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June L6th, 1916. my dear 7arburg: In regard to the Belgian currency we were discussing, this may 'Prove a somewhat larger undertaking than you imagine. Then the war broke out, the erisis was so acute in Belgium that a groat many municipalities issued notes for circulation somewhat similnr to our 1907 Clearing ::ouse certificates. Uncatcelled samples of these, and as complete as possible, both es to issues and denominntiens, is what I want to obtain. Since the complete occupation of Belgium by Germany, the German military government, I understand, has made issues of such currency and I am likewise anxious to get samples of this currency. If you hve anzr friend who can secure these for me, I will very gretly appreciate it. It may cost quite a little mo ey and you will, I know, advise me of the amount Involved. Thank you very much for your trouble. Very truly yours, Hon. ?aul M. arburg, Caro 'Federal Reserve Board, Washington, r. C. BS Jr/VC!l latutnmv u 4131-arT, 191G FEDERAL RESEillaYAlerth' 1916. Dear Mr. Thrburg; Thank you for your reminder of the 5th about foreign exchange men. I have not overlooked it; on the other hand, for the past week it has been imposible for me to do anything.about it. am not acquainted with 11r. Neilson, but I do know Mr. Ro- vensky very well and believe he is a competent man. men would probably be very high-priced men. priced man, in the long run, is the dheaest. know, Kent would satisfy me the best. Both of these Generally, the highOf all the men He receives a salary, 1 think, of16,000 or 20,000 a year and we would likely be criticized for paying any such salaries. Jim Brown in dining with me to-night and will take the opportunity to pump him. A cable is going forward to-night in regard to the Rolland matter nd I will lot you k-Aow the outcome. Very truly yours, Hon. Paul 1. Warburg, Federal Resers77-197PT7' 7ashington, D. C. BC Jr/VCM January 10th, 1916. rear Mr. Warburg: As I have verbally explained to you, our directors felt un- willing to authorize the purehase January 1st. of United States Bonds until after They did.. authorize at a recent meeting, the purchase of 2,500,000 and uuderstadding that the Oomntroller of the Currency had failed from time to time, bonds for sale for account of:national banks, we have had the enclosed telegraphic and letter correspondence with him with reference to tho purch-se of bonds. the matter that you may be informed should I am sending this in order be brought no for discussion at a meeting of the Federal Reserve Board. The Comptroller's letter of January 8th apparently takes exception to the exnression "considerably below par" which Mr. Kenzel usei in dictating the letter of January 7th, signed by me, having in mind, of course, that if we purchased a large block of the bonds at a difference of, say, of money. of 1 in price, the added cost would be a considerable sum It is a se:all matter, but the Comptroller's attitude does not indicate a very friendly disposition towards our plan for buying U. S. Bonds, particularly, as I believe he sold a block of bonds to one of the other reserve banks at a price somewhat below par. If the Comptroller vants to sell a block of :"2,500,000 of 2 s at 99 i, ve could buy them. Very truly yours, .44:Auir4,3r . Hon. Paul axburg, Federal Reserve Board, Washington, D. C. COPY 1916 January 14, 1916. :ERVE BANK Dear kr. ;,arburg: Section 13 of the F-deral Reserve Act limiting acceptances eligible for purchase by us to maturities of not more than 3 months, conflicts with the usance of the Fax East. Those bills of China and Japan exporters which appear in this market are drawn at 4 months' sight, or if the shipment has been made by sailing vessel, at 6 months' sight. In many cases, the acceptor:. are undoubted New York banks or bankers. The imports of silk, silk textiles, tea, hemp, jute, rubber, etc., for the 9 months ending September 30, 1915, amounted to $37,909,000 from China and $73,784,000 fron Japan. This movement is mainly financed by the HongKong and Shanghai Banking Corporation, the Yokohama Specie Bank, Ltd., and the Charter Bank of India, Australia and China, Ltd., the agencies of these institutions in New York carrying in their portfolios large amounts of such acceptances. For example, we are confidentially informed that the New York Agency of the HongKong & Shanghai Banking Corporation for the year ending October, 1915, handled $29,000,000 di. eastern import bills and $16,000,000 of bills representing exports to the Orient. The average holding in their portfolio was about $7,000,000, a volume which has not been materially increased since the war began, That agency has discounted in the New York market bills amounting to 2,000,000 of which only $350,000 are now outstanding. The Yokohama Specie Bank has now under discount in New York $3,500,000 at an average rate of to 2%. These bills represent an important part of the international trade of the United States, and would seem en- #2 Hon. Paul M. Warburg 1/14/16. titled to be considered for purchase by the Federal reserve banks. They will probably take an increasingly important place in the New York discount market. The usance is, of course, firmly fixed by custom and by reason of the distances, so that if we decide later to pLrchase such bills, it will be well to have in mind an amendment of the law that would extend the eligible maturity so as to at least embrace 4 months' bills. Yours very truly, Governor. Honorable Paul M. Warburg, Federal Reserve Board, Washington, D. C. HVC/LES. June 28th, 1916. Dear Warburg: Hooray for the first recruit if we land him: It has been like the camel and the eye of the needle - half of us pushing from the rear and the other half pulling on the other side. In regard to the Belgian currency, ( with which I hate to bother you), it is one of