reserve Bank of New York,
15 Nassau Street,
New York City.
Dear Mr. Strong:

The following radiogram was received
by this office from Paris dated February 28th addressed
to you:

"FOR BENJAMIN STRONG MESSAGE RECEIVED AND
VERY SORRY BUT OP CCURSE I ACCEPT AND
THANK YOU FOR ALL YOUR EFFORTS SIGNED
OWEN YOUNG"

Very truly yours,




July 23, 1925.

Dear Mr. Young:

Here ie a letter I got from Strong a couple of days ago
which I forgot to ehow to you to-day.

I think you might be in.L.

treeted to 141tC it before you 0 a4tay.
Hoping you will have a very euccessful, and I hope very

enjoyable trip, I am,
Sincerely yours,

Owen D. Young, Esq.,
120 Broadway, le-N York City.




r-

120 BROADWAY NEW YORK
ROOM 2558

October 28, 1925.

NV dear Governor Strong:
I regret very much that I can not come to your
dinner to Dr. Schacht an Thursday evening at the Links
Club.

I had supposed that the plan was that we were to

meet him at luncheon on Thursday.

I have an engagement of

long standing to speak to the Electrical MAaufacturers
Club on Thursday evening, and as their meeting is to be

held at the Westchester Biltmore Country Club, I can not
possibly come to you.

I regret this deeply because I have

looked forward to a dinner of exactly this kind given to
Dr. Schacht.
Very sincerely yours,

Governor Benjamin Strong,
33 Liberty Street,
New York City.




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201d-i0 St\c10a2A01,-:

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tAid




I

9261 63.

DO

Oototer 60, 1925.
My dear Owen:

am sorry indeed you coul not be with UF on
Thursday evening, and 1 appreci,te your writing me as you did.

director e

The ch,r1ge in the pitt to have Dr. Schacht met our
OGeb.8i0r1C0 by the fct it '4as nece6e,ary for him

to 86e the Secretary of State in '. .aaninAon on Thursday mornirv).
So on r.,ther ahor:, notice, e
to make. c!inner,party of it.
Hoever, e r. chacht will te here until about the
fifteenth, I Jm hopeful that you and ha ',.ndI can have a wiet

dinner together, 4th opportunity for

chat; poseibly at my
apartment.
He will return from Chicago by a week from Yond-y,
,klen 1, Loo, will be Lack from 4ashington.
ihve you a f'ree
evenin,', that week which we might hold tentatively?

4th beet regards, I am

Faithfully your,

Mr. Owen Young,
120 Eroadway,
New York

(signed for Govrnor Strong
in hie aL8ence)




120 BROADWAY, N EW YORK
ROOM 2058

(72b

November 2, 1925

OWEN 0 YOUNG




My dear Bens

a

week from Monday is the ninth.

I aln be in

town on that evening and on Friday evening, the thirteenth.
The intervening days I am obliged to go out of town as I
have to speak in 6yracuse and Worcester, and it will not be
physically possible for me to get back here and meet any
appointments and those speaking engagements.

There is a

bare possibility that General Dawes may be here on Friday
evening, the thirteenth, and that he will stay with me.
If so, it might be interesting for you and Dr. Schacht to
have dinner with me at my apartment that night.

I will know

probably on my return from the country on Thursday of this
week whet the General's plans are and then I will write you
again or let you know at the Board meeting.

Yours v

NT. Benjamin Strong,
33 Liberty street,
New York City.

y sincerely,

t

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, Mit

November 6, 1926.
My dear Owen:

Your note of November 2 reached
me here in WaShington when I was tied up
in a. conference. And this is really a con-

firmation of what was telephoned to you this
morning from New York.

Owing to Dr. Schacht 's absence

in Chicago, end my absence here, it is
impossible for me to send a reply until
Monday, when I shall do so by telephone.

I understand that Monday is
now out of the question in any event, so
if we can dine on Friday the thirteenth it
would suit me slAendidly.

I know you will underat:)nd and

excuse this belated zeTly.

Sincerely yours,
Mr. 07en Young,
120 Broadway,
New YJrk City.

/)AAA



CV1
'-')14




COPY OF TELEGRAM

1927 JAN 5
BM

BILTMOLLE

NC

PM 12

1030A

OWEN D YOUNG
GENERAL ELECTRIC COMPANY 120 BROADWAY NEW YORK NY

REPLYING TO WIRE RECEIVED FROM CASE WHILE WE HAVE NOT HEARD WRAT
CLARENCE LEARNED FROM HIS VISIT TO WASHINGTON YESTERDAY FOR
PURPOSE OF DISCUSSING PROPOSAL THAT HE FILL FIRST VACANCY
HARRISON AND I BOTH AGREE THAT IT WOULD BE aPLENDED IF YOU MOULD

ACCEPT THEIR PROPOSAL

STOP

OUR ONLY FEAR IS HOWEVER THAT IT

WOULD BE SO SATISFACTORY AS TO ENCOURAGE THE BOARD FURTHER TO
DELAY FILLING FIRST VACANCY

STOP

CASES TELEGRAM INDICATES

BOARD BELIEVES THEIR PROPOSAL TO YOU MOULD FACILITATE MUTUALLY
SATISFACTORY ARRANGEMENT CONCERNING FIRST VACANCY WHICH THEY SAY
SHOULD BE FILLED BY SOME ONE BETTER KNOWN

STOP

IN VIEW 01 THIS

INFKRF.NCE HOPE THAT YOU WILL BE ABLE TO CONVINCE BOARD OF WISDOM
OF A COMBINATION OF THEIR PROPOSAL ANL OURS AND THAT YOU GILL BE

ABLE TO ACCEPT ON THAT BASIS SO AS TO HAVE WHOLE MATTER PROMPTLY

SETTLED STOP

YOU REALIZE OF COURSE THAT THEIR PROPOSAL NCULD

DISQUALIFY YOUR BEING AN OFFICER DIRECTOR LIPLOYEE OR STOCEHOLLER
OF ANY BANK

STOP

BEST TO YOU AND ALL AT THE BA1NK RI= US BOTH
STRONG

January 5, 1927.

to M-. Case,
Telegram telephoned by Miss Morrison, ::::ecretn-y to M. Gwen L. Ioung, at 3:45 0. m.

Asheville,

C. 1/5M.

"0. L. Young

After full discussion seems best for Harrison to return Nev ion( tonight so
so to report fully to you anc directors tomol ow.

Hope this satisfactory.
Benj. Ltrong."

Miss Morrison reports that Mr. Young was called uptown, but said he zould
this matter with you tomorrow.




GiECUSC

New York, January 8, 1927.

C)




Dear Mr. Governor:

The developments during the past week have

been momentous.

I was called to Washington on Tuesday, the

4th instant, and was most cordially received by each member

of the Board.

The outstanding feature of my contacts with

the memoers thereof was their manifestation of friendliness

to our Board and to yourself.

quiry

Without solicitation by in-

or suggestion on my part, they testified in unmistakable

sincerity as to a genuine friendliness, admiration and respect

for you personally, while their reference to your masterful

leadership was not less emphatic than it was earnest and sin-

cere.

As a matter of fact they are proud of your record.

Their appraisal of your work during and since the war stands

as a splendid and eloquent monument of appreciation.

Mr.

Miller was quite as voCal as his colleagues in this connection.




-2-

You can imagine the thrill it gave me to receive

their recommendation that Mr. Owen Young be transferred to a Class

"0" status and thereafter be appointed by them as Deputy Chairman,

only to be followed by the suggestion that Mr. Gates McGarrah be

appointed by them as Chairman of the Board and Federal Agent.

While dispelling all misgivings as to the possibility of naming

a less distinguished and able incumbent of that key position, it

brought a compelling conviction of their interest in the New York

Bank, in you personally, and in their wisdom in thus fulfilling

one of their most Important statutory responsibilities.

Surely

the biggest and most important Bank in tne world is entitled to such

a set up as this presents.

I am convinced that in giving yourearnest

support and whole-hearted sympathy to this action, and thereafter in

according Mr. McGarrah your cordial and ccmplete cooperation in

prosecuting the operations of the Bank, your own peace of mind and




its welfare can thus be assured.

It will, I am persuaded accomplish

another most important result, and that is the certain preservation

of your own well deserved reputation for unselfish, distinguished and

successful service in the upbuilding of the system, and at tne same

time prove again your readiness to do all that in your power lies

to safeguard its perpetuity in the interest of our country and of the

world.

Faithfully you

/4




New York, January 8, 1927

De r Mr. Governor:

The develoments dur inc the past week have
been momentus.

I ma called to ..ashington on Tuesday, the

4th instant, and was most cordially received by each member

of the Board. The outstanding feature of my contacts with

the mein al's thereof was their nanifestat ion of friendliness

to our Board and to yo.xself. Without solicitation by inquiry or s'icr.,,estion on my part, the - testified in unmistakable

sincerity as to a genuine friendliness, admiration and respect
for yen personally, while their reference to your master tal
leadership wa: not less emphatic than it was earnest and sincere. As a matter of fact they are proud of year record.

Their appraisal of your work duri-kg and since tle war stands
as a splendid and eloquent monument of appreciation. Mr.
Miller was 3,12.1.to as yodel as his colleagues in this counection.




You can imagine the thrill it gave me to receive

their roc annvondition that Mr. Owen Yaang be transferrod to a Class

"C"

status and thereafter be appointed by them as

Only t o be followed by the sugcest ion
appointed by thrm as

Chairman of

Deputy Chairman,

that Lr. Gatos UcGarrah be

the Board and Federal Agent.

'ails dispelling all misgivings as to the possibility of naming

a less distinguished and able incumAnt of that key position,

it

brought a compelling conviction of their interest in the Nei; York

Bank, in you ,personally, and in their wisdom in thus fulfilling

one of their mostimpertant statutory responsibilities. Surely
the biggest and

most important Bank In the world Is entitled to such

a sot up as this presents.

support and whale-hearted

according

I am

convinced

that in aiving' yowearnest

symathy to this action, and

tereafter in

Ur. McGarrah your cordial and c cmpIete cooperation in

prosecuting the operations

of the Bank, your own peace of mind and

its welfare can thus be assured. It will, Iam persuaded accomplish
A

another most important rem*, and that is the certain preservation
of your own well deserved reputation for unselfish, distinguished and

successful service in the upbuilding of the vstem, and at the same
time prove agnin your readiness to do all that in your power lies

to safeguard its perpetuity in the interest of our country and of the
world.




Faithful4 yours,




New

York, January 8, 1927.

Dear Governor:

Since October a very great many unusual and fundamental
problems concerning our work and responsibilities have confronted the
directors of the Federal Reserve Bank.

The developments since Mr. Jay's

resignation on the 4th of December particularly have been fraught with
great significance as to the future policies and the effectiveness of
the Bank.

The lack of your constant counsel and advice has been keenly

felt by all of us.

While all of the directors have appreciated the

great responsibility resting upon them and have given to the limit from
their knowledge and experience, the duty of acting sanawhat as a clearing house has devolved, without planning but for sundry reasons, upon
the three of us who are writing these letters.
In thinking together, consulting together and studying the wonderful performance of the Bank in its brief history in serv-

ing our nation, and not alone our nation but the nations of Europe and it is not too muth to

say all of civilization - the outstanding,

the startling, the inspiring part of it all is the great work you have
done, and the sacrifices you have maue to do it.

The wisdom of maw men and centuries of experience
were behind the framing

the passage of the law.

possible to give anyone or any small group of men more than the credit
of performing a duty in a most capable way.

But even their good inten-

tions would have come to naught but for Benjamin Strong, who threw him-

It wo

-2-

self body and spirit into making a wonderfully fine theory a practical
success as a benificent instrument for the service of mankind.
Your interpretation of the law in its greatest fundamental,

that Of having a self-reliant, courageous, independent administration of
each regional bank, and in the manner of administering the great responsibilities, is unquestionably the sound one.

The difficult pioneer work

of interpreting and establishing tnese principles can justly be compared
to the work of the great and distinguished Chief Justice, John Marshall,

wren it fell to his lot to analyze, understand and interpret the constitution of our country.
Your arduous labor as the great pioneer has been performed well,
and we think you have almost established the principle.
done must be preserved.

Villat you have

It is for that great purpose, after weeks of de-

liberation, considering as we believe every pit of the evidence obtainable
and the conceivable future possibilities, and in our sense of duty in
meeting the great responsibilities which rest upon us and our sense of appreciation for the wonderful work you have done, as well as our obligation
to you as a friend to serve you and preserve your great work for the generations to come, that we deem it imperative to place our views before you.

We think a situation has developed, through no planning or influence of our awn, whiCh gives the fairest promise that we could imagine,

not only to hold what you have already accomplished, but to add the few
finishing touches that would complete it, and fix for all time the high




'7

ideal you have conceived and worked for in our Bank.

We believe we

have investigated as you would have investigated if you had been here

with us, we have analyzed as you would have analyzed, and have reached

the conclusion that we feel quite confident you would have reached and

which we believe when you have heard this presentation you will readily

agree to.

We have put upon Mr. Young the responsibility for presenting

the facts in a letter that goest to you at this time.

Yours most sincerely,

Benjamin Strong, Esq.,
Asheville, N. C.




New York, January 8, 1927.

Dear Governor:
Since October a very great many unusual and fundamental

our

problems concerning

work and responsibilities have confronted the

directors of the Federal Reserve Bank.

resignation on the 4th Of

The developments since Mr. Jay's

December particularly have been fraught with

great significance as to the future policies and the effectiveness of
the Bank.

The lack of your constant counsel and advice has been keenly

felt by all of us.

While all of the directors have

appreciated the

great responsibility resting upon them and have given to the limit from
their knowledge and experience, the duty of acting somewhat ae a clear-

ing house has devolved, without planning but for sundry reasons, upon
the three of us who are writing these letters.
In thinking together, consulting together and studying
the wonderfial performance of the Bank in its brief hiatory in serving
our nation, and not alone our nation but the nations o'.7 Euroae - and

it is not too much to say all of civilization - the outstanding, the
startling, the inspiring part of it all is the great work you have done,
and the sacrifices you have made to do it.

The wisdom of many men and centuries of experience were
behind the framing

and the paesage of the law.

It would be im-

possible to give anyone or any small group of

men more than the credit

of performing a luty in a. most capable way.

But even their good inten-

tions would have come to naught but for Benjamin Strong, who threw him-




-2
self body and spirit into making a wonderfully fine theory a practical
success as a beneficent instrument for the service of mankind.

Your interpretation of th,l, law in its greatest fundamental,

that of having a self-reliant, courageous, independent administration of
each regional bank, and in the manner of administering the great responsi-

bilities, is unnuestionably the sound one. The difficult pioneer work
of intrpreting and establishing these principles can justly be compared
to the work of the great and distinguished Chief Justice, John Marshall,

when it fell to his lot to analyzekunderstand and interpret and conetitution of our country.
Your arduous labor se the great pioneer has been pertiormed well,

and we think you hays almost established the principle.
done Evert be preserved.

What you heve

It is for that greet purpose, sfter weeks of de-

liberation, considering. ef we believe every bit of the evi dence obtainable

and the conceivable future possibilities and in our sense of 'duty in
meeting the great rtsponeibilities which rest upon on' end cur sente of ap;recietion for the wonderful work you have done, es well as our obligation
to you as & friend to serve you and preserve your great work for the generations to come, that we deem it imperative to place our vicvs before you.
We think a situation has developed, through no planning or influence of our own, hich gives th.e fairest promise that we could Imagine,

not only to bold what you have already accomplished, but to add the few

finishing touches that could complete it, and fix for all time the high




Ideal you have conceived and worked for in our Bank. We believe we

have investigated as you would have investigated if you had been here
with 118, we have analyzed as you would have analyzed, and have reached

the conclusion that we feel quite confident you would have reached and
which we believe kl.en you have heard this presentation you will readily

agree to.
We have put upon Mr. Young the responsibility for presenting

the facts in a letter that Eoes to you at this time.
Yours most sincerely,

Benjamin Strong, Esq.,




N. C.

(Dictated by S.J.R.
3igned by ail 3)




New York, January 8, 1927

Dear Governors

As you know, Mr. Woolley vent to Washington last
Tuesday in response to the tender which the Federal Reserve
Board had made to him of the Vice Chairmanship of the Board of
Directors of the Federal Reserve Bank of New York.

Mr. Woolley

explained to the Board that he preferred not to accept that
designation for personal reasons and urged the reappointment of
Mr. Saunders.

He learned at that time that the Board had definitely

taken action establishing the principle of rotation in office of
Government directors, and to secure that result Government directors would not be expected to serve more than two terms.

Mr. Saunders had already been notified of the attitude of the
Board.

As a result of the discussion, it was suggested that Mr. Young

resign as a Class "B" director and accept from the Federal Reserve
Board appointment as a Class "C" director with the designation of
Vice Chairman of the Board.

The Federal Reserve Board, wit

concurrence of the Secretary of the Treasury, and the Board of
Directors of the New York Bank with the concurrence of the Executive
Officers of the Bank, were all unanimously in favor of that solution,

and accordingly on Thursday next, Lt. Youne will resign as a Class "B"
director and will be named by the Federal Reserve Board as a Class "C"
director with the designation of Vice Chairman.

Mr. Young, in his letter to Governor Crissinger, While
not making it a condition of his acceptance of the Vice Chairmanship,

expressed the hope that a permanent Chairman would be promptly chosen
so as to relieve Mr. Young from the burdens of Acting Chairman and




- 2 -

also because it would be in the interest of the Bank.
The Federal Reserve Board indicated to Messrs.
Woolley and Reyburn on Tuesday and Wednesday of this week,
that the

Board was ready and anxious to make promptly appoint-

ment of Federal Reserve Agent and Chairman of the Board.

The

Federal Reserve Board expressed the hope that a man of the standing and experience of Mr. Gates MCGarrah might be found Who would
accept that important place.

In fact, the Board expressed the

view that they would act on Mr. McGarrah's appointment at once

and inquired of Messrs. Woolley and Reyburn as to the best method
of presenting the matter to Mr. McGarrah.

They asked the pri-

vilege of making their suggestion on that matter to the Board
later.

Afte r the Board had been advised of Mr. Young's accept-

ance of the Vice Chairmnoship, Governor Crissinger called
Mr. McGarrah on the telephone and asked him to come to Washington.
As a consequence, Mr. McGarrah is going to Washington on Monday
evening and will spend Tuesday with the Federal Reserve Board.