those matters that would have to be dealt with, I am afraid, after some correspondence. There are, of course, a good many people thoroughly acquainted with the history of the Belgian emergency currency who could estimate what the cost of a collection of uncancelled samples would be; cancelled form, it celled, and besides would be of in un- much greater value than the can- that, the samples which I have from other countries now are all uncancelled, including the French, of which I suppose there are 500 to 600 samples, costing possibly from $250 to $500 in uncancelled form. Possibly, the best way to handle it would be to make inquiry as to how extensive these various issues were, and if they are too extensive for my pocketbook, then we might get them cancelled. In any event, please do not bother too much about it, because I have no right to shift it over to you. Mrs. Warburg has just called to say "good-by" and this will be my last letter to you before reaching Colorado. I cannot thank you enough for a great many things, including your sympathy and help. -2- 6/28/16. Hon. Paul M. "Itrburg. With warmest regards, Faithfully, your friend, Hon. Paul M. Thrburg, Federal Reserve Board, Washington, D. C. BS Jr/VCM P. S My first job in Colorado will be to formulate something on the Bank of England matter. B. Jr. COPY January 14, 1916. Dear Mr. Viarburg: Section 13 of the Federal Reserve Act limiting acceptances eligible for purchase by us to maturities of not more than 3 months, conflicts with the usance of the Far East. Those bills of China and Japan exporters which appear in this market are drawn at 4 months' sight, or if the shipment has been made by sailing vessel, at 6 months' sight. In many cases, the acceptors are undoubted New York banks or bankers. The imports of silk, silk textiles, tea, hemp, jute, rubber, etc., for the 9 months ending September 30, 1915, amounted to $37,909,000 from China and $73,784,000 from Japan. This movement is mainly financed by the HongKong and Shanghai Banking Corporation, the Yokohama Specie Bank, Ltd., and the Charter Bank of India, Australia and China, Ltd., the agencies of these institutions in New York carrying in their portfolios large amounts of such acceptances. For example, we are confidentially informed that the New York Agency of the HongKong & Shanghai Banking Corporation for the year ending October, 1915, handled $29,000,000 cif eastern import bills and $16,000,000 of bills representing exports to the Orient. The average holding in their portfolio was about $7,000,000, a volume which has not been materially increased since the war began. That agency has discounted in the New York market bills amounting to $2,000,000 of which only $350,000 are now outstanding. The Yokohama Specie Bank has now under discount in New York ,500,000 at an average rate of Zi to 2. These bills represent an important part of the international trade of,the United States, and would seem en-. #2 Hon. Paul M. Warburg 1/14/16. titled to be considered for purchase by the Federal reserve banks. They will probably take an increasingly important place in the New York discount market. The usance is, of course, firmly fixed by custom and by reason of the distances, so that if we decide later to pLrchase such bills, it will be well to have in mind an amendment of the law that would extend the eligible maturity so as to at least embrace 4 months' bills. Yours very truly, Governor. Honorable Paul M. Warburg, Federal Reserve Board, Washington, D. C. Hvc/Lcs. )cl PERSONAL. January 14th, 1916. Dear Mr. arburg: Replying to yours of the 13th concerning :Ir. Dens, I am afraid that Hurlbut's influence may interfere with gother from what Kent tolls me our landing 11r. Deans. that Mr. Hurlbut thi-lks tht Deans is too big for the job. I am awaiting the result of a telephone conversation to-day and wil not know until ::onday whether Yr. Deans is coming or not. If he does a;me an for an intorvieoi, I uiil try to got him to come over to ashinnton. I am undir commitment to stop One or two nights at 1718 H Street on this trip. ,Aild you care to have me stop one or two nights at your hoube, or are the social allurements of ":ashington keeping you ri.nd with regular boarders? rs. .arburg too busy to bother I will adapt my plans to your conven- ience. Very truly yours, Hon. Paul 11. Warburg, rederal neserw: Y:ashington, 7. U. BS4 Jr/VOM trong but signed in his absence. Dictated by Mr. COIF I DICIT IL. January 17th, 1916. Lear mr. Warburg: I have to thank you for your favor of the 5th inst., containing copy of r. .11ozi letLer addressed to Aonorable John Burke, '2reasurer of the flited States, same relating to operating charges in conneetton with th(? Gold Fund.. With this in hand, I am able to make a report to the Conference in -:ashiugton which I am quite sure will be satisfactory. The copy of Ur. Allen's letter is returned heroin. Very truly yours, Hon. f)aul U. "oarburg, Federal Reserve Board, Washington, 7. C. BS Jr/VCM -2 PERSONAL. January 17th, 1916. Dear 7arburg: Thank you for your telom about stopping I shall certainly go directly with you this week. to your house and will try to leave here in time tomorrow to take dinner with you, provided you are not expecting guests. Will move over to 1718 H street after slending a night or two with you. Sincerely yours, Von. Paul Federal Reserve Board, Washington, D. C. 133 Jr/VC! January 26th. 1916. Dea.r Mr. ':arburm, This to remind yau that you promised send me letter of introduction to:0851°B. LIontagu & Company, nr Felix Schuster and Iesrs. N. M. Rothschild r, Sons. TlyJncing you in advance and with Denim- ad assurances of my consi oratiet, I beg to remain, incerely yours, Hon. paul714, ":arburg, Peqer.1 istsoryo 3oar41, ihington, D. C. ?MW/RS Jr Id ANIJLO-AMERICAN CAB Prefix SENT RAM FOR STAMPS At Code CHARGE Wo R DS DIRECT UNITED STATES