At

that time the Board will urge upon him acceptance of the Chairmanship of the Federal Reserve Bank of New York.

It is the imminence

of this action Which leads us to join in this long letter to you
and send it by the hand of Mr. Harrison.

Inasmuch as the Board is ready to act on an appointment

idich

is satisfactory to us all, it seems to us that we Should make

every effort not only to facilitate that action but to urge upon
Mr. McGarrah the acceptance of the position.

At tte conference in Washington, the members of the

O

3 -

Federal Reserve Board expressed the greatest confidence in and
If there was any feeling on the part of

respect for Dr. Burgess.

the members of the Board, Which we doubt, that the New York Board
had overstepped the proprieties in recommending Dr. Burgess, it is
now removed.

The Reserve

Board, however, feel that it is more

desirable at this time to take a man of high position from the banking world for that office than it is to promote a man less well known
from the organization itself.

The Board recognizes the beneficial

effect of the appointment of a young man like Dr. Burgess on the
morale of the bank organization, but they feel that the other course
would now be wiser in the interest of the Bank of New York and the
System as a whole.

It is certainly impossible for us to say that

that is an unreasonable position forthe Board to take.

It has much

to commend it, and indeed if we could obtain a man like Mr. McGarrah,

we believe that the suggestion of the Board would be wiser than our
own.

We say this retaining our high appreciation of Dr. Burgess and

supporting firmly our original presentation of his name.

Now the question is can Mr. McGarrah be persuaded to
accept the appointment.

We think that lies largely in your hands.

Obviously,he would not ccnsider it for a moment unless you made it
known to him, clearly and enthusiaastically, that yau would like to
have him associated with ycn in the work of the Bank in the full and
equal partnership which should exist between two men occupying those
high positions.

We believe that if Mr. McGarrah can be persuaded to

accept this appointment, it will improve greatly the relations between







- 4 -

the Federal Reserve Board and the New York Bank.

We confidently

believe that many of the irritations which have troubled you so

much and given us so much concern will be alleviated and that you
will have as Governor not only less troubles but a freer hand in
working out the great programs Which you have initiated and Which,
with difficulty, have been executed.

One thing more would probably be necessary to induce
Mr. McGarrah to accept the appointment, and that would be that the
Invitation of the Federal Reserve Board, showing their unanimous
action and emphasizing the importance of the Federal Reserve Bank

of New York and the position of Chairmanship, be made public.
Such an invitation would not be in derogation of the position of
Governor but would emphasize the importance of the position of the
Bank.

Now we realize fully that this situation is not without
difficulty.

On the one side it is necessary, in justice to

Mr. McGarrah, to create a situation so that the general public will
not feel that he it stepping down from his high position in the
banking world and taking a less important place.

If that impression

were created, false rumors would immediately arise of unpleasantness
in his existing association and might have unfavorable reactions on

the Chase Bank.. Therefore, we must all join in doing everything we
can to emphasize the importance of the position to which Mr. MCGarrah
is called.

On the other hand, in creating that emphasis,none of us

would be willing that any reflection should come on the dominance
of the Governorship in the handling of the bank.

That would be




doubly unfortunate.

First, it would be wholly unfair to you

and certainly you must know that we Who sign this letter are as
jealous of your position as you ought to be.

Again believing as

we do that the New York Bank should function as an individual
unit, we could not Agree to any program which would give emphasis to the notion that the Federal Reserve Board was running
our bank through its appointee
Chairman of the Board.

the Federal Reserve Agent and

These difficulties we are confident

can be met with justice to you and Mr. McGarrah and to all
interests involved.

We mention them only because we want you to

know that we have them in our minds and that everything that we
say in this letter is in full appreciation of those problems.

On the other hand, we feel most deeply that no greater thing of
advantage could happen to the Federal Reserve Bank of New York
than to have you as Governor supported by such a man as
Gates McGarrah as Chairman.

In our judgment, if the matt

rightly handled, ,it will increase in the public estimation the

importance of the Office of Governor.

From what we know of your attitude toward this *hole
situation, we assume that this program will not only be acceptable
but will be highly satisfactory to you in all respects.

If you have

any reservations about it, however, then we should like to talk the
matter over with you quite fully before you came to any conclusion.
We feel it so important that either one or all of us even, if that
were necessary, would gladly come to Ashville for the purpose.




However, that will probably be unnecessary unless we have fully
misinterpreted your position.
Most sincerely yours,

Benjamin Strong, Esq.
Ashville, N. C.

New York, January 8, 1927.

Dear Governors

As you know, Mr. Woolley went to Washington last
Tuesday in response to the
Board had made

to him

tender

which the Federal Reserve

of the Vice Chairmanship of the Board of

Directors of the Federal Reserve Bank of New York.

Mt. Woolley

explained to the Board that he preferred not to accept that
designation for personal reasons and urged the reappointment of
Mr. Saunders.

He learned

at

that time that the Board had definitely

taken action establishing the principle of rotation in office of
Government directors, and to secure thet result Government directors would not be expected to serve more than two terms.
Mr. Saunders had already been notified of the attitude of the
Board.

resign

As a result of the discussion, it was suggested that Mr. Young

as a Class

"B" director and accept from the Federal Reserve

Board appointed as a Class "C" director with the designation of
Vtice Chiirman of the Board.

The Federal Reserve Board, with the

concurrence of the Secretary of the Treasury, and the Board of

Directors of the New Yorkbank with the concurrence of the Executive
Officers of the Bark, were all unanimously in favor of that

solution,

and accordingly on Thursday next, Mr. Young will resign as a Class "B"

director and will be named by the Federal Reserve Board as a Class "C"
director with the designation of Vice Chairman.

Mr. Young, in his letter to Governor Criseinger, while

not making it a condition of his acceptance of the Vim Chairmanship,
expressed the hope that a permanent Chairman would be promptly chosen
so as to relieve Mr. Young from the burdens of Acting Chairman and







also because it would be in the interest of the Bank.

The Federal Reserve Board indicated to Messrs.
Woolley and Reyburn on Tuesday and Wednesday of this week,
that the Board was ready and anxious to make promptly appointThe

ment of Federal Reserve Agent and Chairman of the Board.

Federal

Reserve Board expressed the hope that a man of the stand-

ing and experience of Mr. Gates W. McGarrah might be found who
would accept that important place.

In fact, the Board expressed

the view that they would act on Mr. MeGarrah's appointment at

aeyburn as

once and inquired of Messrs. Woolley and

method of presenting the matter to Mr. McGarrah.
privilege of
later.

making their suggestion

to the best

They asked the

on that matter to

the Board

After the Board had been advised of Mr. Young's accept-

ance of the Vice Chairmanship, Governor Crissinger called

Mr. McGarrah on

the telephone and asked him

to

come to Washington.

As a consequence, Mr. McGarrah is going to Washington on Monday
evening and will spend Tuesday with the Federal Reserve Board. At

that time the Board will urge upon him acceptance of the Chairmanship of the Federal Reserve Bank of New York.

It is the imminence

to you

of this action which leads us to join in this long letter
and send it by the

hand of Mr. Harrison.

Inasmuch as thE Board is ready to act on an appoint-

ment which

is satisfactory

to us all,

make every effort not

only to

upon Mr. McGarrah the

acceptance of

it

seems to us that we should

facilitate that action but
the

to urge

position.

At the conference in Washington, the members of the

- 3 -

Federal Reserve Board expressed the greatest confidence in and
respect for Dr. Burgess.
the members of the

Board,

If there was any feeling on the part of
which we doubt, that the New York Board

had overstepped the proprieties in recommending Dr. Burgess, it is
now removed.

The Reserve Board, however, feel that it is more

desirable at this time to take

t

man of high position from the Ilank-

ing world for that office than it is to promote s man less well known
from the organization itself.

The Board recognizes the beneficial

effect of the appointment of a young man like Dr. Burgess on the
morale of the bank organization, but they feel that the other course
would now be wiser in the interest of the Bank of New York and the

impossible
It is

System as a whole.

for us to say that
certsinly

that it an

unreasonable position for

to commend

it, and indeed if we could obtain a man like Mr. McGarrah,

we believe that the suggestion of the
onn.

the Board to take.

It has much

Board would be wiserthan our

We say this retaining our high appreciation of Dr. Burgess and

supporting firmly our original presentation of his name.
Now the question is can Mr.

accept the

appointment;

McGarrah be

persuaded to

We think that lies largely in yoto, hands.

Obviously, he would not consider it for a moment unless you made it
known to him, clearly and

enthusiastically,

that you would like to

have him associated with you in the work of the bank in the full and
equal partnership which should exist between two men occupying those
high positions.

We believe that if Mr. Mcnarrah can be persuaded to

accept this appointment, it will improve greatly the relations between




4-.
the Federal

Reserve:

believe that many of

Boardand the New

the

York Bank.

We

confidently

irritations which have troubled you so

alleviated and

much and given us so much conoern will be

that you

will have as Governor not only less troubles but a freer hand in

working out the
with

difficulty,

great programs which you have initiated and which,
have been executed.

One thing more would probably be

necessary to induce

Mr. McGarrah to accept the appointment, nnd that would

be that the

invitation of the Federal

unanimous

action and emphasizing the

Reserve Board, showing

their

importance of the Federal Reserve Bank

of New /ork and the position of Chairmanship,

be made public.

Such an invitation would not be in derogation of the position of

Governor but would emphasize the importance of the position of the
Bank.
Now we realize fully
difficulty.

that

this

situation is not

without

On the one side it is necessary, in juetive to

Mr. McGarrah, to create e situation so that the general public will
not feel that he is stepping down from his

high position in the

banking world and taking's, less important place.

If that impression

were created, false rumors would immediately arise of unpleasantness
in his existing aseociation and
the Chase

Bank.

Therefore, ne

can to emphasize the importance
is called.

might have unfevorable reections
must sll join

in doing

on

everything we

oC the position to which Mr.

McGarrah

Om the other hand, in creating thst emphasis, none of us

would be willing that any reflection should come on the dominance
of the Governorship in the handling of the bank.




That would be

doubly unfortunate.

First, it would be wholly unfair to you

and certainly you must know that we who sign this letter are as

jealous of your position as you ought to be.

Again believing as

we do that the New York Bank should function as an individual
unit, we could not agree in any program Which would give em-

phasis to the notion that the Federal Reserve Beard was running

our bank through its appointee - the Federal
Chairman of the Board.

Reserve Agent and

These difficulties we are confident

can be met with juetice to you end Mr. McGarrah and to all

interests involved. ine mention them only because we went you to
know that we have them in ear

minds and that everything that we

65y in this letter is in full appreciation of those problems.
On the other hand, we feel most deeply that no greater thing of
advantage oould

happen to the Federal Reserve Bank of New York

than to have you as Governor supported by Such a man as Gates
McGarrah as Chairman.

In our judgment, if the matter is rightly

handled, it will increase in the public estimation the importance
of the office of Governor.
From what we know of your attitude toward this ahole

situation, we assume that

this program will not only be acceptable

but will be highly satisfactory to you in all respects. If you have
any reservations about it, however, then we should

like to talk the

matter over with you quite fully before you come to any conclusion.

We feel it so important that either one or all of' us even, if that
were necessary, would gladly come to Asheville for the purpose.




However, that will probably be unnecessary unless we have hilly

misinterpreted your position.
Most sincerely yours,

(Dictated by O.D.Y.

Signed by all 3)

Benjamin Strcng, Esq.,
Asheville, V.. C.







The Federal Reserve Board has informally advised the Board

of Directors of the Federal Reserve Bank of New York of the intention

of the Reserve Board, acting unanimously and with the express concur-

rence of the Secretary of the Treasury, to nominate Ar. Gates McGarrah

of New York as Chairman of the Board of Directors of the New

The Board of Directors wishes to record its

gratification at

fork Bank.
the nomina-

tion of such an experienced and distinguished banker to not as its

Chairman.

The Directors of the Federal Reserve Bank of New York con-

sides

that the

resignation of Mr. Pierre Jay as Chairman brings to an

end the first era In the history of the Bank.

Under the leadership of

Mr. Benjamin strong as Goveruor and Mr. Jay as Chairman, the

institu-

tion has been created; its general habits and customs of doing business

established; and its organization has become seasoned and adjusted both

in periods of strain, suck as the war, and in periods of alternate

strains and ease since the war.

from every point of

A new building has been erected, and

view, the period of organization, initial growth

and experience has been a truly marvelous performance, reflecting

the greatest credit not only on the men above named, but upon their

associates, the Deputy Governors, the Assistant iederal Reserve
Agent, and the beads of departments, and broadly speaking all employees.

A very real morale has been created both of loyalty to the institution
and

the System, and of service to the public.. During that period there

has been between all of the men engaged, the most effective

cooperation

and the most unselfish and devoted effort which has accounted

for the

success of the Bank, and leach it is hoped may be continued through all

Its life as a guaranty of the successful administration of this great
undertaking, and as a

monument to its officers.

The Board of the New York Bank believes that at the
this era

the domination of

a man of the standing

close of

of Mt. Gates McGarrah

as Chairman of the Board and his aceeptanoe of that office sill per-

manently set the standards for the future so that the entire financial community

Governor of

will recognise that

positions of Chairman and

the Cederal Reserve Bank of New York are the highest

financial positions in this tederal




the

Reserve

District.

By way of expressing their appreciation of the action of the




-3Reserve Board and of Mr. McGarrahls acceptance, the Board of Directors

of the New York Bank, with the approval of the Governor, wish to

establish In this instance such relationship between the offices of
Chairman and Governor as exists quite generally between those offices

in the great commercial banks and industrial institutions of this
District, and therefore, the Board grants to the Chairman such powers
as may be needed to accomplish that result.
This grant is made supplementary to all powers which the

Chairman has under the authority of the iederal Reserve Act and to
all which have been or may be from time to time conferred upon him by

the federal Reserve Board under the authority of the Act. In taking
this action, the New York Board does not wish to raise any issue 48 to

where its authority under the law begins or ends In the matter of
delegating powers to the Chairman.

Its only purpose is to make clear

that so far as the New York Board can grant them, the Chairman shall

have all the powers necessary to establish the relationship above
indicated. It has been thought wise not to specify with any particu-

larity the powers and duties of the two offices, and we believe that

a

4

is not generally done in other institutions, because such specifications

are quite likely to turn out to be limitations rather than grants of

powers,

It is generally recognized that the Chairmau, as the

presiding officer of the Board, Shall be the director of such

policies of the Bank as the Board of Directors lay from time to time

adopt with the approval of the iederal Reserve Board exercising their

supervisory powers under the aot.

It is also reoognised that the

Governor shall be the executive head of the Baak with the duty and

responsibility of executing all action taken by the Board exaept in

those specific cases where some exceptional duty is delegated to the

Chairman by the

Act or by the Reserve Board under the act.

This action is taken at this time in order that experience

ay be gained during the period of mft. lioGarrah's chairmanship as to

how the great offices of Chairman and Governor can best function in

the

idterest

of the System in general and of this Bank in particular.

At the end of the Chairmanship, or indeed during it, and in the

light of such experience, suoh formal action can be taken, as may be







needed, to establish those relationships for succeeding periods.

It

is apparent that such experience should be had before final action is

taken, because in the case of this Bank, the Chairman is not, us in
other institutions, elected by the Board, but named by the Federal
Reserve Board, and it may not always huppen that the oboice will b0,

as in this case, of a man .how either board, acting independently, would
have unanimously selected for that position.

It mey well be that as experience develops, the federal
Reserve board will desire to act without being bound in az*/ sews by

this resolution or being oonsidered to have acquiesced in it, except

temporarily, until further action, and therefore, it has been passed
so as not to require concurrent approval by the Wooderul Misery*

Board or to commit it in any way even to the extent of that Board

assenting to this delegation of power to their own appointee.

, present board of Directors does express the hope,
however, that subsequent boards of the iederal Reserve Bunk of

New York will treat this resolution as a representation of its intent
to :Zr. McGarrah as to the powers and duties of Chairmen, and that sudh




-6
powers and duties will not be changed during his term of office as
Chairman without his approval and consent, and that of the Governor
of the Bank.

Biltmore, N. C.
Suaday, January 9, 1927.

My dear Associates:

Mr. Harrison has just handed me your joint letters, and reported the
developments of the last week.

Had I ever doubted the devotion which you feel

for the Bank, which I never have, those doubts would be dispelled by such letters
as you send me.

Fven more, I am touched and greatly affected by the evidence

they give me of your regard and confidence, and for that I am wholly unable to
express even a small part of my appreciation.

But it heartens me wonderfully

at a time when it has been needed, to have such letters to read and ponder.

I hope you understand, as you must, that no one can replace Mr. Jay
as my partner and confidant;

or in my affections as an associate in the

The present situation, resulting from his resignation and my illness, and now the termination of Mr. Saunders, service on our Board - leads me to write
you as follows:
First.

You need have no thought that I shall attempt to accomplish

the impossible in seeking or asking to have Burgess appointed.

judgment, and still is, that in the long run, that would prove best for the Bank
and the System.

All this I have explained, and realizing now that it is im-

possible, I cheerfully accept that decision, with which I understand our directors
and senior officers agree.
Second.

There need be no hesitation in agreeing to any appointment

on the score that it would appear, within or without the System to Minimize my
personal position or authority in the Bank.

It was always a regret to me that

Mr. Jay never enjoyed the full recognition, publicly or privately, which he should
have had.

My effort has always been to make that clear, as you may recently

have observed.



So please dismiss any misgiving on that score.

-2-

persons]. advantages for myself, I would not now be in the Federal Reserve Bank.
Third.

As the Federal Reserve Board has decided not to appoint Dr.

Burgess, I am fully and wholeheartedly in favor of the appointment of Mr. McGarrah,
and have addressed the enclosed letter to him, for delivery as and when you decide,
hoping that it may aid in inducing his acceptance.
Fourth.

The possibilities of misinterpretation of his appointment by

the public, as you point out, are much in my mind.

It has no personal signifi-

cance for me, but has for the Bank and for Mr. McGarrah.

My hope would be that

such statement as the Federal Reserve Board and the Chase National Bank, see fit
to issue to the press, can be carefully examined and agreed in advance.

Of course

I would appreciate seeing them, but that is not necessary if you are allowed to
pass on them.
Fifth.

It seems important that Mr. MoGarrah be fully advised of the

scope and character of his work and responsibilities in the Bank before he decides.

Any change, certainly any considerable change in the present assignments, would involve many changes in our organization and possibly personnel, which I am sure
would be detrimental.
Sixth.

We cannot overestimate the value of having Mr. Young accept the

office of Deputy Chairman.

It will strengthen our hands with the Federal Reserve

Board and with the public.

We owe him much already and this greatly increases

our debt.
Seventh.

I have no fears that

in fact, or even in appearance, these

changes in our Board will alter or weaken executive management such as the law
intends.
Eighth.

The outstanding failure of the past twelve years work, so far

as I am personally concerned, is undoubtedly the inability to establish and maintain such relations with the Federal Reserve Board, as we should enjoy.

Possibly

other methods could have accomplished this, without too great sacrifice of




The proposed appointments may, and I am hopeful that they will,

independence.

accomplish what I have failed to do.

C)

Nothing would please me so much, just now, as the visit you

Ninth.

are good enough to suggest, - but frankly I have no reservations to express or deYou may say to Mr. McGarrah that if any argument of mine is needed to

bate.

persuade him to accept, I would hope to have him come down and let me talk it over
And if he does accept, I shall gladly make it my first responsibility, -

with him.

as it will also be a pleasure, to do everything in my power to make his work a
success and his association with us a joy and satisfaction.
Finally,

I must add a few personal words.-

It is

as I have had with such directors as we now have, that the greatest satisfactions
are realized.

Your attitude, your earnest endeavor at any sacrifice, to serve

the best aims of the Bank and of its officers, does give me a thrill of pleasure
which makes it all worth while.
Please understand how grateful I am,
Sincerely,
(Signed)

To

Messrs. Reyburn, Woolley and Young.

(Note:

The above is a typewritten copy
of Mr. Strong's handwritten letter.)




B. S.

CCAFI': :ilAL

Janu-ry 11, 1927.

1,r Mr. Young:
I returned from Asheville yesterday afternoon, and am enclo6in

a copy of h letter which Mr. Strong gave me to hand to you,

Mr. ioolley and Mr.

Feyburn, together with a copy of a letter which

he wrote to Mr. McGasrah and uhich Mr. heyburn handed to Mr. McGerrah
yesterday afternoon before he left for tashington.
I

shall, of course, be

clad

to tell you about my trip to

Asheville at any time that suits your convenience.

Suffice it to

say now that Mr. Strong Was unqualifiedly in favor of the whole
program.

Very sincerely yours,

Mr.
c/o
120
New

Owen D. Young,
General Electric Co.,
Broadway,
York City.

MLitt
Fnce.




ISC. 3. 1-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

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FEDERAL RESERVE BANK

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OFFICE CORRESPONDENCE
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FROM

DATE JaP- 191 1927

192_,

SUBJECT:

B. S.

Par. marked "A" will be interpreted by the particular person with whom
you are dealing, =-19, fixing his authority in the bank as the "superior authority."

I do not regard it as especially

important, as

that will or will not be the fact,-

as circumetances and personalities later may develop.

But it is important

the words and letters be free from any ambiguity, = So it is merely
now of exactly

expreesire what the directors desire.

that

a question

If they do not desire the

Chairman to be the last and final "authority" in the bank - to "direct" the

execution of the policies of the directere, then the expressions used will be
come up to make difficulty.

misleading, and later

I am glad to agree to this or any other statement for him to base his

decision upon - which the directors believe wise for the bank - except one which
may be misunderstood -

or mean something different for him

than for

I am also clear that only a more exact statement of

the

the rest of us.

relationship,

than one which is either ambiguous or indefinite, will be needed for this pertieular person.

The one prepared is, I feel, a little indefinite.

clear that the Chairman

Why not make

directors, that he represents the F. R. Board - that he participatein all decisions - and
as a director is a participant in determining the policies - but is not the
is the spokesman and

executive head of the bank in
measure supervisory.
authority will

(under

operating and

representative of

organization duties.

But if he is to direct
the language) be

the

supreme.

the execution of policies,

I'd not




System.

his

object to such a

decision by the director, personally, - but believe it would be bad

bank and for the

He is in a

for the

Sc.i S.

1

815 m

FEDERAL RESERVE SANK

12,5

OF NEW YORK

nFFICE CORRESPONDENCEDATE
To
PROM

0. D. Y.

Jan. 19, 1927

SUBJECT

B. S.

-2Please do not overlook that it has long been desired by some members

of the F. R. Board - that the Chairmen should be in fact the executive and final
authorities in the Reserve Banks.

of that view).

(See Parker Willis's book and his reflection

Personally I think the directors are the supreme authority -

and the Chairman is their representative - but not the executive head of the
bank.

Hence my fear of ambiguity.

(copied from B.S.
pencil memorandum)




192_

January 20, 1927.

Dear Mr. Young:

I am enclosing an original and four carbon copies of
the memorandum which you left with me to-thy.

As requested, I

am sending e carbon copy to Mr. Whitmarsh without comment.

I

underetand that Mr. keybumn Is writing him separateiy.

I shall send you ,.. copy of Pr. 't,rongts pencil memorncum to you sometime tomorrow.

Very sincerely yours,

Mr. OwenD. Young,
120 Broadway,

New York City.




January 21, 1527.

Dear Mr. Young:

I am encioeing the original and one copy of Mr. Strong's
pencil note of January 19, concerning the memorandum which I took

to Asheville on t,ednesday.

I am also returning the original of

your memorandum, of which I purposely have kept no copies.

Sincerely yours,

Mr. Owen D. Young,
120 Broadway,
New York. City.
GLH.MM

Face.




1-7SM-9- 23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
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FROM




DATE
SUBJECT:

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FEDERAL RESERVE BANK

OF NEW YORK

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. I-75M-9-23

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CLASS OF SERVICE DESIRED
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THE

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UNION

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WESTE

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WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

TEL,
NEWCOMB CARLTON!. PRESIDENT

CHECK

AM

TIME FILED

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

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

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CLASS OF SERVICE

SYMBOL

TELEGRAM

DAY LETTER

BLUE

NICHT 1VIESSAGE

NITE

NIGHT LETTER

WESTE

NI

If none of these three symbols
appears after the check number of
words) this is a telegram. Otherwise its character is i ndicated by the
symbol appearing after the check.

TEL

NEVVCOMB CARLTON. PRESIDENT

UNION

CLASS OF SERVICE

SYMBOL

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If none of these three 'symbol:

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

appears after the check number o
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wise its character is indicated by thE
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A° filing time as shown In the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME.

Received at 62 Patton Avenue, Asheville, N. C.

D27 FEP

1

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cPB242 36

CD NEWORK NY1 154P
EiENJAL1 IN STRONG
ST UYVE SALTS

201
ROAD B I LTNIORE FOREST B Irr TORE NCAR

I AM QU ITE SA.T I SF IED THAT WE SHALL BR I NG THE PROGRAM THROMH
SUCCESSFULLY STOP WE ARE NOW DEVELOP ING DEF IN I TE PLANS AS "AC

HIS SIGNIFIED WILLINGNMSS TO ACCEPT IF PLANS CAN BE CARRIED
OUT W ITH APPROVAL OF EVERYONE
OWEN D YOUNG.

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144
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UNION

TEL

NEWCOMB CARLTON, PRESIDENT

CLASS 131- SLRVICt

SYMUL

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DAY LETTER

NITE

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AM

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NL

these three symbo
If none of
appears after the check (number of
words) this is a telegram. Otherwise its character is indicated by the

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

symbol appearing after the check.

the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on all messages, Is STANDARD TIME.

,tton Avenue, Asheville N. C

NI 1/69

4717

.77 EPHONED TELEGRAM
FEB

3937

2

PM

NEWYORK NY 2

9

BE LJA11 IN STRONG

ST UYVE SANT S ROAD B I LTMORE POREST B I LTMORE NCAR

MAC IS HELD HERE TMAPORAR I LY BY SUBPOENA IN LAWS U IT WH ICH W ILL
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SAT IIIDAY MORN I NG THEN ALL DETA IIS W ILL BE AGREED UPON !NCI UD
l'O11M OP ANNOUNCEMENT STO P E )CDPAC TED SALAR ir,S TWO PR I NC I PAL 07P I CRS

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BEST TO

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CLASS C

1BOL

TELEGI,

DAY LETTL.,

BLUE

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NIGHT LETTER

NI

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wise its character is indicated by the
symbol appearing after the check.

NEVVCOMB CARLTON. PRESIDENT

GEORGE W. E. ATKINS. FIRST VICE-FRESIDTTF.

DAY LETTER

BLUE

NIGHT MESSAGE

N1TE

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NL

If none of these three symbols

appears after the check number of
words) this is a telegram. Otherwise its character is indicated by the
symbol appearing after the check.

The filing time no shown in the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD IME,

Received at 62 Patton Avenue, Asheville, N. C.

J.

cn35 C2 2/74

GET DRAFTS OP AN NO UNCEMENT TO YO U FOR YOM S UGE ST IONS AND
APPROVAL BEFORE

I SSUE STOP I N V 1E17 OF MANY T H I NGS TO BE DONE

HERE D UP I NG NE >C1' WEEK OR TEN DAYS BEL IEVE
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TO V IS IT YOU STOP AFTER PRESS I NG MATTERS ARE CLEANED

UP THAT WILL, NAT URA.LLY COME STOP DELIGHTED TO HEAR SUCH GOOD
REPORTS FROM YOU AND I AM SURE THERE I S NOTH INC THAT YOU NEED
TO WORRY ABOUT HERE
OWEN D YOUNG.

SYMBOL

TELEGRAM

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If none of these three symbols
appears after the check number of

words) this is a telegram.

UNION

Alif t.STE

NITE

CLASS OF SERVICE

23

RiLEABL THURSDAY MORNING PApas. FaEUARY 10

On receiving notification of the appointment of
Mr. Gates M. McGarrah as Chairman of the Board

of Directors of the Federal Reserve Bank of New

York, Mr. Oaen_1on, Deputy Chairmen of the
Board, issU t e following statemont.

fhe directors and officers of the Federal heserve Bank of
New York Appreciate highly the action of the Federal Reserve Board in
naming Mr. Gates t. McGarran

as

Chains:en of the Board, imd they are compli-

zented by Mr. V cGarrah's accetance of that office.
The Federal Reserve Lank of New York as the largest bank in
Olet.t

the Federal Reserve System and the Iii(rgast bank of issue in the world,
A

should have as its chief officers men of cutstandinb achievement in the

financial field.

tith Mr. Gates t. gcGarrsh as the :)residing officer

of the Board, and Ir. Benjamin Stron14 as Governor, the board of directors

feel the standards for the future are set. Both are intimately familiar
with the banking needs of this Federal Reserve district and of this country
ae a whole.

In addition, both ure familiar with the economic and financial

conditions of turope, and will be of inestimable aid in working out with
the Fedora.' nouta.ve Board at-Ui;.shincton sound ad appropritAa policies.







Stuyvesent Road,

Biltmore Forest,
Biltmore, N.C., March 6, 1927.
My dear Owen;

In default of opportunity for a full diecuecion with you, the

next best thing is a letter, but I am afraid it will be a poor substituto

for a talk. I have been meaning to write it for some time past.
length is due to the necessity for recounting a little history.

its

By way of introduction: when the Federal Reserve Act became law -

in the face of strong banking oppouition, manifested more In "Tall Street"

than in any other part of the country - the principal fears aroused were,
I believe, three - othere being of love consequence.

The first was that

the new banking system, which was compulsory upon national banks, would be

politically controlled.
number of districts

The second was that dividing the country into a

as it developed, no les than twelve - strong sec-

tional fooling would enter into the management of the System and P. would

to impotent to perrorm its chief functions smoothly and efficiently.

The

third was that the Reserve Lanks, taking over such vast resources or capital and deposits from the national banks and with such broad owere

granted thaa, would become active competitors tc the detriment of the intereets of the member banks.

This was the situation before the War started.

In April or

May of 1914, Warburg brought the Federal Reserve Board's request, with the

approval of president Wile= and Secretary lc Adoo, that I should become
the head of the New York Bank, organize it end be responsible for its
success.

I was on the eve of sailing for Europe, and declined positively




3/6/27.

Mr. Young.

2.

On my return about the first of July, the pro-

to entertain the idem.

posal was renewed with greeter urgency, and nein T declined.

Then

came the liar end, an you know, a derperately bad situation, liable to become grently worse as the vicissituden of the "ar developed unlene our new
banking system imeedietely became effective.
was egein epproached by

ft

Some time in September I

committee of the rederel Reserve Board, of which

Warburg was one, with n very Insistent plee that 1: should undertake the

task.

I think they else brought me a letter from Fresid,nt rilson urring

me to do so.

They then told me that the Board wes encountering the

greatest difficulty in getting men to take positions in the Relervo Banks.
My memory is thet they did not definitely have

ft

heed for even one bank

of the twelve, and the argument was that if T would accept the position,
it would set en exemple that would enable them to get good men in the

other districto.

After many conferences with my associates in New York,

and especielly with Jock Morgan, Harry Davison, Dwight Morrow and r.

Paker, I was persuaded to any "Yes".

It involved a very greet finenciel

eecrifice, as you renliee, fnd, aH it has later developed,
my health as well.

ft

necrifice of

But my ecceptence of the position was only after

very clear declaration of my attitude which T made to 7arburg, Jack Morgan
and Merry Davison, end which rarburg advised me he had conveyed to his

associates in -ashington.

They told me that the hoed of the Bank would

be designated es the governor of the Banks that he would be the actual
executive head of the Benk end would be permitted to ease upon the selec-

tion of associates.

T replied that I preferred to accept the nocition

without any conditions whatever, either as to title or celery or otherwise




3.

3/6/27.

1Sr. Young.

soy° that I yould head the Bank, but that everybody chould underctond
what my position would be in certain contingencies'.

Tn a word, it woo

that any development in the lystom in the direction of a politicel control,
or of control by the banks of the country or by the *1,11 3treet honkers,
or any interference from any quarter with the autonomy and independence

of the leserve Bnnk of New 'fork as contemplPted by the etatute, would

reeu3t in my reeznation but would certainly result In my ettemoting by

n'or; legItimcte mon= to defeat any suel effort.
It developed thet the suggestion or my accooting this porition
coming from the redorel leservo Boerd geve rise to some resontmont on the

As I racer, the eix

part of those directors ot^o had thor been selected.

elective membero of the boerd had been elected by the. B nk

nrui one out

of the three Clacto C directors had been apoeinted - Mr. Ceorgo 7. roabcdy.
The other two appointments hed not yet boon made.

"Alen ' agreed to accept

the ooeition of Covernor, the Nord with my assent appointed "r. Say, and,

over my protect, appolrted "r. 47terec% to: the third Clow C director - a
undentrablo appointment, ao it later developed.

The directors then

appointed me Governor of the Ban's, but not before T had received a cell
from

Toodwrrd, the object of which, as shortly developed, wre to

satisfy himself and associates that the Fedorel Reserve, Bank, because of
my relection, would not become promptly "!organized."

satisfied before we got through.

T think ho ors

That possibility T never ?erred!.

But

I did fear the political control.
Privately, I told those members of the Pectoral Reserve Board

whom T knew that I anticipated difficult times aheed, on the one hand with




I
4.

3/6/27.

Mr. Young.

the members of the system, many of whom were hostile to the plan, and on
the other hand between the Reserve Dunks and the Federal Reserve eoard.

I also anticipated the development of feeling and jealousy between the
Reserve Banks.

It is a singular fact that the Reserve Banks had not been organized three months before all of these developments were actively harassing

us, and not the least was the imeedinte effort by the Tederal Reeerve Board
to assume powers and exorcise authori*- not contemplated by the ect.
result of the Governors' Conferences and our committee form of procedure,
we have succeeded in overcoming sectional jealousies.
work hemoniously together.

The teelve banks

Largely as a result of patient ecreepiege by

the Reserve Banks rather than attempting to move too fast, most of the
banking hostility to the System has been overcome.

The one outstanding

keeer in the System is in the unsatisfactory relations which now subsist
between practically all the Reserve Banks and the Federal Reserve hoard.

This difficulty is the result of inherent defects or weaknesses
in the schema itself. The situation which has now arisen was almost bound

to arise, and some of us clearly foresaw it in the early days.

The only

difference between what I anticipated being forced to do and what proves te

be practicable, is uue to the circumstance that my health is now such that

it is quite impossible for we to carry out such a program as I had outlined
wave years ago, for I am simply not physically equal to the task of dealing with a development Which I believe is almost certain to wreck the
System in the course of years; nor do I believe our directors would supper:
me in the attempt. Let mo endeavor to give you the picture as I see it,

and thereby explain, as I hope I may be able to do, the causes of the

major difficulties.
The Federal Government has never yet conetituted an independ-

ent bureau as a permanent branch of the Governient free of depertmental con-

trol under a member of the Cabinet which has been a success.

The Inter-

state Commerce Commission (certainly until the last three years) in bowing

to the public clamor for lower rates in the face of increasing costs of
operation, that is, wages, materials and taxes, wrecked the railroad system'
of the country, and it was not many years ago that we had between 60,000 and

my*




80,0G0 miles of our railroad lines in the hands of receivers - between a

fifth and a quarter of the entire mileage.

Many others barely eecceed.

The 0hipeing Board - there is no need to recount the history

of this unfortunate en4erpriee.
The Federal Farm Loan Beard.

l'ere the fects knoun in regard

to the affairs of this organization, as they are eeadually becoming mown in
the Treasury, I am satisfied that you would be astoeished.

They would be

fully known, were it not for the alarm which might arise among holders of the

obligations cif a system which is today borrowing over a billion dollars from

the eublic in one form or another.
The Alien property Custodian.

It has boon nothing short of a

scandal of the first order, and here the independent officer of the Government appointed to execute this vast trust of :300,000,000 or more is directly
responeible to the }resident.

Fortunately, recent changes have improved

matters.
The Tariff Commission.

It has been an unfortunate and imoot(

3/6/27.

Mr. Young.

6.

body fran the start.

I could go on at some length recounting others with which you
are doubtless familiar.