To March 5, 1916 By VIAWESTERN UNION THIS FORM WILL BE ACCEPTED AT ALL POST OFFICE TELEGRAPH STATIONS. TO PREVENT MISTAKES PLEASE WRITE DISTINCTLY. Gl Best uishec for your trip and a safc return Be!LStron NOT TO BE Having read the conditions printed on the back hereof, I request thii,t the above telegram be forwarded by the Western Union Telegraph-Cable System, subject to the said conditions to which I agree. rELEGRAPHED. Signature Address THE WESTERNLARGEST TELEGRAPH AND CABLE SYSTEM IN EXISTENCE. SYSTEM UNION TELEGRAPH-CABLE THE 8 DUPLEXED ATLANTIC CABLES, OVER 25,000 OFFICES AND 1,500,000 MILS OF WIRE. Direct Wires from Cable Stations to all the principal commercial centres in Great Britain, United States and a) irect connection with Central America, West Indies, South America, Australia, New Zealand, Fanning, Fiji, and Norfolk Islands. DIRECT AND EXCLUSIVE CONNECTION WITH MEXICO. FtECEIYING OFFICES IN TI IE UNITED ME LNGLO1VI:Telephone Nos. Telephone Nos. NDON: 1, Old Broad Street, E.C. .. 3761 Wall 63, Old Broad Street, E.C. .. 3316 48a,Gresham House,Old Broad Street,E.C. 704 9117 21, Royal Exchange, E.C.... ... 39. 40, Mark Lane, E.C. 1070, 1384 Avenue, 3762 3763 Avenue East India Avenue, E.C. . The Baltic, St. Mary Axe, E.C. 6974 Central, 976 34, Throgmorton Street, E.C. I, Drapers' Gardens E.C. 109, Fenchurch Street, E.C. General Offices ANTWERP: AMSTERDAM BA R CE LO N A 1368 Wall 1830 Central 1050 Avenue - LONDON: 10, Holborn Viaduct ... ... Effingham House, Arundel Street, W.C. 4119 City 1713 Gerrard 34, 35, Southampton St., Strand, W.C. 1155 ... 3598 2, Charing Cross, W.C. 5, Royal Opera Arcade. Pall Mall, S.W. 2073 Central 34, Victoria Street, S.W. ... 3716 Victoria 48, Tooley Street, S. E. ... 984 Hop 1c221225773545Central LIVERPOOL. Cotton Exchange D6, Exchange Buildings 26, OLD BROAD STREET, LONDON, E.C. ri 960 BRISTOL : Canada House, Baldwin Street BRADFORD: 10, Forster Square ... ... DUNDEE: I, l'anmure Street .. ... EDINBURGH: 50, Frederick Street CtASCOW: 4, Waterloo Street .. 4581 Central, 2017 Central, 113, Hope Street LEITH : Exchange Buildings ... MANCHESTER: 31, Brown Street NEWCASTLE-ON-TYNE: Tel ephone - I, side ... 5261 LONDON WALL. Telephone No 309 771 1351 400 2324 Argyll 600 1455 1329 PRINCIPAL CONTINENT1'LL OFFICES AN I) AGENCIES :COPENHAGEN Dr. Olgasveg, 47. PARIS: 1, Rue Auber. 4. Avenue de Keyser. 49, Canal des Reeollets. 4, Weesperzijde. 57, Calle Caspe. CHRISTIANIA: 4, Prinsengade. HAVRE: HAM BU RG 118, Boulevard Strasbourg. 12, Ernst Merckstrasse. ROME: NAPLES: Academia, 10. Via Marina Nuova, 14/18. VIENNA VIII, Kaiserstrasse, 24. ZURICH: 59, Rigistrasse. MADRID: 37, Rue Caumartin. 26-27, Piazza di Spagna- The public are recommended to hand in their Telegrams at the Company's Stations, where free receipts are given for the amounts charged. Telegrams for this Company's Cables are also received at all Post Office Telegraph Stations; but in order to insure transmission by the Western Union Telegraph-Cable System forms upon which Telegrams are written should be marked "Via Western Union," "Via Anglo" or "Via Direct." This indication is signalled free of charge. Cable addresses are registered free of charge. All important Telegrams should be repeated, for which an additional quarter rate is charged. CONDITIONS ON WHICH THIS TELECRAM IS ACCEPTED IF IT BE HANDED IN AT AN OFFICE OF THE WESTERN UNION TELECRAPH-CABLE SYSTEM. The Company may decline to forward the Telegram, though it has been received for transmission; but in case of no doing shall refund to the Sender the amount paid for the transmission of the Telegra The Company will refund to the Sender the charges paid by him for any Telegram which through the fault of the Telegraph Services has experienced serious delay or fails to reach the Addressee, or W owing to errors made in transmission has manifestly not fulfilled its object. The Company shall not be liable to make compensation, beyond the amount to be refunded as above, for any loss, injury or damage, arising or resulting from the non-transmission or non-delivery o Telegram, or delay, or error in the transmission or delivery thereof, howsoever such non-transmission, non-delivery, delay or error shall have occurred. The control of the Company over the Telegram shall be deemed to have entirely ceased at any point wherein the course of the transit of the Telegram to its destination it may be entrusted by the Com (and the Company shall have full power so to entrust the Telegram) to any other system, service, or line of telegraph for further transmission. CONDITIONS ON WHICH THIS TELECRAM IS ACCEPTED BY THE POSTMASTER-CENERAL IF IT BE HANDED IN AT A PUBLIC TELECRAPH OFFICE IN THE UNITED KINGDOM. Either the Postmaster-General or any Telegraph Company or Foreign Government, by whom this Telegram is or would in the ordinary course of the Telegraphic Service be forwarded, may de to forward the Telegram although it has been received for that purpose; but in such case the amount paid for transmission shall he refunded to the Sender at his request. Neither the Postmaster-General nor any Telegraph Company or Foreign Government, by whom this Telegram is or would in the ordinary course of the Telegraphic Servicebe forwarded, eh liable to make compensation for any loss, injury, or damage arising or resulting from non-transmission or non-delivery of the Telegram, or delay, or error, oromission in the transmission or delivery ti, through whatever cause such non-transmission, non-delivery, delay, error or omission, shall have occurred. 5. This Telegram shall be forwarded m all respects in accordance with the provisions of the Regulattons made pursuant to the Telegraph Acts, 1863 to 1604, and the provisions of such Regulati shall be deemed to be binding not only between the Sender and the Postmaster-General, but between the Sender and any Telegraph Company or Foreign Government by whom this Telegram is or would i ordinary course of the Telegraphic Service be forwarded. The substance of these Regulations will be found in the Post Office Guide. WEST Number TimeFilecle UNION RAM 1Ci$>) W:).,t\c)\CC' c_s 71.1E0.N.VAIL, PRESIDENT CLASS OF SERVI Full Half Rate Cable Week E should mark markations e class of service Ise FULL RATES w SEE BACK OF T 41. Send the fo1iowingtTegram, subject to the terms on back he 40, which are hereby agreed to New York, April 14, 1916. lee ...LINOWAINippoomm., American Ambassador, Santiago. Just arrived. matter. Very fit. Spend next week Washington collection Best regards your party, particularly yourself. Benj. Strong, Jr. Charge to Federal Reserve Bank, 62 Cedar Street. LL MESSAGES TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERMS: To guard against mistakes on the lines of this Company, the sender of every message should order it repeated; that is, telegraphed back from the terminus f said lines to the originating office. For such repeating the sender will be charged, in addition, one-quarter the usual tolls of this Company on that portion f its lines over which such message passes. This Company will not assume any responsibility concerning any message beyond the terminus of its own lines. It is agreed between the sender f the following message and this Company, that this Company shall not be liable for mistakes or delays in transmission or delivery, nor for non-delivery to the ext connecting telegraph company, or to the addressee, of any unrepeated message, beyond the amount of that portion of the tolls which shall accrue to this 3ompany; and that this Company shall not be liable for mistakes in the transmission or delivery, nor for delay or non-delivery to the next connecting teleraph Company, of any repeated message, beyond fifty times the extra sum received by this Company from the sender for repeating such message over its own nes; and that this Company shall not be liable in any case for delays arising from interruption in the working of its lines, nor for errors in cipher or obscure aessages. And this Company is hereby made the agent of the sender, without liability, to forward any message over the lines of any other Company when ecessary to reach its destination. It is agreed that this Company shall not be liable for damages in any case where the claim is not presented to it in writing within sixty days after the message filed with this Company for transmission. THE WESTERN UNION TELEGRAPH COMPANY, INC. No employee of the Company is authorized to vary the foregoing. THEO. N. VAIL, PRESIDEN/ 3 CLASSES OF SERVICE FULL RATE An expedited service throughout. Code language permitted. DEFERRED HALF RATE delivery the second morning following date of filing if telegraphic delivery is selected. Delivery by mail beyond London can be effected in same period of time to most European countries. Cable Letters may also be mailed to New York for transmission. Half rate messages are subject to being deferred in favorRates $1.50 for 20 words and 30e. for each additional 5 words, between New York, Boston, Halifax or Montreal and London of for FRASER full rate messages for not exceeding 24 hours. Must be in Digitized language of country of origin or of destination, or in French. http://fraser.stlouisfed.org/ This class of service is in Federal Reserve Bank of St. Louis effect with most European countries or Liverpool, plus night letter rates to New York and regular charges beyond London if telegraphic delivery desired. ESTE /rORG REC UNION AM iTEL . ATK NEWCOMB CARLTON, PRESIDENT DENT R'S No. TIME FILED BELVIDERE CROOKS, VICE-PRESIDENT CHECK SEND the follg Telegram, subject to the terms on back kti/eof, which are hereby agreed to New York, April 14, 1916. arburg, 1704 Eighteenth Washington, D. C. 'rs. Paul Ti 5t., Have just jumped from the boat into harness and find your letter on top of the pile. Thanks for the warm welcome. brought Godknawswhat with me. Wish I could have Will see you Sunday. Benj. Strong, Jr. Charge to Benj. Strong, Jr., 62 Cedar St. Form 260 ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUB, To guard against mistakes or delays, the sender of a telegram should order it REPEATED, ti For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram an The Company shall not be liable for mistakes or delays in the transmission or delivery, or I amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or fo the sum received for sending the same, unless specially valued; nor in any case for delays arising frond errors in cipher or obscure telegrams. In any event the Company shall not be liable for damages for any mistakes or delays in th ..gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTi DOL greater value is stated in writing hereon at the time the telegram is offered to the Company for tram Nan such value equal to one-tenth of one per cent. thereof. The Company is hereby made the agent of the sender, without liability, to forward this te leach its destination. Telegrams will be delivered free within one-half mile of the Company's office in towns of 5, cities or towns. Beyond these limits the Company does not undertake to make delivery, but will w expense, endeavor to contract for him for such delivery at a reasonable price. No responsibility attaches to this Company concerning telegrams until the same are accept such office by one of the Company's messengers, he acts for that purpose as the agent of the sender. The Company will not be liable for damages or statutory penalties in any case where the c gram is filed with the Company for transmission. No employee of the Company is authorized to vary the foregoing. THE ',41 NEWCOMB CARLTON, . RESIDE/Mr CLASSES OF SERVICE TELEGRAMS A full-rate expedited service. NIGHT TELEGRAMS Accepted up to 2.00 A.M. at reduced rates to be sent during the