The one notable exoeotion is the 7ar Finance

Corporation, and its escape from the fate of these other independent bodies

has been due to the good fortune of getting a man of ontstanding ebility

111
.

and large independent means who dominated the citustion absolutely from the
stert and was willing to devote himself to the work so long as he could

control it, without fees of losing his job:
The reasons for these foilures hew

all

been disclosed many times.

The failures are principally due to inability to get good men.
aries are smn73.
tions.

The sal-

Political considerations enter too much into the selec-

Put what is even more serious, these men, when they are selected,

become timid and Inefficient, unconsciously almost subordipsting reo/ convictions to their fenrs lest they may not be reappointed or may encounter
such a body, as the history of every buroeuc stic body glows,

criticism.

endeavors to cure its own inefficiency by seeking to grasp more powers.

The difficulties of their odministration arise portly from inability to got
good essisttntn, because they cannot pay enough, and partly because business
is conducted as though it were a parliamentary body, votes must be had upon
everything, end members hesitate to go on record for and against importent
measures which may arouse antagonisms.

The result is a fairly equal divi-

sion between:




Hesitation, procrastination
Unfortunsto coarromires;

and inaction;

and

Mistakes.

Almost continuously throughout the past twelve years a compare-

3/6/27.

Mr. Young.

7.

tively small group of men in the Reserve Banks have been contending ugainnt

those difficulties in the Federal Reserve Board.

Their existence in well

known and admitted even by members of the Board.

Usually logical argument

and frank submission of the facts and persuasion has been sufficient.

At

times it has even been neceseary, us you know, to seek the influence of ths
Secretary of the Treasury.

The first real toot that arose in this rather subtle reaching for
authority by the Federal Reserve Board was, as T said above, within a few
months of the opening of the Menke.

The Board undertook to direct the

Fedora/ Reserve Bank of 1Jinneapolin (as I recall) to 'make e chenge in its

discount rate.

The Governor of that Bank protested by direction of it

director, and the matter was brought up at a meeting of the Governors in
Washington.

At a joint meeting with the Federal Reserve Board, this effort

s very frankly discussed, the Board attempted to assort its authority to
initiate changes in the rate, and as I was then Chairman of the Governors'
Conference, I told the Board, k, unenimoue direction of the Conference, that
if the Board undertook to do so the Reserve Banks would find it necessary to

test the Board's power in the courts.

It wee, of course, a bombshell, re-

sulted in the Board's asking the opinion of the then Attorney-General as to
their eoeere, and while I have never seen the opinion, I have been informed

that it was somewhat adverse to the Board's contention, except that in the
case of a Bank which proved obviously recalcitrant in remaining out of line

with the general level of rtes or something of that sort the Board could
initiate rate changes. T have since been informed that a later opinion
was secured from Attorney-General Daugherty or One of his assistants, which

rather sustained the Board's point of view.



We at that time consulted Mr.

Mr. Young.

8.

John G. Johnson of Philadelphia es

3/6/27.

to what the Act meant, and after some

correspondence, as I recall, he wrote an opinion which was substantially
similar to the one which I understand was given by President Wilson's

Attorney-General and which I believe was written by Mr. Sohn W, Davis,

although this is from hearsay.
From that early beginning until the present time, there hes been

conducted quietly, but nevertheless with a certain degree of success, v
systematic effort on the part of some members of the Board to gradually set
up precedents which would give them powers greater than the law contemplates
to direct the operations of the Reserve Banks from Washington.

It would

make this letter much too long to recite the various efforts in this direction, but the files of our Bank, of the Governors' Conferences, and T believe equally of the other Reserve Banks, are filled with correspondence,

memoranda, opinions of counsel, etc. constituting a long record of resistance by the Banks

to efforts by the Board to centralize authority and

assume executive duties in

Washington.

In the first few years of the life

of the New York Reserve Bank, committees of our directors and sometimes the
entire board, at timer) visited %eshington to protest against this develop-

ment and, while Secretary Mc Adoo was Chairman of the Board, usually with
complete success.

This relates simply to the question of centralization of authority
and direction of operations, etc.

The other serious development lies, I believe, in the growing inability of the Board to make prompt decisions and in many cases wise ones
whore important but nicely balanced questions appear for decision.

I think

the three outstanding examples are the pension system, what we call the non-




3/6/27.

Mr. Young.

9.

cash collection system, and the Cuban
sion system

A proposal for a pen-

branches.

Te

has been pending before the Board for over six years.

have spent ebout $100,000 in studying and formulating it, and during that
entire six years the Board has never been willing to approve the plan pro-

duced from the studies which they originally authorized.
Mr. Banain,

Finally, through

a vote was obtained in the Federal Reserve Board to the

that the Board would raise no objection if the
Banks which was handling the matter

ef;ect

Committee of the Reeerve

souEht to obtain the necesrary legisla-

tion from Congress, but the Board would itself assume no responsibility.
The bill was

The Committee got to work actively within the past year.

passed unanimously by the Semite, but has just failed in the House.

result of this delay, which many of us feel was
due to dissention

and timidity in the Board, has

entirely unnecessary and

boon to accumulate a liabil-

ity for accrued contributions approaching t4,000,000.

with by a reedjuetment of the plan, but somewhat
prise, and

the delay of course makes the

tinue this

pending before the

service, and if we do continue it,

or without a service charge.

be dealt

to the injury of the

enterextent

now never be made.

matter of the non-cosh collections,

there has been argued and

This can

protection ineffective to the

that some five or six years of contributions may

As to the

The

for

over

three years

Board, whether we should con-

whether it should be done with

It is the type of service which should be con-

ducted uniformly as to methods and dharges throughout the System.

The

Board has now ruled that the Reserve Banks may continue the service, but
charge or not as they please.

The result is

that some Reserve Banks will

charge for doing the work, and others will not - a

situation




to be

remitted to develop.

thoroughly unwholesome

,

3/6/27.

Mr. Young.

O.

In the Cuban matter, which is a very long story, after some
intimation from

the Department of State, the Board was

this important question by authorizing

the

led to compromise

establishment of two branches

in Cuba, one for Boston and one for Atlanta, both offices probably being

illegal and conducting a

business which is not justified either by the

situation itself or by the Federal Reserve Act.
.

_

I am developing this subject in the two categories: one the ef-

111161.
-

fort on the one hand

to

obtain more authority, and the other the evidence

which is now so convincing, that once obtained it is almost impossible to
hope that it will be wisely and
be impaired.

intelligently

exercised;

efficiency will

But there is still another point of view, and that is as to

the capacity of_Ala body such as the Federal Reserve Board in Washington to
Initiate and direct policies in credit matters when they are located such a
distance from the money maesets, when all their information reaches them by
word of mouth and second hand, or through written reports end from very
limited sources.

There is no bank of iscue In the world which has its ad-

ministrative and executive

headquarters elpeehere than in the money capital

of the country as well as in the political capital.

In our case, if the

executive and administrative direction of the System is gradually assumed
by the Federal Reserve

Board,

the political

influences

Board in Tashington will render so many of their

which surround the

acts subject to

fear of

political consequences that a clean-cut, decisive, courageous policy by the
System will be impossible.

again, in

those matters requiring

might prove to be an
serve Board that




Of this we have hod abundant evidence time

influence.

this or

and

decision where political considerations
Repeatedly we hear from the Federal Re-

that must be done or must not be done, because of

11.

3/6/27.

Mr. Young.

the reaction which will be felt in Congress.
A11 of the above is to give you the background for what 1 wish
to write you about - the present development in our own Bank.

Before

left New York, in my conversations with Mr. Jay, Mr. Reynolds, Mr. Woolley

and Mr. Reyburn, I took the position thet upon Mr. Jay's resignation the
wisest and best course would be to secure the appointment of Dr. Burgess if

that were possible.

If it were not possible, my second choice, as you

know, was Mr. Mc Garrah.

I had no doubt of Dr. Burgess' ability to fill the

position and ultimately to develop into an influential and valuable officer
of the Bank and of the System, but of course it would have taken some time.
The appointment of Mr. Mc Garrah, I felt, would be in every way a happy one

se far as personal relations were concerned, but as I explained at the time,
selecting an outside person would be much more likely to open the door to

the very development which we all feared, namely, to give a further impetus

to the Board's desire to center the executive management of the System in
Washington.

This letter, in order to give you the whole story, must be

frank to the last degree.

I hap)en to have known for some time, as no

doubt Mr. Jay explained to you, that the Board is contemplating changes in
Feceral Reserve Agents in a number of other Banks.

There are various

causes, but it just so happens that these Banks are Boston, Philadelphia,
Cleveland and Chicago.

Those four Banks, with the New York Bank, represent

three-quarters of the resources of the System, and the Governors of those
five Banks constitute the Open Market Committee.

Practically all matters

of policy are initiated in that Committee.

The development of initiative as
to policy should originate in the Reserve Banks, where the operations are
conducted;




supervision and collaboration only should lie with the Board.

Mr. Young.

12.

3/6/27.

Feeling as I did that 'Ir. Jay's resignation would open the door

to just this development, I awaited with much interest

the terms of the

Board's announcement of the change for some confirmation of my expectation.
Certainly the announcement was ample confirmation.
ceived the enclosed newe slip, which is undoubtedly
confirmation of my belief that from

I hove just now reinspired

and is further

now on the drift in the System will be

in the direction of centralization and that in five or ten years we will
not recognize the Federal Reserve System of

that day as being even a

cousin of the one that has existed for the past five or ten years.
reason for writing this,

second

My

The resistance

I think, is simply common sense.

to this development has centered in the organization of the Governors.

It has taken concrete form in the Open

Market Committee.

Without the

least desire to exaggerate my own influence in these matters, the battle
has raged over my head most of the time.

It unfortunately has

happened

that every time I have been away in recent years, efforts have been made by
the Board to weaken the influence of this Committee and of the Governors.
In 19n3, when I was in Colorado, the Committee of Governors previously conducting

the open market operations (which I had appointed at

the Governors'

Conference) was summarily dismissed by the Federal Reserve Board and a new
Committee appointed, not by the Governors' Conference but by the Federal

Reserve Board, the some individuals constituting the new Committee, but with

instructions set out

in a resolution of the Board which deprived the

Banks of even their statutory
ment securities.

powers in the matter of investments in

A Protest was made

as to the terms of the

Reserve
Govern-

resolution,

but some lack of perspicacity on the part of those present led them to

look the fundamental encroachment, which lay in the assumption by the




over-

Ir. Young.

13.

3/6/27.

Reserve Board that they had the powor to dismiss such a Committee and
appoint a now one subject to their own direction.

Similar occurrences

of less Importance have taken place more recently and at times due, I
regret to say, to a lack of vigilance on the part of the members of the
Committee, who have missed the point of them) efforts by the Board to
grasp in greater degree some sort of authority over the operations of the
lyntom.

So far I have discovered no one In the Federal Reserve Banks who,

when I retire, will be willing to submit to all of the annoyance and give
the amount of time necessary, by scrutiny of every single activity of the
Reserve Board, so as to lead a proper and necessary resistance to this effort.

Certainly the directors of the Reserve Banks

have not got the time,

nor is it possible for v director to scrutin:zu everything that transpires
with this thought in nind.

It is no exaggeration for me to state that the

Board, probably under the influence of only two or throe of Ito :10.1bere,

has rithin the past fee months seen an opportunity more favorable than any

111111111111

that has formerly arisen to consolidate its grasp upon the System.

I be-

lieve that come of them are consciously expecting that, as soon as I retire,

they can gradually assume an almost undisputed control of the activities
of the Reserve Banks to a degree far beyond what the law originally conten-

plated, and to an extent which in the and will be disastrous, I believe, to
111111111,w40

the System and to the country.

This will likely be expressed by an at-

tempt to have Federal Reserve Agents servo on the Open Market Committee.
M1116Of course, when Mr. Jay's resignation first became a pocsibility,

I was In 7urope and had opportunity without the disability of illness to

consider the situation resulting, and all of these fears of mine were most



3/6127.

Mr. Young.

14,

active at that time and were then expressed to Mr. Jay.

illness made me doubt my own judgment somewhat, but my

On my return,

instinct, which I

frequently find a pretty good guide, was so strongly against any outside

the urgency and

appointment that only
led me to take the

position

persuasiveness of our awn

directors

It had seemed to me that the were so

T did.

many evidences that the Reserve Board and our awn directors

felt, as

had

been repeatedly state to me, that I had too much the habit of wishing my
own way, that I should in this instance, being a matter where I had absolutely no authority, surrender my own views

completely to those of my assoc-

iates, and I did so after melting perfectly clear in whet direction my doubts

the Board's announcement

Now frankly, Owen, the terms of

lay.

undoubtedly inspired

and of this

article in the News Bureau confirm every doubt that

had in mind at the time of our correspondence.

situation that causes me any personal
mortification.

embarrassment or uneasiness, or even

As you know, I have been for a

any responsibility at all, to nurse my health
man.

There

long time eager to oecape

and to feel that I am a

free

My anxiety is about the Federal Reserve Bank of New York and the

Federal Reserve System, and I am writing you this long

epistle to express to

you my conviction that we are not only headed in the wrong direction,

that we

are in i-minent darer, looking

ahead only but

five or ten years,

that very grave questions will arise which must be the subject of

tion by Congress and which may indeed result In a very serious
out the country about the System.

The enclosed

but

considera-

strife through-

letter of Professor Allyn

Young of Harvard is evidence of what may happen.




You may properly ask what other course could have been pursued,

3/6/27.

Mr. Young.

15.

end it is not an eesy question to answer.

The course which was followed

The alternative, I believe, was the one which

was certainly the easiest.

I had advocated before loving for EUrope, and that was a definite, clearly
drawn issue between the Federal Reserve Banks and the Federal Reserve Board

on all these points where the Board was seeking to encroach in its

authority.

You must not gather from the above that I have not considered the possibil-

ities of

an

equally successful System in case the Board were able to get the

right type of men as Chairmen of the Reserve Banks and have whet might be

called a "Class C" management of the Banks, with the Board directly govern-

ing the activities of the Federal Reserve Agent, who would then be the executive head of the Bank.

I think I can assert without reservation that such

a scheme of management would be impossible of success.

The Board has never

been successful since the System got started (except in the case of Mr. Mc
Garrnh) in getting the type of men escential to such a scheme, and they have
endeavored to exercise such a domination of those they have appointed as to
render them ineffective as managers anyway.

land, and Mr. Perin of San

Francisco were the outstanding examples of first

rank men who were not dominated by the Board.
high

regard for the Board, died recently;

earned,

never really

had the

Federal Reserve

Mr. Jay, as you have

No one of those

and Mr.

doubtless

Perin has

Banks could be said to be

Boerd, because the Chairmen in each case declined

In the

to submit to their domination.
dominated in each instance.

Mr. Wills, who never had a

confidence of the Beard;

een forced to resign in despair.
run by the

Mr. Jay, Mr. rills of Cleve-

A

other nine Banks, the Governors have

"Civet] C" type of manegement for the System

would result very promptly in losing some of the best men we have got in the




100011100010.11

3/6/27.

Mr. Young.

16.

Reserve Banks.

(In our awn Bank I would expect shortly to lose Case,

Harrison, Rounds and Gilbert).

The executive heads would all of them

awe their positions to the Federal Reserve Board. However honest such a
man may be or however independent he may intend to be, after some years in

such a position to be faced with losing it, and of subjecting his family to
possible distress by doing so, he will usually submit, and that I apprehend
would be the situation in the Reserve Banks. The feet now is that six of

the nine directors of a

Reserve Bank control the selection of the head of

the Bonk, but if the Board has its way, while the Board names but three of

the directors, it will nevertheless select and control the head of the Bank.
There has been ample time down here to think these matters over
deliberately.

My fear is

that circumstances heve now led to the development

of a situation where it will be almost Impossible to stem the tide of centralization.

My belief is that this development is absolutely contrary to the

conviction and the desire of ouch men as the President,
Senator Gless, and others who
erest in its welfare.

Secretary qellon,

understand the System and who have a keen int-

I feel very certain

that such men as

well, Parker Gilbert and Garrard Winston - and there are

scell Leffing-

none in better posi-

tion to judge than they - will look with grave concern upon the

development

of such a plan for the FeCeral Reserve System as is forecast in this inspired
article of the wall Street Journal.

Now the question is, What to do about it.

After expressing the

views which I held, possibly not as urgently as I would have expressed them
had I been sure of the future as to my health, etc., our directors, Mr. Mellon
and the Federal Reserve Board have decided upon what to do in our own case,




3/6/27.

Mr. Young.

17.

in the
and I suppose the Federal Reserve Board will now decide what to do

case of the other four Ranks I have mentioned, and probably in one or two
others which I believe are somewhat in their minds.

I oersonally feel

that my lest responsibility is discharged in meking clear ell that I feel
about it.

You and my other associates in the Bank have been so wonder-

fully loyal and understanding and sympathetic in your attitude to me, that
I feel more than willing, even more than obliged, to conform to any course
which seeme to them to be wise.

It is nevertheless e question as to whether

this course, which I now feel is clearly embarked upon, will not force me to
abandon all hope of achieving anything further in the matters in which T
have been particularly interested all these years.
If I should resign now, I fear only adding to the difficulty and
emberrassment.

Even though it may subject me to same criticism, it has

seemed to me that I should continue at levet long enough so as to get the

drift of matters personally and on the ground and form a better opinion than
I now can as to what my real duty is.

Rut for the last few weeke, I have

felt that it was impossible for me to remain silent and watch this development without some warning.
I have opened my mind to you very fully, but
that, for the present, it should go no further.

ing on me that

with

the conviction

The thought has been grow-

possibly the best plan would be for me to arrange to meet you

in 'Washington within, say, a couple of weeks, as I could probably then make
the trip without much

risk, so that we could discuss this situation frankly

with

and, if

Secretary

Mellon

necessary, with the President.

I am sensible

of some embarrneement because of the fact that you are now n Class C director
and Vice-Chairman of the board and fool a natural



sense

of responsibility to

Mr. Young.

18.

3/6/27.

the board, which 7 would not for a minute ask you to lay aside and

especially not f you did not pretty fully agree with some of the concern Aith I lave expressed. Sc I shall conclude by asking you to hold

this letter .n confidence for the moment and consider Whether such a visit
in Isshl on is not the wisest course as preliminary to any conclusion
which I eight otherwise reach.

With best regards, I remain
Sincerely yours,

Mr. Owen D. Young,
120 Broadway,
New York City.




COPY of a Letter written hy Governor Strong and
delivered by hand by Mr. Harrison to Mr. Owen D. Young
PERSONAL AND CONFIDENTIAL

Stuyvesant Road,
Biltmore Forest,
Biltmore, N. C.
March 6, 1927.

My dear Owen:

In default of opportunity for a full discussion with you,
the next best thing is a letter, but I am afraid it will be a poor
I have been meaning to write it for some
substitute for a talk.
Its length is due to the necessity for recounting a
time past.
little history.
By way of introduction: when the Federal Reserve Act
became law -- in the face of strong banking opposition, manifested
more in 'Wall Street'than in any other part of the country -- the
principal fears aroused were, I believe, three -- others being of less
The first was that the new banking system, which was
consequence.
compulsory upon national banks, would be politically controlled.
The second was that dividing the country into a number of districts
-- as it developed, no less than twelve -- strong sectional feeling
would enter into the management of the System and it would be impotent to perform its chief functions smoothly and efficiently. The
third was that the Reserve Banks, taking over such vast resources of
capital and deposits from the national banks and with such broad
powers granted them, would become active competitors to the detriment
of the interests of the member banks.

This was the situation before the War started. In April or
May of 1914, Warburg brought the Federal Reserve Board's request,
with the approval of President Wilson and Secretary McAdoo, that I
should become the head of the New York Bank, organize it and be
responsible for its success. I was on the eve of sailing for Europe,
and declined positively to entertain the idea. On my return, about
the first of July, the proposal was renewed with greater urgency,
and again I declined. Then came the War and, as you know, a desperately
bad situation, liable to become greatly worse as the vicissitudes of
the War developed unless our new banking system immediately became
Some time in September, I was again approached by a comeffective.
mittee of the Federal Reserve Board, of which Warburg was one, with
a very insistent plea that I should undertake the task. I think
they also brought me a letter from President Wilson urging me to do so.
They then told me that the Board was encountering the greatest difficulty
in getting men to take positions in the Reserve Banks. My memory is that




- 2 -

they did not definitely have a head for even one Bank of the twelve,
and the argument was that if I would accept the position, it would
set an example that would enable them to get good men in the other
districts. After many conferences with my associates in New York,
and especially with Jack Morgan, Harry Davison, Dwight Morrow, and
Mr. Baker, I was persuaded to say 'Yes.' It involved a very great
financial sacrifice, as you realize, and, as it has later developed,
But my acceptance of the position
a sacrifice of my health as well.
was only after a very clear declaration of my attitude which I made
to Warburg, Jack Morgan, and Harry Davison, and which Warburg advised
They told me
me he had conveyed to his associates in Washington.
that the head of the Bank would be designated as the Governor of the
Bank, that he would be the actual executive head of the Bank and
would be permitted to pass upon the selection of associates. I replied
that I preferred to accept the position without any conditions whatever,
either as to title or salary or otherwise save that I would head the
Bank, but that everybody should understand what my position would be in
certain contingencies. In a word, it was that any development in the
System in the direction of a political control, or of control by the
banks of the country or by the Wall Street bankers, or any interference
from any quarter with the autonomy and inddpendence of the Reserve
Bank of New York as contemplated by the statute, would not result in
my resignation but would certainly result in my attempting by every
legitimate means to defeat any such effort.
It developed that the suggestion of my accepting this position
coming from the Federal Reserve Board gave rise to some resentment on
the part of those directors who had then been selected. As I recall,
the six elective members of the board had been elected by the Bank
and one out of the three Class C directors had been appointed -- Mr.
George F. Peabody. The other two appointments had not yet been made.
When I agreed to accept the position of Governor, the Board with my
assent appointed Mr. Jay, and over my protest, appointed Mr. Stareck
as the third Class C director -- a most undesirable appointment, as it
later developed. The directors then appointed me Governor of the
Bank, but not before I had received a call from Mr. Woodward, the object
of which, as shortly developed, was to satisfy himself and associates
that the Federal Reseive Bank, because of my selection, would not
become promptly 'Morganized.' I think he was satisfied before we got
But I did fear the political
That possibility I never feared.
through.
control.

Privately, I told those members of the Federal Reserve Board
whom I knew that I anticipated difficult times ahead, on the one hand
with the members of the System, many of whom were hostile to the plan,
and on the other hand between the Reserve Banks and the Federal Reserve
I also anticipated the development of feeling and jealousy between
Board.
the Reserve Banks.




-3-.
It is a singular fact that the Reserve Banks had not been
organized three months before all of these developments were actively
harassing us, and not the least was the immediate effort by the
Federal Reserve Board to assume powers and exercise authority not contemplated by the Act. As a result of the Gdvernors'Conferences and
our committee form of procedure, we have succeeded in overcoming
sectional jealousies. The twelve Banks work harmoniously together.
Largely as a result of patient 'creepineby the Reserve Banks rather
than attempting to move too fast, most of the banking hostility to
the System has been overcome. The one outstanding weakness in the
System is in the unsatisfactory relations which now eird6t between
practically all the Reserve Banks and the Federal Reserve Board.
This difficulty is the result of inherent defects or weakThe situation which has now arisen was
nesses in the scheme itself.
almost bound to arise, and some of us clearly foresaw it in the early
The only difference between what I anticipated being forced to
days.
do and what proves to be practicable, is due to the circumstance that
my health is now such that it is quite impossible for me to carry out
such a program as I had outlined twelve years ago, for I am simply not
physically equal to the task of dealing with a development which I believe is almost certain to wreck the System in the course of years; nor
do I believe our directors would support me in the attempt. Let me
endeavor to give you the picture as I see it, and thereby explain, as
I hope I may be able to do, the causes of the major difficulties.

The Federal Government has never yet constituted an
independent bureau as a permanent branch of the Government free of
departmental control under a member of the Cabinet which has been a
The Interstate Commerce Commission (certainly until the last
success.
three years) in bowing to the public clamor for lower rates in the face
of increasing costs of operation, that is, wages, materials and taxes,
wrecked the railroad systems of the country, and it was not many years
ago that we had between 60,000 and 80,000 miles of our railroad lines
in the hands of receivers -- between a fifth and a quarter of the entire
mileage. Many others barely escaped.
The Shipping Board -- there is no need to recount
the history of this unfortunate enterprise.
The Federal Farm Loan Board. Were the facts known in
regard to the affairs of this organization, as they are gradually becoming known in the Treasury, I am satisfied that you would be astonished.
'alley would be fully known, were it not for the alarm which might arise
among holders of the obligations of a system which is today borrowing
over a billion dollars from the public in one form or another.
The Alien Property Custodian. It has been nothing short
of a scandal of the first order, and here the independent officer of
the Government appointed to execute this vast trust of $300,000,000 or
more is directly responsible to the President. Fortunately, recent
changes have improved matters.




(5) The Tariff Commission.
and impotent body from the start.

It has been an unfortunate

I could go on at some length recounting others with which
you are doubtless familiar. The one notable exception is the War
Finance Corporation, and its escape from the fate of these other
independent bodies has been due to the good fortune of getting a man
of outstanding ability and large independent means who dominated the
situation absolutely from the start and was willing to devote himself
to the work so long as he could control it, without fear of losing
his job.

The reasons for these failures have all been disclosed many
The failures are principally due to inability to get good
times.
The salaries are small. Political considerations enter too
men.
But what is :even more serious, these men,
much into the selections.
when they are selected, become timid and inefficient, unconsciously
almost subordinating real convictions to their fears lest they may not
be reappointed or may encounter criticism. Such a body, as the history
of every bureaucratic body shows, endeavors to cure its own inefficiency
by seeking to grasp more powers. The difficulties of their administration arise partly from inability to get good assistants, -because they
cannot pay enough, and partly because business is conducted as though
it were a parliamentary body, votes must be had upon everything, and
members hesitate to go on record for and against important measures
which may arouse antagonism. The result is a fairly equal division
between:
Hesitation, procrastination and inaction;
Unfortunate compromises; and
Mistakes.
Almost continuously throughout the past twelve years a comparatively small group of men in the Reserve Banks have been contending against these difficulties in the Federal Reserve Board. Their
existence is well known and admitted even by members of the Board.
Usually logical argument and frank submission of the facts and persuasion has been sufficient. At times it has even been necessary, as
:au know, to seek the'influence of the Secretary of the Treasury.




The first real test that arose in this rather subtle reaching
for authority by the Federal Reserve Board was, as I said above, within
a few months of the opening of the Banks. The Board undertook to direct
the Federal Reserve Bank of Minneapolis (as I recall) to make a change
The Governor of that Bank protested by direction
in its discount rate.
of its directors, and the matter was brought up at a meeting of the
Governors in Washington. At a joint meeting with the Federal Reserve
Board, this effort was very frankly discussed, the Board attempted to
assert its authority to initiate changes in the rate, and as I was then
Chairman of the Governors 'Conference, I told the Board, by unanimous
direction of the Conference, that if the Board undertook to do so
the Reserve Banks would find it necessary to test the Board's power
in the courts. It was, of course, a bombshell, resulted in the Board's

-5asking the opinion of the then Attorney-General as to their powers,
and while I have never seen the opinion, I have been informed that
it was somewhat adverse to the Board's contention, except that in
the case of a Bank which proved obviously recalcitrant in remaining
out of line with the general level of rates or something of that sort
the Board could initiate rate changes. I have since been informed
that a later opinion was secured from Attorney-General Daugherty or
one of his assistants, which rather sustained the Board's point of
view. We at that time consulted Mr. John G. Johnson of Philadelphia
as to what the Act meant, and after some correspondence, as I recall,
he wrote an opinion which was substantially similar to the one which
I understand was given by President Wilson's Attorney-General and
which I believe was written by Mr. John W. Davis, although this is from
hearsay.
From that early beginning until the present time, there has
been conducted quietly, but nevertheless with a certain degree of success, a systematic effort on the part of some members of the Board to
gradually set up precedents which would give them powers greater than
the law contemplates to direct the operations of the Reserve Banks from
Washington. It would make this letter much too long to recite the
various efforts in this direction, but the files of our Bank, of the
Governors' Conferences, and I believe equally of the other Reserve
Banks, are filled with correspondence memoranda, opinions of counsel,
etc. constituting a long record of resistance by the Banks to efforts
by the Board to centralize authority and assume executive duties in
Washington. In the first few years of the life of the New York Reserve
Bank, committees of our directors and sometimes the entire board, at
times visited Washington to protest against this development and,
while Secretary McAdoo was Chairman of the Board, usually with complete success.
This relates simply to the questions of centralization of
authority and direction of operations, etc.
The other serious development lies, I believe, in the growing inability of the Board to make prompt decisions and in many cases
wise ones where important but nicely balanced questions appear for
decision. I think the three outstanding examples are the pension
system, what we call the non-cash collection system, and the Cuban
branches. A proposal for a pension system has been pending before
the Board for over six years. We have spent about $100,000 in studying and formulating it, and during that entire six years the Board
has never been willing to approve the plan produced from the studies
which they originally authorized. Finally, through Mr. Hamlin, a vote
was obtained in the Federal Reserve Board to the effect that the Board
would raise no objection if the Committee of the Reserve Banks which
was handling the matter sought to obtain the necessary legislation
from Congress, but the Board would itself assume no responability.




-6The Committee got to work actively within the past year. The bill
was passed unanimously by the Senate, but has just failed in the'
The result of this delay, which many of us feel was entirely
House.
unnecessary and due to dissension and timidity in the Board, has
been to accumulate a liability for accrued contributions appraching
$4,000,000. This can be dealt with by a readjustment of the plan,
but somewhat to the injury of the enterprise, and the delay of
course makes the protection ineffective to the extent that some five
or six years of contributions may now never be made.
As to the matter of the non-cash collections, for over three
years there has been argued and pending before the Board, whether we
should continue this service, and if we do continue it, whether it
should be done with or without a service charge. It is the type of
service which should be conducted uniformly as to methods and charges
throughout the System. The Board has now ruled that the Reserve Banks
may continue the service, but charge or not as they please. The result
is that some Reserve Banks will charge for doing the work, and others
will not -- a thoroughly unwholesome situation to be permitted to develop.
In the Cuban matter, which is a very long story, after some
intimation from the Department of State, the Board was led to compromise this important question by authorizing the establishment of
two branches in Cuba, one for Boston and one for Atlanta, both offices
probably being illegal and conducting a business which is not justified
either by the situation itself or by the Federal Reserve Act.
I am developing this subject in the two categories: one the
effort on the one hand to obtain more authority, and the other the
evidence which is now so convincing, that once obtained it is almost
impossible to hope that it will be wisely and intelligently exercised;
efficiency will be impaired. But there is still another point of view,
and that is as to the capacity of any body such as the Federal Reserve
Board in Washington to initiate and direct policies in credit matters'
when they are located such a distance from the money markets, when all
their information reaches them by word of mouth and second hand, or through
written reports and from very limited sources. There is no bank of issue
in the world which had its administrative and executive headquarters
elsewhere than in the money capital of the country as well as in the
political capital. In our case, if the executive and administrative
direction of the System is gradually assumed by the Federal Reserve
Board, the political influences which surround the Board in Washington
will render so many of their acts subject to fear of political consequences that a clean-cut, decisive, courageous policy by the System
will be impossible. Of this we have had abundant evidence time and
again, in those matters requiring decision where opolitical consideraRepeatedly we hear from the
tions might prove to be an influence.
Federal Reserve Board that this or that must be done or must not be
done, because of the reaction which will be felt in Congress.




0
All of the above is to give you the background for what I
wih to write you about -- the present development in our own Bank.
Before I left New York, in my conversations with Mr. Jay, Mr.
Reynolds, Mr. Woolley, and Mr. Reyburn, I took the position that
upon Mr. Jay's resignation the wisest and best course would be to
secure the appointment of Dr. Burgess if that were possible. If it'
were not possible, my second choice, as you know, was Mr. McGarrah.
I had no doubt of Dr. Burgess' ability to fill the position and ultimately to develop into an influential and valuable officer of the
Bank and of the System, but of course it would have taken some time.
The appointment of Mr. McGarrah, I felt, would be in every way a
happy one so far as personal relations were concerned, but as I explained at the time, selecting an outside person would be much more
likely to open the door to the very development we all feared, namely,
to give a further impetus to the Board's desire to center the executive
management of the System in Washington. This letter, in order to give
you the whole story, must be frank to the last degree. I happen to
have known for some time, as no doubt Mr. Jay explained to you, that
the Board is contemplating changes in Federal Reserve Agents in a
number of other Banks. There are various causes, but it just so happens that these Banks are Boston, Philadelphia, Cleveland, and Chicago.
Those four Banks, with the New York Bank, represent three-quarters of
the resources of the System, and the Governors of those five Banks
The development of initiative
_constitute the Open Market Committee.
as to policy should originate in the Reserve Banks, where the operations are conducted; supervision and collaboration only should lie
with the Board.
Feeling as I did that 14±. Jay's resignation would open the
door to just this development, I awaited with much interest the terms
of the Board's announcement of the change for some confirmation of my
Certainly the announcement was ample confirmation. I
expectation.
have just now received the enclosed news slip, which is undoubtedly
inspired and is further confirmation of my belief that from now on the
drift in the System will be in the direction of centralization and
that in five or ten years we will not recognize the Federal Reserve
System of that day as being even a second cousin of the one that has
existed for the past five or ten years. My reason for writing this,
The resistance to this development
I think, is simply common sense.
has centered in the organization of the Governors. It has taken concrete form in the Open Market Committee. Without the least desire to
exaggerate my own influence in these matters, the battle has raged
over my head most of the time. It unfortunately has happened that
every time I have been away in recent years, efforts have been made
by the Board to weaken the influence of this Committee and of the
Governors. In 1923, when I was in Colorado, the Committee of Governors
previously conducting the open market operations (which I had appointed
at the Governors 'Conference) was summarily dismissed by the Federal
Reserve Board, the same individuals constituting the new Committee, but
With instructions set out in a resolution of the Board which deprived




-8the Reserve Banks of even their statutory powers in the matter of investments in Government securities. A protest was made as to the terns of
the resolution, but some lack of perspicacity on the part of those
present led them to overlook the fundamental encroachment, which lay in
the assumption by the Reserve Board that they had the power to dismiss
such a Committee and appoint a new one subject to their own direction.
Similar occurrences of less importance have taken place more recently
and at times due, I regret to say, to a lack of vigilance on the part
of the members of the Committee, who have missed the point of these efforts by the Board to grasp in greater degree some sort of authority
over the operations of the System.
So far I have discovered no one in the Federal Reserve Banks
who, when I retire, will be willing to submit to all of the annoyance
and give the amount of time necessary, by scrutiny of every single activity of the Reserve Board, so as to lead a proper and necessary resistance to this effort. Certainly the directors of the Reserve Banks. have
not got the time, nor is it possible for a director to scrutinize everything that transpires with this thought in mind. It is no exaggeration
for me to state that the Board, probably under the influence of only two
or three of its members, has within the past few months seen an opportunity more favorable than any that has formerly arisen to consolidate its
grasp upon the System. I believe that some of them are consciously expecting that, as soon as I retire, they can gradually assume an almost
undisputed control of the activities of the Reserve Banks to a degree
far beyond what the law originally contemplated, and to an extent which
in the end will be disastrous, I believe, to the System and to the
country. This will likely be expressed by an attempt to have Federal
Reserve Agents serve on the Open Market Committee.
Of course, when Mr. Jay's resignation first became a possibility,
I was in Europe and had opportunity without the disability of illness to
consider the situation resulting, and all of these fears of mine were
most active at that time and were then expressed to Mr. Jay. On my return,
illness made me doubt my own judgment somewhat, but my instinct, which I
frequently find a pretty good guide, was so strongly against any outside
appointment that only the urgency and persuasiveness of our own directors
It had seemed to me that there were
led me to take the position I did.
so many evidences that the Reserve Board and our own directors felt, as
had been repeatedly stated to me, that I had too much the habit of wishing my own way, that I should in this instance, being a matter where I
had absolutely no authority, surrender my own views completely to those
of my associates, and I did so after making perfectly clear in what
direction my doubts lay. Now frankly, Owen, the terns of the Board's
announcement and of this undoubtedly inspired article in the News Bureau
confirm every doubt that I had in mind at the time of our correspondence.
There is nothing in this situation that causes me any personal embarrassment or uneasiness, or even mortification. As you know, I have been for