night and delivered not earlier than the morning of the next ensuing business day. DAY LETTERS A deferred day service at rates lower than the standard telegram rates as follows: One and one-half times the standard night letter rate for the transmission of 50 words or less and one-fifth of the initial rate for each additional 10 words or less. Subordinate to the priority of transmission and delivery of. regular telegrams. Must be written in plain English. Code language not permissible. Telephonic delivery permissible. Day Letters received subject express understanding that the Company only undertakes delivery the same on the day of their date subject to condition that suffl,ic time remains for such transmission and delivery during regular off hours, subject to priority of the transmission of regular telegran NIGHT LETTERS Accepted up to midnight for delivery on the morning of the tic ensuing business day, at rates still lower than standard night telegrE rates, as follows: The standard day rate for 10 words shall be charg for the transmission of 50 words or less, and one-fifth of such stands day rate for 10 words shall be charged for each additio'_ial 10 words less. Must be written in plain English. Code language not p, missible. Mail delivery, postage prepaid, permissible. PER May 12th, 1916. Dear Mr. Warburg: Thank you for yours of the 10th just received. Very much to my regret, it hay seems possible for me to get over to Washington for, at any rate, more than one day I gill, however, try to run over either Monday or next week. Ruesday, if that is entirely convenient to you, but I may be unable to do even that. It will be fine to have opportunity for a long chat and exchange experiencefl. Mrs. Warburg I hope will be willing to put me up. Sincerely yours, Hole. Paul 7. Warburg, Care Federal Reserve Board, Washington, D. C. BS Jr/VCM PERSONAL. May 12th, 1916. My dear Warburg: I am enclosing with this an analysis of the reserve posltion of each New York City bank and trust company that is a member of the New York Clearing House Association as of April 29th, 1916. You will notice that of the total surplus reserve, now somewhat less than $100,000,000, tee National City Bank alone holds , 9,000,000, the other $60,000,000 being held principally by eight or ten institutions, some of the most imeortant banks in the CJearing House Association eaving entirely exhausted serves, including oven the their surplus re- First National Baek. The significance of this statement reveres no explanation. The general expansion of loans and deposits taking place at many cenhalf ters has absorbed reserve provisions of the surplus reserves arising from the new and from importations of gold. At this season of the year, however, and paricularle with the great business and with planting only recently completed, demand for money than later in the see the reserves ther. activity there is always a greater Summer, so that I would expect increase a little later, rather tean declimany I am sending you this stetement, however, for your to fur- considera- tion in connection with the policy of so many reserve banks to pur- chase Government bonds. The system now of Government bands and I learn in a holds in round figures e50,000,000 general way that orders are still outstanding for considerable additional amounts. -2. Hon. Paul M. Warburg. To Realizing that this is really none of my business, I am writing you personally to ask you to consider the following features of our situation: The general uncertainty in all financial affairs by reason of the war demands that our course be very conservative and that our resources be kept in hand, Operations now undertaken in Mexico with the probabil- ity of their enlargement make it reasonable to suppose that the Government might find it necessary to borrow some money, possibly to sell some Panama bonds, The revenues of the Government are still considerably below their expenditures and the condition of the Treasury without re- gard to the 7exican situation might necessitate the Government selling some bonds, The volume of bills is constantly increasing, not only in total, but as regards eligibility on account of the filing of statements by various private bankers, and we should be able to at least hold or even inCrease the amount purchased for the System, No matter what conditions may be in the future, the Federal Reserve System must buy 25,000,000 of bonds every year, or appear before the country as failing to carry out one of the principal objects of their organization, and we can, therefore, count upon a constant increaee in our bond account, If money rates work higher and if the itself Government is selling bonds in sufficient quantity to make the price of 2s -3- To Hon. Paul M. Warburg. Vey 12, 1915. ease off, the offerings of 2s at par each quarter will grow in volume and we may be in the position of being required to buy 16,250,000 every three months at prices somewhat above the current market.price. 7. If the entire amount of bonds- purchased could be con- verted into 3s and one year notes, it would put the Federal reserve banks in a somewhat more favorable position, should they have a large bond account. Under the present plan only a small pioportion of the total holdings of bonds can be so converted. In former years, before the Federal reserve banks were organized, had the Clearing House balks of New York City serves in the neighborhood of 20%, as at repirted re- present, we would have had a most serious situation to deal with, possibly struggling Clearing House certificate problem and with the certainly having no market to rely upon for long time bonds; money would have been unobtainable. The aseurance widen now prevails, notwithstanding the many causes for conservatism growing out of the wer, indicates the extent of the reliance of the bankers of the country generally