-9a long time eager to escape any responsibility at all, to nurse my
health and to feel that I am a free man. My anxiety is about the
Federal Reserve Bank of New York and the Federal Reserve System,
and I am writing you this long epistle to express to you my conviction that we are not only headed in the wrong direction, but that
we are in imminent danger, looking ahead only but five or ten years,
that very grave questions will arise which must be the subject of
consideration by Congress and which may indeed result in a very
serious strife throughout the country about the System. The enclosed
letter of Professor Allyn Young of Harvard is evidence of what may
happen.
You may properly ask what other course could have been
pursued, and it is not an easy question to answer. The,course which
was followed was certainly the easiest. The alternative, I believe,
was the one which I had advocated before leaving for Europe, and that
was a definite, clearly drawn issue between the Federal: Reserve Banks
and the Federal Reserve Board on all these points where the Board was'
seeking to encroach in its authority.
You must not gather from the
above that I have not considered the possibilities of an equally
successful System in case the Board were able to get the right type'
of men as Chairmen of the Reserve Banks and have what might be called
a 'Class C' management of the Banks, with the Board directly governing the activities of the Federal Reserve Agent, who would then be
the executive head of the Bank.
I think I can assert without reservation that such a scheme of management would be impossible of success.
The Board has never been successful since the System got started
(except in the case of Mr. McGarrah) in getting the type of men essential to such a scheme, and they have endeavored to exercise such a
domination of those they have appointed as to render them ineffective
as managers anyway.
Mr. Jay, Mr. Wills of Cleveland, and Mr. Perin
of San Francisco were the outstanding examples of first rank men who
were not dominated by the Board. Mr. Wills, who never had a high
regard for the Board, died recently; Mr. Jay, as you have doubtless
learned, never really had the confidence of the Board; and Mr. Perin
has been forced to resign in despair. No one of those Banks could be
said to be run by the Federal Reserve Board, because the Chairmen in
each case declined to submit to their domination. In the other nine
Banks, the Governors have dominated in each instance. A'Class C' type
of management for the System would result very promptly in losing some
of the best men we have got in the Reserve Banks. (In our own Bank I
would expect shortly to lose Case, Harrison, Rounds and Gilbart).
The executive heads would all of them owe their positions to the
Federal Reserve Board. However honest such a man may be or however
independent he may intend to be, after some years in such a position
to be faced with losing it, and of subjecting his family to possible
distress by doing so, he will usually submit, and that I apprehend
would be the situation in the Reserve Banks. The fact now is that six
of the nine directors of a Reserve Bank control the selection of the
head of the Bank, but if the Board has its way, while the Board names
but three of the directors, it will nevertheless select and control
the head of the Bank.




-10 There has been ample time down here to think these matters
over deliberately. My fear is that circumstances have now led to
the development of a situation where it will be almost impossible
to stem the tide of centralization. My belief is that this development is absolutely contrary to the conviction and the desire of such
men as the President, Secretary Mellon, Senator Glass, and others who
understand the System and who have a keen interest in its welfare.
I feel very certain that such men as Russell Leffingwell, Parker Gilbert, and Garrard Winston -- and there are none in better position to
judge than they -- will look with grave concern upon the development
of such a plan for the Federal Reserve System as is forecast in this
inspired article of the Wall Street Journal.
Now the question is, what to do about it. After expressing
the views which I held, possibly not as urgently as I would have
expressed them had I been sure of the future as to my health, etc.,
our directors, Mr. Mellon, and the Federal Reserve Board have decided
upon what to do in our own case, and I suppose the Federal Reserve
Board will now decide what to do in the case of the other four Banks
I have mentioned, and probably in one or two others which I believe
are somewhat in their minds. I personally feel that my last. responsibility is discharged in making clear all that I feel about it. You
and my other associates in the Bank have been so wonderfully loyal and
understanding and sympathetic in your attitude to me, that I feel more'
than willing, even more than obliged, to conform to any course which
seems to them to be wise. It is nevertheless a question as to whether
this course, which I now feel is clearly embarked upon, will not force
me to abandon all hope of achieving anything further in the matters in
which I have been particularly interested all these years.
If I should resign now, I fear only adding to the difficulty
and embarrassment. Even though it may subject me to some criticism, it
has seemed to me that I should continue at least long enough so as to
get the drift of matters personally and on the ground and form a better
opinion than I now can as to what my real duty is. But for the last few
week's; I have felt that it was impossible for me to remain silent and
watch this development without some warning.
I have opened my mind to you very fully, but with the conviction that, for the present, it should go no further. The thought has
been growing on me that possibly the best plan would be for me to arrange
to meet you in Washington within, say, a couple of weeks, as I could
probably then make the trip without much risk, so that we could discuss
this situation frankly with Secretary Mellon and, if necessary, with the
I am sensible of some embarrassment because of the fact
President.
that you are now a Class C director and Vice-Chairman of the board and
feel a natural sense of responsibility to the board, which I would not
for a minute ask you to lay aside and especially not if you did not
)retty fully agree with some of the concern which I have expressed.




'or

0
So I shall conclude by asking you to hold this letter in confidence
for the moment and consider whether such a visit in Washington is
not the wisest course as preliminary to any conclusion which I
might otherwise reach.

With best regards, I remain
Sincerely yours,

Mr. Owen D. Young,
120 Broadway,
New York City.

BS:M




120 BROADWAY, NEW YORK
ROOM 2558

OWEN D. YOUNG




March 31, 1927.

PERSONAL

My dear Ben:

When Harrison broughtme your two letters of March 3d and
6th, the Polish situation was particularly occupying our minds, and
that was so kaleidoscopic that it was scarcely worth while to write
about it.

When Harrison handed me your long letter of March 6th he

said I might read that entirely at my leisure.
no thought of postponing it so
country,

long.

At that moment I had

Today, coming back from the

I have had an opportunity for the first time to read it with

the relaxation with which such a letter should always be read.

I

shall have the opportunity, I suppose, in a few days, of talking the
whole matter over with you and then we can consider it fully.

The

only thing that I now want to say is that I have no fear of centralization resulting from the appointment of strong men to the Class
"C" directorships, one of whom, of course, must be Chairman of the
Board.

My fear has .always been that the Federal Reserve Board,

either influenced by political considerations or by its desire to
secure control of the banks, would appoint as Class "C" directors

men who would be mere agents and servants of the Board, and that such
a group throughout the System, cooperating closely with each other
and the Board., might be able to dominate the System.

They would dom-

inate it not because of their strength, but because they could. make

it so uncomfortable for the elected directors of the bank that men of
position and power would not serve.

If I were on the Federal Reserve




-2-

Board and wanted to dominate the Federal Reserve System and centralize its power in Washington, I would name my own henchmen on every
bank in the System, and be sure that they were men who would take
orders.

The present tendency is exactly the reverse of that, and
whatever may be the motive back of it, it is to my mind all to the
good.

If the motive be to get control of the Federal Reserve Banks -

and I think that motive may exist in the minds of some - the method
adopted will fail.
tration.

Take our own situation in New York as an illus-

I think that the influence of the Federal Reserve Board in

our affairs will be less with Gates EcGarrah as Chairman than it would
be with Dr. Burgess as Chairman; not that Burgess is not as strong as
McGarrah, but he is less well known, and therefore his resistance would
be less effective.

As a matter of fact the Board might, with safety

to itself, endeavor to dominate Burgess, but it could scarcely do so
with LeGarrah and therefore would be much less likely to try.

If

equally strong men Can be put into the other reserve banks in place
of the men already there, I feel that we will have insured the System
against the very centralization which you fear and against which for
so many years you have given such effective resistance.
In the early years you were compelled to do it almost

single handed in the sense that you had no outstanding men as associates in the officers of the other banks.

what you did is my best argument.

That you succeeded in doing

If one man of outstanding character

-3and, ability in a new system could resist the encroaciments of the Fed-

eral Reserve Board aa the independence of the several banks, then it

seems tome that a group of strong men as Class "C" directors could
support the officers of these banks and make them almost invincible
against any attack of any kind from the Federal Reserve Board, whether
such an attack be induced by the desperation of a bureaucracy or by
political ambition.

Certainly you can not have any stronger views

against centralization in Washington
Woolley and myself.

thanA

Gates McGarrah, Clarence

If the Class "0" directors of the other Federal

Reserve Banks were of a similar type there is every reason to believe
that we would all be a unit in our views on that subject, and I do not
see haw the Federal Reserve Board could make any encroachments on the
independence of the several banks, because the avenues through -which

the Board could normally act would all be closed.
I think the newspaper article which you enclosed in your letter was undoubtedly inspired, and may reflect the views of some members
of the Board.

It will take much more than newspaper articles or views

of the Board, however, to accomplish the encroachments which you fear.
I have tried to

say

several times that to my mind the Feder-

al Reserve Act is like the Constitution of the United States, and all
other great charters for that matter.

At best it can only draw the out-

line of the picture, and if it had been entirely wisely drawn it would
have omitted many details which were inserted.

After the outline is

drawn, then we fill in the picture by precedents.




shall did to the Constitutiam.

We do what the British Parliament has

We do what J




done to the Magna Carta.

Therefore, the work which you have been doing

for these many years in watching precedents has been most important vital,

I think - to the System.

You have a great many precedents down

already, and they are not likeIy to be broken.

Now we have the foreign situation which was not in contemplation by the drafters

of the Act at all. There we have to learn haw to

make the Act function wholly on precedents, with very little outline to
the picture.

It is important how we handle that job in the early years

in order that the precedents may be right.

The point which I want to make on all this is to let you know
that I appreciate the importance of the precedents which were established
and that I recognize the necessity of watching them carefully in the
future.

I must say this, however: That when you were fighting pretty

much alone it was necessary for you always to lean backward lest you
make a concession which would weaken you tremendously in the future.
That practice I do not regard so necessary now.

If a man were fighting

alone he could scarcely trust himself to a conference of any kind under
a flag of truce.

would all be over.

One violation of good faith by his adversaries "ma

it

If, however, a man has an army back of him as well

organized and as strong as the opposing army, he may quite safely trust

himself under a flag of truce with
violate it.

full

knowledge that neither will dare

It is that to my mind which is happening now.

Instead of

assault and counter-assault on each other's positions, we are meeting to
discuss them quite frankly and openly and with firmness.

We are not go-

ing to surrender any important positions, but we should eliminate much




-5-

petty skirmishing.

If the Federal Reserve Board is able to tabs any

major position as a result of negotiation, then I would be almost
willing to concede that they ought to run the bank.
It is wholly unnecessary for me to say that this letter is

personal, and I will talk with you more about it when I see you in a
few days.

Sincerely yours,

Mr. Benjamin Strong,
Stuyvesant Road,
Biltmore Forest,
Biltmore, N. C.

October 5, 1927.
My dear Owen:

During the past year I have been watching the development in Germany, as

you doubtlese have, with a growine, feeling of uneaeineee. This le not tesed upon
an

conviction that there will be t break-down of German finance or of the German

monetary position because I think the Dawes Plan of iteeif provides 1,131 the eate-

euarde that are possible against ouch an occurrence. Illy uncertainty arises more

from the possibility of political developmerte being permittied to interfere in one
or enother way with the smooth operation of the plan as we,s intended by ite ,;uthors.
The possibility of such a development became obvioue s soon as the dis-

pute arose over the proposal of the State of Prueeia to borrow 4V3,000,000 in this
market.

We have been coneulted by the Department of State and finally are asked to

submit a memorandum of our views as to these borrowinge.
them out in the enclosed memorandum.

I have attempted to set

While not in its fine form it embodies in

substance the points which I think require immediate consideration, FIX et brief
sugeeetion at the end as to what may now be done to poetpone the day when a reckon-

ing of the situation will have to be undertaken.
I am not sending this to you in order to Let you committed in any way to
these views, but I should greatly value any criticisms of the memorandum which you

think are justified so that I may have the benefit of them before completing

it. I

shall, of course, send a. copy to Gilbert when it is finished.
One can hardly escape the feeling that the situation might easily become

critical in view of the increase yesterday in the dieeount rate of the Beichebank
and our kriowledg,e of the fact that their reserves are now pretty close to the minimum provided by law, even including the undisclosed reserve of devicen which has

practically an vanished.
Mr. Owen D. young,
 Broadway, New York.
http://fraser.stlouisfed.org/
BS/RAH
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Federal Reserve Bank of St. Louis

Sincerely yours,

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120,12- 2_

Grand Hotel,
Cri,460, Juue 11, 1928.

Deer eeen:

Yeu mey be curprioed at hearina from me, particelarly When you

discover the eubject of this latter.

It 1114 not only exceedingly vxivete,

but relatea to cocm mattere of teem:Ivo on whiCh'T believe you have oinlone and to whidh 7 am very tnxious that you should give name deliberate
theuglit between now end the September meeting of ths F1DA4C0 Coeeittee of the

Leegue tf Nations.

To refreeh your memory as to histcry, ehieh I doubt lu neeeseury,
the Genoa Cenference paezed u rocclutien the subetunce of uhieh Into a decla-

ration of for. of a poseible shortage of gold for world gold reeervez, =pp-

reeulting in high benk

rates and declining priceo, with poc-

cible natisuarbankruptciee resulting;

it cm:esti= that economy in the use

tition.for gold

of

sold

could be effected 1),,, the development of tho geld exthange ctundard,

and fine/1y,

with my two exthange centere like London and Lew York;

rectian to the Uovernor of the Wnk of alglend to cell

t

e

di-

=Terence of the

heeds of the varioue banks,cf iscue for tho purpcee of exploring tho subject
aad devieing remedies.'

This I quote simi/ly from memory, az the resolution

is not before me.
The invasion of the fitihr arrested a program for

Nadirs ouch a'

muotinc, und poetic:memento have since taken placo,. partly because everyone

wee preoccupied with monotary reorganisation and partly because in a quiet
way we have been ineloting that wo were not in sympathy with the Genoa reso-

lution in certain reepecte and that we would regret declining an invitation




01/28.

Mr. Owen D. Young.

2.

to ouch a conference, if that was found necesoary, or on the other hand
would feel the need for going under reservations which would protect the

unique position of our on country.
Thio idea Of the need for (economy in the uso of gold hao been

very much agitated by a certain group of economist°, notably

Ga000l, Keynes

and others in'Europe, Fisher and others of like faith at home.

the London bankers,

notably go Konna, have

Certain of

held somewhat similar views.

to the honesty of their point of view - at least as to some of them

harp been

As

r. I

inclined to raise doubts, because it offered possibilities of

eMharrasnment to the lank

of

England 14 the way,

of,eritiolems whidi some

of the critics of the Dank are always ready to grasp.

I had a long talk with Salter in Pariasobout this whole matter
and expressed to him the many doubts I feel as to the wisdom of a program
such as suggested by the Genoa resolution.
said

Something of thoosame sort

to Professor Cassel When he called on me in New York.

In fact, from

the time I first heaol the Genoa reoolution until the preeont time, I have
had definite misgivings as to its wisdom and, in fact, as to whether the
grounds for any ouch action were substantial or sound.

I want to recount to you at some length just what this proposal
involves.

Thies of course, is partly interpretation of the language of

the reeolution and partly that I gather from
advocate it.

conversation

with those who

It involves a conference at Ohloh, by come sort of action,

the world'e banks of issue would agree to maintain reserves in the two
principal axdhaoge markets which would obviate the necessity of so large
gold reserves being held in their own vaults.




They would moat domands

Ur. Owen D. Young.

3.

6/11/26.

or geld for export eitner by legal memo of furniohing valuta to eatisfy
demands for gold, or by using valuta in the exehange market to prevent the

exchange rate pawing the gold export point.

This, in subatance, is the

proposal Which these gentlemen have urged upon me at various times.

Sc the matter has slumbered until this year certain members of
ew League organization, more especially Strakoschchave agitated the used

for doing something, and possibly a reflection of that agitation is found
in the resolution adopted by the Economic Comaittee at a recent meeting,
recommending to the Finance Committee that steps should be taken in their

discretion.

The resolution was introduced in the Economic Committee by

Layton, and the Finance Committee took cognizance of it and in turn passed

a resolution Which in effect postpones the determination of the course of
action until the September meeting.

The League's attitude, as I gathered from talks with Strakosch,
samsAbet confirmed by Salter, would be to explore the whole situation from

a factual point of view, but, as I feared, to go somewhat beyond this by
euggesting a course of action to the banks of issue. This 1 would object to

on the general theory that the technique, individual relations, idlosyncraciea and prejudices of the various banks are such that it would be quite impossible to expect any constructive result fran a general meeting developed

at this time under auspices of the League, according to the ambition of such
men as Strakosch. They have approached the subject with a definite accept-

ance of the view that a world gold shortage is impending and will result in

a price decline, that economy of gold by this method

in

the only means of

relief, and that the League should take cognizance of A and should call




4.

Ur. Owen D. Young.

6/11/23.

upon the central benke to deal with it.
Now let me also explain some grounds for objection Whirl I. Peel

must be uread very etronglys-

(1) There is no definite, outheritative knowledge ce to the outlook

or gold production in the world, outeide of etudiee ex4o. a law ywra neva
the prospects of the south Africon mines.

Thedmta has never teen aesembled

as to world produaion.
(2). It iv assumed by these gentlemen that rigid minimum roperve

retied aro to be established by the banke oflesue throughout the world, so

that flexibility Is reduced below what exieted before the ear.

ie a

taloa premiee, because T believ there will be et greet flexibility an, end
peeoibIY Ereater thm, existed before the war.

Yurthermoro the Latin Uoue-

tary Union having boon denounced ,.the gold atandard will be an actual gold

otandard nnd the great otoreo of cold of the countries in the Latin onotary
Union will be available to an extent which was not the moo before the wnr.

They overlook the fact that our policy at home is graduolly
making available to the world CM amount which will be the equivelent of any

vhortage in South Africun produetion for a good many years to came, and that
Aiortage has not yet developed

at the preeent timo, in feet, production is

fLm record volume.

The oetatliehment of a gold =Change stundard on these principlea 044MS that a bank of issue like the National bank of Belgium can Jew*
notee againot balencee hold it Lendon and.Now York.