upon the Federal reserve banks and the degree to which belief nrevails that can meet any strain. I .am, therefore, writing to express to you :1' the system personal view that no further Government bonds ihould be purchased by the reserve banks; that we should take steps to convert as many as possible into one year notes and You know this town market Lhe 30 year 3s. better than I do and how promptly senti- ment changes and things go to pieces under the influence of distress. we cannot afford to miss our opportunity of showing our strength for 4 Hon. Paul M. Warburg. the sake of a few dollars of earnings. May 12, 1916. I am writing to you person.. ally as i do not want to be in the losition of criticising the man.. agement of the System as a whole. if you feel disposed to snow this letter an a parsons' communication to your associates, please do not hesitate to do so. Very truly yours, Hon. Paul 4 Warburg, Care The Ysdcral Reserve Board, Washington, D. C. BS jr/Vai.. WESTEaSAA UNION E if Form 260 YIESTERNUNION Z W. E. ATKINS, VICE-PRESIDENT ER'S No. ) TEL Ilk NEWCOMB CARLTON. PRESIDENT TIME FILED the following Telegram, subject to the terms back hereof, which are hereby agreed to AM ..011:41,49 U. BELVIDERE BROOKS. VICE-PRESIDENT CHECK 13, Paul M. Warbur.., 1704 - Eighteenth St., Washington, ). C. 1111 be over tomorrow in time for dinner. II you have engage.. ment will dine at the Clrb. Benj. Stro, Jr. Char:' to 1 eserve Ba Equitable Building. Fede ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLL; To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the or 'g 01 Fm. this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNRE: I'AID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows: The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any IINREPF amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED eleg. the sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the workin;', ,C Tin s errors in cipher or obscure telegrams. In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-deliv, ry, gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereb, VZ a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed o on such value equal to one-tenth of one per cent. thereof. 3. The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company wh en reach its destination. Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of sue ho cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his a gen expense, endeavor to contract for him for such delivery at a reasonable price. No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telf gra such office by one of the Company's messengers, he acts for that purpose as the agent of the sender. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty day s at gram is filed with the Company for transmission. No employee of the Company is authorized to vary the foregoing. THE WESTERN UNION TELEGRAPH C' INCORPORATED NEWCOMB CARLTON, PRESIDENT CLASSES OF SERVICE TELEGRAMS A full-rate expedited service. ,NIGHT TELEGRAMS Accepted up to 2.00 A.M. at reduced rates to be sent during the night and delivered not earlier than the morning of the next ensuing business day. DAY LETTERS A deferred day service at rates lower than the standard telegram rates as follows: One and one-half times the standard night letter rate for the transmission of 50 words or less and one-fifth of the initial rate for each additional 10 words or less. Subordinate to the priority of transmission and delivery of regular telegrams. Must be written in plain English. Code language not permissible. Telephonic delivery permissible. Day Letters received express understanding that the Company only undertakes the same on the day of their date subject to condition tha time remains for such transmission and delivery during rq hours, subject to priority of the transmission of regular NIGHT LETTERS Accepted up to midnight for delivery on the morning ensuing business day, at rates still lower than standard nigh rates, as follows: The standard day rate for 10 words shell 1 for the transmission of 50 words or less, and one-fifth of sue day rate for 10 words shall be charged for each additional 1 less. Must be written in plain English. Code langi ag rnissible. Mail delivery, postage prepaid, permissible. Estes Park, Colo., July 24, 1916. Mr. Paul M. Warburg, Federal 7.e3erve Board, Washington;'D. C. Dear Warburg: I have addressed some letters to .7,27e). Warburg and to you at Loon Lake. New York, and am wondering whether that aaress le sufficient. If you are wondering also why you have not heard from me, possibly that iu_ties explanation. Yesterday's mail brought yours of the/p.th.-- st of lav time le still spent loafing here, but I r/in abo one hour a da y. working and hope shortly to inc efiee that -0 an hour and a half. Treman and the others at the-, office ite me regularly end tell me of the meetinzs, which I am Sure are good fer everybody. About rates, I hav .ome to e conclusion that if even time money gets up t5 per ce4t., or higher, in New to increase our disYork, it will not 1) dviSdble for count rate, but shou me& \the siti.tion by changing our rate for bills, defer until there is °onside rediscount eommercia z_170t14),& in the discount rate e teiidency for member banks to The world's money markets are ait Ve and we can change our rates now getting pretty, fl _a,y, but I believe a change in our for bills without( discou rate mi It be, reductive of harm. It is a matter that wir , require sifl1ful handling and I regret very much not being theze_.to watch matters move this fall. The view yoa oxpree rebeat7ihe short loan rate confirms my own view about all the rates for discounts. You have Loubtless been advised that the minimum rate for bills is now 2;,:- per cent. I Ongratulate you on establishing relations with e will get them in time, Sabin looking to membership. but I would be more pleased te see the time in the near . future than deferred until next year. If we get the Guaranty, we will get the Bankers and Tith them the vtholc state bank membership problem is solved. Don't you dare insult me by calling those Republican obstructionists in the 3enate my friends. I have no use for any of them. After the hard work that we have ell given to the subject of Amendments, it makes' me sick to see those jealous time serving partisans throw us down. i,or the first time I have been tempted to "write a letter to the Press" on the subject. Can't we push the matter along 'through the rreeident arid wouldn't it be a good scheme if some of us addressed a letter-Or-two to Colonel House on the subject? 2. I am glad the responsibility has been made clear, but it shoul.i be done publically. Thank you for sending me a copy of Mr. 11/abort's letter. He is a fine fellow and if you and your associates can make a generous ruling, on the Clayton matter, we can start the bail rolling in Chicago just. as 11 as in liew York. Jimmie and I have exchanged postalE rind. I am trying to tempt him to stop up here for a visit fol his way home. It is well worth the extra time for the ouitry is wonderful. You .astound me by your erence to your wife and Settina by sayilv7 with- thqse two ent there is ace give em both my but little left of your famIzaZI love. link it has been better ilbout al& own progre the last two or three days stronger, more energettef now we are engagiO/In bu rear of the cottaee, and in the office arrangements hawlust trying/tv=ax hi lou at any time. I am feeling e a better appetite. Just Line sleepine; porch at the ther small improvements eive letter from Fred Strauss and am o out here in September, intimating that with a bit of persuasion you and L':irs. ilarburg might be eaggest September rather than August as tompte4 also. the a mate is n at its best and the Park will not be so crowd .t.to. ; Wi rmest regards and endless thanks for your letters, which male me feel that I still have a hand in things, Faithfully your friend, Estes Park, Colo., August 1, 1916. Hon. Paul M. Warburg, Loon Lake, N.Y. ,rburg: Dear There is very little news I can sen.çyou from here, as news implies activity and---tleate. tp just now Tito I have a boss h'iivaine-th shape of Miss out of my line. Thompson, who holds me down,atat-4his wee be indulged by a short all)* nce Cf fishin you know the outcome. am going to I will let e me frequently and I The boys at the off vhat is going on. They am pretty well in teueh wi bond arrangement on a basis have concluded th°_agov. au can be worded out that seems to mp/as sat* uree we missed our market, Of under present p nditionet through no fa 1 of our p n. ju, a le& memorand 1- omp RV , d and forwarded to Lew York mueh/too long I fear, in relation to A couple of weeks' quiet doliber- fore gn correspondent°. atji on thattter up here in the mountains convinces me iat 'it is/ eally our duty to conclude an arrangement, I regal4d, as most favorable, while the opportunity existdhch I fear will disappear if we procrastinate with it:-- have a vision which may be over optimistic, but which I think you have sometimes shared with me, that whi in a few years the Federal Reserve ystem may be able to develop relations with the principal central banks of Europe, such as never would have been possible prior to the passage of the Federal eserve Act. This country of ours needs it as one of the safe-guards against unfavorable after -war developments. ala views on this matter are __not partisan and if conditions respecting communication, security, etc., made possible, I would be just as ready to extend this plan into Germany as into any other country. For the present it seems to me we should make banking arrangemente with the Bank of England, the aank of France, the Bank of the Detherlands, some of the South American Banks and possibly a little later some of the Scandinavian Banks. After you have been over the memorandum I wish very much you would write me fully your views about it. this If the situation makes it necessary for you to turntheir matter over to your associates without influencing C.,. 2. decision yourself, then write me your views personally. I have a bully letter from Mrs. Warburg, in which she reproaches you for deserting her. It leads me to renew my suggestion that this is a good place to spend part of your vacation and it is too far f to result in interruptions. My best regards to you old man. can spare the time. om Washington I W irte me when you - I t Faithfully lizrxr> Estes Park, Colo., August 5, 1916. Hon. Paul M. Warburg, Loon Lake House,. Loon Lake, liew York. Dear 4arburg: I have your long letter of July 31st, tated at Loon Lake,fine, au dictating an answer in dicand our new sky thatparlor, which looks rightwith at the Continental Divide is still well sprinkled up big 8,4671-ft fts. I wish you were here for there seems to be an!end-I4 matters that we could discuss with 9/vantage, umber of as you seem to be worried and as';a4sf G.Z.W. wil ticularly I am the best certify soporific for these un ortunate/meods of yours. Your good spouse te in wonderfully fine shape, by the "row" over the Gov old man would be -- think of much worse t me t at menta Ii phycuiy you are are much harassed th orship. /Don't lethappen that things at might it worry you -`thine/that you now fear. I have sent ice a memorandum about the Bank oo long and in pretty rough but I have asked t shape, it down and polish it off and send it the Bo= eiling from the Bank. Ia I have Aoleted t line of an arrangement by addition which all twelve of a i-':eser nks would conduct foreign transactions in elle_ , the the account ova it to a liew York :Aserve hank to manage of the Gov nors. This iscertain supervision by a Cominittee also tentative seat both lacuments to you direct, except and I would have of England matter. courtesy i officers in exile. as a matter seemed 'necessary for me to first consult of the the bank, as well as the diliectors, while I am Ai are going to have a great opportunity in the near future to develop arrangements of value and importance abroad. A letter just received from dial expressions and asks if Ir. Vissering contains most corcannot arrange to visit Holland and talk over that is one of banking matters with him. shouldover get well, the first things that we If I do. thank you for advising me about your correspondence with Sabin and the new ruling about acceptances. You and I might not consider the ruling good business under ordinary conditions, but in order to get these laggards into the system where they belong, I think any ruling of that kind is justified. 