In the case of Nee !fork,

wo calculate at the Eenk that it would be posoible legally for the National
Bank of Belgium to leoue 1CO. in notes in Belgium agoanst es gold balance




Ur. eeee J. eeueg.

5.

6/11/28.

indirectly held by the Federal ROSOCV0 Bank of New York for account of member

banks of only t1.53.

The plan takes no account of the fact that if 30 or 40 countries should rely upon centrel bank balances in New York and London as re-

serve for not leeues or expansion of bank credit at home, the amount of
those balances will be great enough and their investment would be of such
consequence to the money market that the control of the domestic money market

might indeed be delivered quite fully to others than the bank of issue.
Demends for gold, as we have experienced them in recent years,

we know at times originete from mental rather than actual influences.
The introduction of a gold exchange standard in so many countries which are
not practiced in central bank maneeement - of which Poland is a good enample means a real menace to the London and New York markets in cases where panic

conditions arise.

It is difficult to sea how such a responsibility can be formally assumed as the moult of formel meetings in which we participated, without subjecting the Reserve System to the hazords of political developments

abroad, and to the even greater hazard of political investigation and possibly
control at home.

MY suggestion in this matter has been uniformly the same to ell who

have discussed it with me:-

That i yrs doubtful of the soundness of the basis of the conclusions suggested by the Genoa resolution and was quite certain that the
soundness of the remedy proposed was open to serious question.




That a "town meeting" such es proposed would be a sort of spec-

Utr. Owen D. Young.

6.

6/11/28.

tacular affair, would center the attontion of the world upon an assumed

prograta for regulating all of these matters, including prises, to an extent
which would never

be

posaible by that method and consequently would involve

disappointmont and invite criticism.

(3) That it offered too great an opportunity for uncontrolled inflation by countries whore political domination of the banks of issue or ignorance in management made self-control difficult, and there was an almoot
equal hazard to the two countrios which were expooed to the consequences.
(4)' That no ouch program ahould be undertaken until the outcome

of the Dawes Plan was more fully developed, that the Dame Plea provided that
it was a means of ascertaining how much Germany could pat and how much her

creditors could afford to receive, and that the whole program of the exchanges mud the gold standard was mere or less wrapped up in the outcome.

,(5) Finally, that it might be a good plan for the League to under-

take impartial studies of the facts as to cold production, the available
amount of monetary gold, how it was distributed, whet were the legal and

other limitations upon its uos, what was the experience of the world as to
the secular increase in demand for monetary reserves, and all allied questions of fact, and then have them made public without reoemmondations as to

any course of action.

In 'the meantime, the subject it well be discussed

privately by the five principal banks of issue, that is, London, Paris,
Berlin, Rome and New York.

My own idea, which I have not eapressed very freely, is that every

of the nations should reestablish the gold standard, restore its gold reserve or create a new one where needed, making special arrangements for doing




*Jr. Owen D. Young.

7.

6/11/23.

so where neceusary, and reestablish its own domestic autonomy in monetary
matters without any such dependence upon other markets as implied by the
gold exchange standard.

Important balances in London or New York of course

may be highly desirable, but the most desirable thing is autonomy and selfrelience and good onduct on sound monetary principles at home.

With this

principle once established and gradually put into execution, relief from
temporary strain in any particular quarter could than be supplied by diecounting bills in the principal markets, which should not be confined to
London and New York, but be expanded to include at least the five countries
named above.

Obviously, the object of this scheme is to avoid the irritations
and possibly the attempt at domination which might result from any such plan
and on the other hand leave the two principal markete, London and New York,

free to decide for themselves whether they would or would not furnish assistance in ease of need,
have a lurking suspicion that a brood development of the gold

eeohange standard might result in conditions which would bring about the very

fall of prices which the proponents of the plan appear to fear; that is to
say, unreasonable demands upon London and New York for gold, which would force

high bank rates there and in turn protectively lift bank rates the world
around.

Such discussions of this matter as I have had in the past lead me
to believe that Paris, Brussels, Zurich and Rome are definitely of the same
view that I am; that Berlin and Amsterdam are probably of that view; and that
London has heretofore rather leaned in favor of the Genoa resolution, possibly




8.

Ur. On D. Young.

6/3.1/28.

bocauce of the tradition of the London exchange market being a world .exChange center.

This subject has so many rumificationo und the consequences of

one or another course of action may be Go grave, that I am fearful a bit of
the influence of a =all and rather determined group of men in the league
wno aeon bent an having this question formally dealt with at an early date.
In this group the '%nglish mawbera have a strong influence.

I am not oending you this as u request to do anythivg, but simply

to thinkaboutit, with the possibility always in my mind that your °aide
acquaintance and very groat influence with practically all the men Who are

active in these Matters abroad may reeult in your being consulted.

-

In

fact, this seems twescapable, because of the relation which the Dave Plan
bears to any development of this sort.

All that I have solar.done is to suggest to Jeremiah Smith that
the matter be delayed.

Norman has thought thatit might be well to go slow

with proposals, at least until we had a chance to examine it on our own account and have eome preliminary notion of what attitude we should take.

Some months ago I asked Dr. Durgese to starta study in the rank
of this whole mutter, end I understand 0=0 progress has been made.

I RM

enclosing a spare copy of this letter, in case you' should feel willing to
ask Dr. BArgess to road it and talk with you about it, but I avail not send
it to him, as ho than might drag you into a discuosion which you would feel
juot now took too much time.

Please do not in:or from this letter that I am engaged in any such
lengthy correspondence as this every day.




2hile I have had some visitors

Ur. Owen D. Young.

V.

01/28..

hero and spent soma time in keris, I really have dcno little work and
just letting matters accumulate for the moment.

am

I GM very much better,

but etill suffering DOLIO of the after effects; of my illnuee, Lad fool the

need of the rest that I am getting here.
With boat regards and apologies for bothering you with thio

matter, I roman
youra,

Ur. Owen D. Young,

c/o General Slectric Company,

120 Broadway,
New York.

July 18, 19281

P. S.

I have held the above letter, as I expected to see

Salter again, WhiCh I have done.

Between our meetinge, T have had oppor-

tunity to co over ftll of the papers and resolutione, and with Dr. Stewart,
end ee both agree that it ctuede out most prominently that thine gentlemen

are really directing their efforte toward and ultimately - if they once
etart - 1111 arrive at a determinntion to reek° some endeavor to induce

tho central banks to accept the rusponaibility ter stabilizing the pure
chneing vnlue of cold.

fore the public.

Thie le a moct hazardouc prepocition to lay be-

It will armee endleso controversy, revive the waning

hopes of all of the tectreme theoricte, and likely help to create a public
opinion that the banke of issue can assure impocsible reeponsibilities.



10.

Mr. Owen D. Yourc.

7/18/23.

Believing this quite firmly, I have told Salter at a meeting When
Stewart and Hhrrison wore present that 1 felt obliged to withdraw even

the moderate suggestion I had already made in Paris of a factual study.
This is where tbe matter now rests.

Wisti




Dear Owen:

When I saw Jackson Reynolds in Paris we had a long talk about

the

The situation presents some diffioultiee, and

suooessor.

his

possibilities

are as follows:

First, tradition in recent years has been established that Class A
It is not

directors shall rotate and not serve more than one continuous term.

universal in the System beoause George Reynolds has served continuously in
Chicago since the bank was organised.

So the first question is whether, in

the present situation, it may be desirable to continue Reynolds

notwithstand-

ing the tradition.

Second, hae the time arrived to have a representative of a state
Institution

to

repre.ient the Class A banks?

Canvassing

the situation I believe

there is only one man mho stands out as eligible in this group of banks, and
that is Potter, chairman of the board of the Guaranty Trust Company.

This is

partly because of his known ability and integrity as well as the fact that he
represents the largest state institution,
else that I know ef who approaches him

but

partly because there is no one

in qualifications

whose selection would

not arouse bitter oritioism,from some of the large national banks who have been
members from the beginning.

Third, there is the undoubted natural course of electing the head of
one of the largest national
beet thing to do.
tively few.

banks

in the city.

On the whole this may be the

In choosing, however, the choice narrows itself to compara-

Alexander and Woodward have both served in the past.

Challis

Austin, who would be an excellent direotor, is too new in banking oiroles in

New Tort.

!lard of the Irving has been suggested. Be is
. P-.17:ofir or
so h

undoubtedly a fl ret

1

a.ceept, the deal csiors




or

the eArectore In

An matt.mrs 5rld not .1

- 2-.

rate man, tut I think that choice might be regarded as a slap at the big national
banks.

Some day he would make an excellent director.

The choice, however,

probably narrows down to Mitchell of the City or Wiggin of the Chase.
latter, I ma opposed to his election.

As to the

The reasons for it I shall not recount,

but they are ample and oonvinoing and conclusive to me.
As to Mitohell, I have a high regard for him.
the ablest of our bankers.
I do.

He is truly one of

You probab/y know his characteristics as well as

For a long time he was a very bitter critic of

what we were

The

doing.

influence of some of my friends outside of the bank has been quietly exerted
to educate him a bit as to our policy andphilosophy.

A strong influence has

been recently felt in young George Roberts who went from our bank to the City

The same

and who has done yoeman's work in making our affairs clear to him.
.

.

is true of Gerrard Winarton who left the Treasury to join the firm of Shearman

and Sterling and is
straighten him

more

out

very close to
in

our

reasonalle and much

cooperative.

affairs.

Mitchell

For the last year Mitchell has been much

less critical.

I have had one

and has been a good influence to

site recently he has been most

talk with him

and

Mr. Harrison has

had

on the general eubjeot of our work and the credit position and the

a nuaber

po4.6y

of

the City Bank.

On tbe.idiole, I think

he is my ohoice.

It might be that Potter

would be a better choice in some ways were it not that his health hs.e,

recently

been so very bad that I have been doubtful of his ability to serve.

This

would nerd to be
my 'conviction

investigated.

that

The real point of this letter is

to. express

if Mitchell should be selected it would be betit!at

outset to have a. very frank understanding with him on two pointif,:.

that so long as he is a member of
to accept




the decision of

the

board

of

directors

tke

One is

he should bei willing

the directors in adl matters and not

4440.ge,u

outelde criticism but be loyal to the majority of his aseociates. I em convinced that a nice talk with him on this eubjeot would in .ure that cuch mould
be the cabs, and it is not. eo much the need for having an understanding in
advance as it ie to avoid ony possibility of minunderetanding in euvanoe, end

the distinction in Mitohell'b osee is important.
the inevitable influence which his knowledge
upon his policy in running the City Bulk.

in central banking. How can a

The other point ie as to

of whet we are doing may exert

This is one of the oldest

problems

director who is interested in the other srice of

all banking problems be disinterested and impartial
Reserve bank as well as

in

confidential knowled&e,

and steer

in his attitude in the

his own bank, not take an unfair advantage of his

a

clear course in a very delicate situation.

Charlie litchell is one of these fellow° who faces the facts honestly, and I
think it can be dieecuseed with him frankly and no possibility of alauncierstano-

log arise.

ils a minor matter, I have always felt that

attend,

very eilde ihtereets, many meetings to

were he a director, his

and pressure

of the affairs of

the City Bank and of the City Company, would sake it impossible for

him to

attend our meetings which eometimes last rather long and ehich occur twice a

week.

We would need to ht,ve an

I believe that whet h.

understanding with him a!out this. In general,

director of his class gains

edee, experience, information, etc., is ample
time in otter matters.

dignified

from the

repayment

for the

Besides that, it ie probably the root

directorship of the country.

carefully revised

applying to his ease, and any talk

to cover the

with

others.

important and

is

to to

the Board should,

particular circumstances

him should be had by you and by Jack

Reynolds, and not by any active officer of

Case, Harrison and the

sacrifice of hie

Should it be arranged that he

nominated, the cuatomery letter sent him by the Chairmen of
I believe, be very

Reserve bank in knowl-

the bank, which would exclude licGarrah,

There hive been old entaoniams between licGarrahos

bank and the City Bank and that situation should be avoided; as well as Mitchell'.



-4amour propre respected by having the matter arranged by yourself and by Jack
Reynolds.

Your being Vice Chairman of the Board and Reynolds being the retir-

ing Class A direotor makes that a perfectly natural suggestion.
I hope this appeals to you as a reasonable discussion of the problem
and not too urgent or definite a recommendation by me, which is something which

I should wadi" avoid Just aow.
Sincerely yours,

Mr. Owen D. Young,

iao Broadway, New York City.




far.

t-tH/t4

PERSONAL

August 20, 1928.

Dear Owen:

I shall burden you with only one other communication, bit I fear
it is rather long.

Ny illnesses for the last two years have delayed putting into effect certain changes of detail of the bank's operations which I have undertaken

to

explain in the enclosed memorandum.

nil. preparing this, it seemed desirable to expand it into an
'elk

expression of some general views about the bank and the System.

You may re-

gard it as my testamentary direction to my successor.

Should y

explanation of why I send this to you you may understand that it is beoause
I have so high a regard for your Judgment in these matters, euch confidence
in your understanding of my point of view and the purposes in regard to the

bank, and, more humanly speaking, ouch a persona affection for you, that I
steal feel more content to have you hand this to ay successor with such comments and elaboration as you feel Justified in making.
I am very anxious to see you soon for a little chat about some of
these matters, but hesitate to draw on your time.

If your seoretary could

telephone me suggesting what time would be convenient to you I can certainly
arrange to meet your oonvenienoe any day before Friday.

Oa that day I may

go up to the country and stay with my soul

Vith best regards, and thanks

also,

Very sinoerely yours,
St

Kr. Owen D. Young,
120 Broadway,
New York City.




(Second

Draft)

ZT)4
August 17, 1928.

.s

There are certain matters in the work of our organization which require the

thought and attention of the officers and which will only have the attention required
if the head of the bank initiates plane for dealing with them and follows them to a
conclusion.

They are grouped in this memorandum according to a rough classification.

I.

INTERNAL DETAIL

The Forms Of Reports Made to the Directore.

1.

These are not, in my

opinion, satisfactory,and do not disclose the bank's position,
in its position

by periods the causes

the

significant changes

Of the changes, and, finally, a summary of the

transactions of the various departments.

In some respecte the reports are

submitted

in too great detail and much of the detail is not read and would not be very illuminating even if the directors did have time to study them.

Each director now looks Over

the papers for some particular item or items in which he is interested.
reports-

to' directors

My idea of

is quite ' different from our present' iriOti ce, and ImoUleli st

the information to be submitted roughly as follows:

r

(a)

The statement of the bank with the figures so consolidated
that only those items where changes are important to the
dir3ctors are clearly brought out, and every change for the
period covered should be shown and the cause of the change
explained.

oe

all

of the information in regard to our
This will comprise
reserve, the members, reserves, changes in the investments,.,
loans, bills, etc.,, the note issue and other material facts.

formia

l(C)'doMMuniCaiions frOM'thEI'ledeiti Asserve BO/1rd.
ForeignHmatters.

The money market and changes in general conditions.
LD

th

t(f)

"%AIX '(g)
vrt8ti&ltl(h)




The rate situation and recommendations for Changes.
The usual detail.
Departmental reports. At intervals, suitable with regard
to the importance of the department, each department should
submit to the directors a brief comprehensible report of its
transactions. This Should incidde every department of the bank,
the more iiportant ones at freqUent intervals, the less important ones more infrequently.

The whole subject of reports to

directors should be

Opernting. Reports to Officers.

eration than

overhauled.

This requires more etudy and consid-

have yet given to it, but the reports as at present being made are

unorganized and they should be brought to a comprehensive whole by a careful study

so that each senierofficer knows every

day what the whole bank is doing.

System. Quite frequently within the last year or

two I have

caled for papers which I know are in the files and have been unable to get them.
Where I have examined some of the files I gain thelinpression that too much weight

given to filing by
pondent.

subjects and

too little to filing under

the name of the

isA

corres-

My belief is that the bank should have the master file arrane,ed by the name

of the correspondent, and that file should contain the original of every letter re-

caved from

every source and

the first carbon copy of every letter sent to that cor-

respondent.

The subject file should be subordinate and dealt with largely by cross

references.

I an inclined to think that the complication of the present correspon-

dence is so greet that we must perfect a subject and numbering aystem9 and that Miss
Parker should have the assistance of the best experts that can be hadi;.

Personal Correspondence.

We must have some better formula for deal-

ing with personal and private correspondenoe of a confidential. nAure coe-4ucted by

the senior officers of the bank which it is not possible to put in the bankvs files.
My own correspondence I expect to deal

with myself in due time, but a satisfactory

formula to cover the eo ire organization should be promptly devised.
Assignments of Officers Y

For Duties.
the first. time, I believe, in

the history of the bank a serious mistake hoe been made in the aseignalent of duties
to the senior officers.

My retirement will now afford an opportunity to correct this,

and it should be done before we become too deeply entrenched in an unbalanced and
.;;7-..
eee.
d
*ft/
unscientifio arrangement of the work.




.

uztLuc/.
Emortrf-,

arisen

le 0/ '

ilt.t*

e to mix

derstaneie

II.

Governors, Conference and Procedure.

6.

to

have been due
getting

PROCEDURE IN .EXTERNAL SYSTM MATTERS.

Most of the

difficulties

the indifference of the Federal Reserve Board in the past.

up a program,

clay in

reviewing the

action of the

iliarity of the Board with action previously,

conference, and

here

Delay in

the unfem

taken and approved, has resulted in die-

cuesion and dispute and sometimes serious misunderstanding.

I think much of this

mould' be obviated by the preparation of koareful formula,eoirculated among the rm.!
serve banks,,,

the

members of the

Reserve

Board, and the staff of the Board, Which should

be printed and sent out with the program as en integral part of the program before
every conference.

Such a formula can be gradually developed so that everyone in-

opiference and

tereeted may be Consulted in connection with the preparation for the

conduct of the meeting and action taken subsequent to the conference so that it will
be productive Of better resulte.
7,

cooperation, a

with Governor Youngs

System Committees and Procedure.

Here I think,

great improvement

can be effected. My idea would be

in our procedure

to have the formula above mentioned contain a

committees of all

providion for the

reference to system

subjecte which require epecial study either by the Federal Reserve

Board or by the Federal
changes of regulations.

Board, and especially

reserve banks preliminary to the'makine

of

rules or rulings or

Much of the. difficulty between the Reserve banks and the

between our bank and

the Board, has arisen as

a result of rulings

made by the Board which later need to be Changed or reversed becluee of ignorance of
all of the facts.

The Board should stand reedy at any time to refer questions to

committees for Study and report and

recommendations, and the Board would not suffer in

prestige by doing se, but would rather gain, becEease their rulings would be more Intel

ligent bnd acceptable to the banks themselves.
closed from objection

in many

The banks would,

in

fact, be fore-

caees beceuse the Board would have had their recommends,-

Lions in bend before making ouch rulings.
1

8.

The Relations of our Bank with other Reserve Banks.


difficulty Ohl&


Almost every

wa

has arisen in our relations here has been due to misunderstanding

Cr

-4

C resulting

from laok of interchange of views.. So

System as a whole, more than Le the case

the other nearby and more important

such of what we

with any other

that

I think

reserve banks should be consulted more frequently

of dieootuit rate (excepting in emergency) unless te had

sion with the other nearby Reserve banks.

I It is the best

bank,

fact, I should never think of recommending a. change

and more fully than they are.. In

transactions.

Reeerve

do, affects the

had

some preliminary aiscus-

And the enme applies to

way to cultivate a good spirit in

many of our other

the Federal

Reserve

System.

THE CURRENCY

III.

The Greenbacks.

9.

eral reserve

The growth of the capital and the surplus of the Fed-

banks is certain in

time

to

give rise to some legislation.

this year the total will doubtless be $375,000,000 or thereabouts.

It is

surplus possibly will be $115,000,000.

At the end of

Our capital and

greater than is needed and may some they,

_eee

invite the attention of Congress and its lief, for some purposes which might not be

setisfactory.

altogether

There

8

a great varietyof possibilities for dealing with this, but I

think possibly the most satisfactory would be at the proper time to make a proposal
to the Government to pay off the greenbacks and take over the gold now held in the
trust fund.

to

It is not necessary

elaborate the detail of a plan.

It would get

the Government out of the currency business, give as $153,000,000 of gold, and reduce
the surplus of the Reserve bpnks gradually as the greenbpcks came in by a very consid
ertble amount, possibly as much as 4160,000,000 or $170,000,000.
of course, been destroyed and will never come in.

any of them have,

It will save a big printing bill f

for the Government and eliminate one of the weak spots in our currency.

If we paid

them off they would simply be charged to our surplus and the currency replaced by
issues of Federal

reserve notes,

and the burden on our reserve would not be great on

"

account of the gold we would receive.
7,




,.

I

The law should proviae, of course, that we

.

would only pay off greenbacks 'blob were

surrendered

to

us before a stated date, and

any greenbacks

not

presented by

that date would thereafter lose their legal, tender

quality and be retired by the Treasury out of current funds.
close our a000unt at a definite figure.

There is precedent

what was done with old issues of Treasury

their retirment shortly after the new

pared in

currency is issued. We should be well pre-

the "twos" may be dealt with in 1930 when they

required to

to replace them.

notes issued

carry 40

for the

may be retired fit

I should say that on no account can

such a way that we are

this, as I recallbin,

certain to arise a demand for

advance of that date with some kind-of a program

Government.

-for

notes.

National Bank Notes. There is almost.

10.

This would enable us to

Treasury so that
the option of the

this be done, as things

per cent.

now are, in

reserve against Federal reserve

The Government should gie us some kind of a low

interest-bearing obligation which would give Lte a wall revenue to cover our costs

and a little over, and it would no doubt
place in the currency of

the

be proper to have our ,note

issue take its

country as a fiduciary issue similar to that of the Bank

of England and the Bank of France and others.
CERTAIN SPECIAL VOIBER BANK MATTERS.

IV.

As I have already. written to

Banc' talY

.

initely of the

opinion that when Giannini applies

to-us for

Mr. McGerrah I am defan,exteneion of time in

which to distribute the stook of the Bank of America we should decline to do so un-

lees he will
balance

do

certain things.

sheet of

The principal one is to

furnish us with a

the Bancitaly Corporation, and after extmining it

complete

I think we will',

feel justified, as the inducement for an extension, to require him- to liquidate

securities and invest the proceeds in Government eecurities or bills, which are
eligible with us, with the understanding that they will be retained for uee

in pro-

tecting the position of the Bank of America (or, the Bank of Italy indeed) in case
any emergency should arise;

and that hie obligation

te,

ult in that reapect will con-

tinue until,- the stook of the Bank of America Lo4odged in4he,hands



stockholders and, fully

paid for; byt theoll

tone, ridtk 1

6

After the present storm blows over, I

apprehend that Giannini will again
We have no undertaking from him

be ambitious to create a large bank in New York.

not to extend his purchaeee in New York.
for him to do so and retain manberehip

On the other hand, it will be very difficult

in the Federal

Reserve Syetem so long as the

Reserve Board has the power to withhold approval whore its

approval is neoeeeery in

1 would not hesitate to notify Giannini definitely and finally that

any particular.

we will oppose'any effort

on his part to establish a

b,m1k in New York City under his

control or the control of any holding company such as the Banoitely
-12.

Joneees.

of their affairs.

,

They seem to be working diligently to improve the situation

Somewhat the same

nini; the essential

attitude should be taken with him as with Gian-

difference in the

position is that *Jonae" is a purely domestic

problem whereas "Giannini" extends from one coast to the

other, with large foreign

With lionas I ehouldebe inclined to insist right awty that his

investments as well.

holding company get

Corporation.

in iuch liquid shape thatit can help the

Manufacturers Trust

Company to any extent required at any time that any emergency arises.
13.

The tendency in dealing with this matter

Kanter Bank Borrowings:,

has at times been,tureauoratic rather than preonal

and direct:. Every time I

hear the

expression that a. member bank has been in our debt for a. continuous period or has gone

out of our debt

within

a given period or borrowed in excess of capital, etc. I feel

that the whole tkilosophy in this
problems.

matter is wrong. Each member bank has its own

The "time" formula or the *basic

banks, just makes trouble and does not

linaw

formula applied generally to member

fit many eases.., With only a little over 900

membertathere should be no difficulty for the department handling these matters to
understand the position of each member sufficiently well so as to deal with it as an

individual Cabe rather than to apply some purely arbitrary mathematical rule.

If we

are undermanned in the .departakent to enable .us to do this letiss get more men. Here'

again, a simple formula, printed mad. in theAtands of all:mf those interested,
.givedLtvaid the handling of-AtivaseArattars

http://fraser.stlouisfed.org/ proc3c8
Federal Reserve Bank of St. Louis

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afiaa

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7CO146

'elcve

V.

THE CREDIT SITUATION

I am attaching a copy of a msmorandum prepared by Dr. Sters;rt which
4tiwas intended for my personal use only, and a copy if a letter which I wrote him in
reply.

It speaks for itself and I shall not comment on it.

Broker& Loans for Customers and correspondents.

I had intended to

write a letter from abroad on this subject, but decided to await my return lest the
letter be misinterpreted.

I.am now sorry that I did pot write bebause the

talk which

I had the other day with Mr. George Roberts, Jr., convinced me that the true signifil
canoe of the large growth of the loans made by New York City banks for account of
their customers is not fully understood by our, bank.

What takes place is about as

follows, ani is partly responsible for the expansion of loans and deposits

.

which has

recently occurred,

If a correspondent or

customer of a

New York City bank decides to use, say

$10,000,000 of a bank balance by making loans on the Stock Exchange the reeult on the
banking poeition is that the member bank reduces ita deposits by $10,000 000 and reduces its loans by $10,000,000.

It makes no difference whether the

reduction of

loans occurs directly On the books of the member bank h!kving the correspondentle

account or on the books of other member banks, the result is to reduce the re.erve
requirement* (in the case of New York)

by 13 per cents of the amount of

the loans made.

In other words it is just as though a New York member bank paid off $10,000,000 of its
deposits by

turning over $10,000,TA of its portfolio to a depositor.

$1,300,000 of reserve and.creates a surplus

This releases

reserve balance in the Reserve bank. The

member bank at once lends the surplus and thereafter, by the rapid process which we
understand well enough, this $1,300,000 forms the basis of an expansion of oredit of
another $10,000,000 so that

by the

ship of

transfer of

bank deposits and bank loans ere not permanently reduced

brokers loans from

their customers.

an

the ownership of the mrAmber banks to the owner

exception of consequence is where a member bank in New

York owes money at the Reserve bank and uses the surplus reserve to repay.

extent that process is taking plawright now. Broadly speakin"



however,

To some

I believe

neion of bank loans and deposits Which occurred during the last

"ri?

8

nine months or year

can be

attributed to this development and can be found to closely

oorrespomd to the expansion resulting from the reduction of reserve requirements on
the one hand and the increase in loens resulting on the other hand.

The last months of 1927 and the first six months of 1928. There is

18.

occasion to reiterate my

belief

could have been avoided had
January.

Dim

of

that some

the difficulty at the yesent moment

our policy been more vigorous commencing the firet of

We are probably three months late.

This may result in considerable criti-

of the system at the time of my retiriefsent.

within the next

situation

no

I an rather of the opinion now that

few weeks a careful Judicial study of

this year to date should be published.

the situation last

It should be prepared

year and the

in the form of

a comparison of conditions in this period with 'she conditions in the corresponding

periods of 1925-28 and of 1923-244 The

country will be greatly

enlightened and I

believe some oritioism avoided.
There is

Hesitation.

policy, and that dan;er has its

noth!ng so dangerous as a

effects six

months or a year later when a preeent need

for high rates an d the consequences of such high

curtailment-of
unfavorably.

vacillating uncertait

rates becomes

reflected later

in a

construction and other business activities which might affect bueinese
This lag in the consequences

difficult things to

of changes in

appraise, especially as

the time has come to take some of the
our hand more than is inevitable.

our policy is one of the most,

to its duration.

pressure off the

My present feeling is

that

money market without disclosing

This can best be done by taking over bills and any

securities of a character which rill not give rise to the belief that we have suddenly

changed front. Ltuse purchases of

Government securities might easily revive the specu-

The important thing is to lay out a program for a period ahead and

lative tendency.

then see it through without hesitation.

Dealing

with an Nmerg,ency in the Money and Stock Market.

four principal methods of handling a sudden break-down, which are
ezet



(a) e

By reduction,of.,discount rates.

(b)

EV open market purchases of Governments,

tie have

710e

'tww

By Purchase of bills,

By purohaeee of foreign exchange.

Discount rate

rates

reductions would

probably not be

effective unless na,irket

were first eased off.

Open market

purchases

of Governments disclose our hand.

Purchases of bill s can be only limited in amount although we probably
could buy bills directly from

by what can.be had

from

mtwaber banks to some extent and increase the amount

dealers.

'he should now purchase ourselves any bills sold

by our foreign correspondents.
Purchases of foreign exchange just now, except

ment with the correspondent, is not a

very

in special case° by arrange-

good method for dealing with an

It puts us in possession of an asset which we might be embarrassed

My conclusion, therefore, is

as rapidly as it can be brought about,

later

that a gradual inorea,e in the

is the first

As probably desirable that a combination

of

emergency.

in using.

bill portfolio,

thing that can be done.

But

it

remedies for any enter ency situation is

more desirable than relying upon any one.

In a broad way, the situation presents itself to me at present about as
follows:

Pressure of
to

arrest

money rates

WEAL' required to arrest the expansion of credit and

overborrowing in this country by.toreign

undue strain upon

our gold reserves, and,

borrowers

such as might put an

in fact, to 'bring about some reduction in

foreign balances held here which may even now be too heavy. One of the consequences

of this policy, of course, is to check the advance in

the Stock M rket.

If

carried

too far either as to the level of rates or too long at the existing level, it might
result in serious, possibly calamitous condition in the stock market followed by
some business liquidation and unemployment next winter, etc. On the other hand, if
we buy Government

securities in e Urge

ill there is ample

evidence that there is

soma 'danger that vs aight-again have arboiling stock nwrket and'that an increase in



v.

10

volume of credit might iemedietely reeult.

-)

their

importance and as to the

or the other I

general consequences

to the

think it is in every way desirable to

/the

situation by buying securities,
sure to a point where we

matter

Weighing the two contingeeeice as

literally must be

country of one

development

void a possibly dangerous

even though stocks do advance, than

rosily had a

to

to continue pres-

serious deflation and business setback.

The

judged from day to day, and I urge that comparisons be made

of previous periods, notably 1923/24 and 1926, to see whether they do not afford some
guide.

It might be a good plan alto to luietly ascertain Just how liquid some of our

banks are as to securities that can be bought by the Reserve bank.

This must be done

with great discretion.

GENERAL DANICING PROELENS

VI.

The Outlook

for the Federal Reserve System

sents possibilities of two developments,
the other can ultimately be avoided.

and I heve

One would be

for

of

developing the local

Reserve

from Federal

is too delicate

autonomy of

in the direction of a greater

every

question of System

Board in the light of
the other.

In

juotify the

opinion,

expecta-

I think the management of our bank should

policy and every new issue with the Federal

a possible ultimate

Reserve

development of the System along one line or

any event I apprehend that the time is coming when dissatisfaction with

the Federal Reserve

We should have

the di-

The present balance, in my

upon too many human factors to

tion that it will continue indefinitely.
consider

other more in

the Reserve banks and more independence

Board control or domination.

end is dependent

WA, to see how CMG or

never been

centralization of power in the Federal Reserve Board, and the
rection

the long future pre-

Board will lead to an

that in

mind,

effort by Congress to reorganize the System.

and when the first indicatione arise, should prepare

our-

selves for it and have a definite policy and program.

The Future of Central Bank

Cooperetion.

Possibly the

best

understand-

ing of the outlook can be badeby a review of the periods which have developed since
the Federal Reserve. System'



was Organized.

/J-m luny:try

they

I

divide them into four distinctdivieions.
icdL.-,

First, the war period, when every consideration gave way to winning the war.
Thie, applied generally to all financial and economic factors.

§econd, the immediatelpost-war period of complete confusion, where no constructive work could be undertaken with

any

hope of bringing about monetary re-

form and stability.

Third, the period af reconstruction of currencies which undoubtedly had its
beginning in the Dawes plan, and from 1924 until now, in an aetoniehingly short time,
the reorganization of practically all the important currencies has been completed.
Fourth, the period we are now entering, which I

deal

describe as the period

of revival of competition, or economic contest.
,During the first three periods, national and international jealousies and
rivalries and efforts to obtain monopolies, trade privileges and the like were at b.
minimum.

Now that budeets are balanced, debts are lees menacing and currencies are

reorganized, the principal European nations are bein,; influence 0 by the fueling of

strength and security which they have obtained, and the old evils of cut-throat competition are again showing themselves.

It even enters into the policies of the banks

of issue. my belief is that. the time has arrived to

keep out of any complications of

the sort which the huropean banks of issue are likely to

encounter.

our morel obligation to .Europe,

be no further occasion for

and there seems to me to

entering into arrangements which might embarrass us

in any way,

We have diecharged

politically or finan-

cially.
22.

The Finance Committee of the Leaole of NI tions. This matter has been

so thoroughly canvassed that I

shall

make no further particular comment.

We should

have nothiag to do With such an inquiry as the Finance Committee of the League proposes or, the gold exchange standard, or gold shortage, or whatever it may be.

we should make it clear to our banking friends abroad, as I have

I think

done with those with

whom I have recently conversed, that we cannot cooperate in such a

dangerous progrem.

There was some suggestion, almost a threat, at Geneva that if the finance
Digitized forcommittee abandoned
FRASER


the inquiry, they would be obliged to explain %het they did so

- 12 -

4because the Bank of England, the Bank of France and the Federal Reserve Bank of New
Should the Finance Committee make any euch statement I think we

York disapproved.

.mould be justified in ansvering them publicly.
23.

Our Organization.

the

This is

most important matter which I have

Federal rederve

The prestige and efficiency of the

in mind to discuss.

bank does

not arise from the importance of the powers it exercises nor from the size of its
capital and assets, nor from its

fine building, nor from any

material thing.

entirely due to an erganization of human beings who determine
and execute it.

organization au coeds unless the

No business

inspired in some way to do a good job. The inspiration
which is not run

for

profit is

the policy

It is

of the bank

people employed are

in an institution like ours

the essential requirement for its success.

It would

or

never exist in our bank/in any other organization unless it were gained from the
attitude of 4he head of the
tank from the senior

vinced

deputy

bank and

Every employe of the

governor to the porters and scrub women must be con-

that there is some one in the

is always thinking

his immediate associates.

bank,

and necessarily the head of

of their interests, their welfare and

the bank, who

their happiness.

Failing

that, any organization rill disintegrate and in the case of our bank, efficiency

and success will

immediately be

in

jeopardy.

Never should a year pass but something

is suggested of a constructive and inspiring nature for the benefit of the organize
tion.

I frankly believe that such inspiration is founded upon the relationship

between the head of the bank and all of the people in it, and it can beat be described by the word, "affection."




September 17, 1928,

Dear Mr. Young:

The accompanying copy of a letter from my

physioial,

Dr. James A.

Miller, will I am sure make clear to our directors that it has now become
necessary for se to resign my position as governor of the Federal Reserve Bank
of New York.

Dr. Miller expressed this opinion in Paris on August 27, follow-

ing a full review of my

physical

condition, and at my request stated his con-

viction quite unreservedly after twenty-four hours' reflection.

Since that

date, ad I have orally explained, the need for rest has become even more urgent
beoauce of an intestinal complication which will require constant qttention. So
I am compelled to submit my resignation to become effective at such date as the
directors may determine.

It is quite impossible for me to express the regrets which I feel in
leaving my associates in the bank and in discontinuing service in an organiaa-

Lion which for fourteen years has given as the greatest joy and satisfaction.

These feelings are not lone due to the interest and importance of the work, but
are even sore the consequence of the splendid cooperation and the hearty enthusiasm with which the entire organization has devoted itself to a great publics
service!

It fiats been inspiring enct-itorth every sacrifice.

I hope the director's
delatly rhave appreciatedAhei

and all of the officers and cmployes realise how

loyalty and sympathy daring ay long illnesses
,

and

how deeply they have,elaiislhold

ay affection.

Vary

sincerely,

Governora
Mr. Owen D. *Young,

1

Acting Chairman, Federal Reserve Ban),
New York City, New York.




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