2. Thank you also for sending me the letter which the Board sent to Breckenridge Jones. It should answer his objections, Which I recall were very fully set out in a brief, covering this very point, which struck me as being an able argument. Of course Beeckenridge Jones has dealt with the Charter powers of the Mississippi Valley Trust Company pretty generously, but he is a sound banker and a safe man in mu opinion and hie institution is undoubtedly In good shape. (1 The newspapers report the passage # the Amendment Bill by the Senate, so I am acting upon y - modification of my suggestion and writing simply_to Mr/ lass. It hardly seems nececsary now to write. Senat-evaDwe4: copy or r1V letter is enclosed and I hope 1.,t meets with, our approval. Ay best guess is thatt,'we ar0 going to Vr6e money reasonably easy until nepte bger o ctober, but after that a good demand. I suspecthp.r.t oo of the gold recently importel hau not yet appear's bank reserves in llew York; where it comes from _ie to eo extent a mystery, but can be Jane° has not shown any increase but a cOng6iderab dee e se in its gold holdings, notwithstanding that the 4nch people are still giving up an average of a mill on and alcuarter dollars a week from their hoardings. To tlqic can bd ddea the nroduction of the partly explained.' African 0A2lustr aIs, which probably amounts to four anata half mi Il.oe]adollars a week, and, as you ourmitine very ognsiderable contributions by eussia.. We must not overle k the aJ also that tlw effect of the issue of English curre4r notes hfs been to drive gold into the London joint stook 'cs saspect that some of this old is also beine u7-Wring the period that gold shipments were suspended by the :13en'e of ehlgland the accumulations from these four sources of supply were doubtless considerable. I must say that the skill with these great transactions are being managed justifies admiration. It indicates that they propoHe lo keep our bank reserves fluehee with gold so long as they are large borrowers in our market. Possibly you observed some months ago that the Bank of Russia announced that in publishing its gold reserve it uid not include its stock of bold held abroad; that gold was undoubtedly in London and quite likely had been moved there a long time ago. Your suggestion about Aiken has long been in my mind. It is a matter that I woule hesitate to broach in i;ew York without first conferring with Jay, and, as he will not be back until August 21st, pcssible It would be well to wait until then. Aiken would be a great addition to our force, but a tleaenduous loss in Boston, where in my opinion he has ahhieved a greater succees in securing cooperation from his members than any other bank. He is a lovely fellow and would prove an eminently satisfactory associate; nothing would suit me better. had heard of Billy -.Arter's illness before fact, the first news was a letter of sympathy Aaich he digtated I had of itlong not after he was taken sick, and you will agreeto methat was that most characteristic of him. It is a terrible blow to all of us who have been fond of him for many years. This is enough to inflict am sorry that yo:Ir letter had you with at one sitti stating that you had been haileda sting i the postscript, to "dashtown" as :ill's. darburg has christened it. leaving Dew York; in As always, Aitied4W4 =AP Estes Park, Colo., August 7, 1916. Ur. Paul I. Warburg, Loon Lake House, Loon Lake, 14ew York. Dear Warburg: One of the boys at the offid-a-iv t a copy of the Dew York me nol \ExaminerNsind you will be amused at readl, ticle on the first \\/' f which are marked. page and an editorial., bd'it It simply in4i tes t soNof the old heresy is extant. Ii keen interest the outooØ of your negotiations for the passage of the dments./) am 14i6aing-47 Yours sincerely, Estes Park, Col., August 24th, 1916. Dear rburg: For over two weeks I have been without( alp here and ot of °there, won't attempt to do so to-day, but wi ifTts4 fully to.. consequently unable to answer your letters and morrow or next week. 4 --Am going to/D0,av14* baturda\ o meet two of my yonngsters who are coming I have a letter from t wi )my brother Billy. // Glass expressing confidence tne exception of the -prow that the smendmentgwili-Ta)\ / vision authorizing change of ileder'$Yreeerve notes for gold. This is very disappiki tiny."may get up a little brief on this end him ari'AlAsend you a copy. he certainly takes a narroi view of eor very fundamental banking prineiples. If he does may decide to send him two or three good imprdy books on thEIT-gaject which he should neve read long before attempting to say *hat kind of legislation this country needs. t.ave 4uet learned confidentially that we wore very near success in ting the New York trust companies into membershipi but they h Vs now been advised that membership in the system will Me imposwiible co long as they have any private bankers on their Board of4Directore and, consequently they cannot afford to join:, matter w Hon. Paul Y. Warburg. Aug. 24, 1916. This is another kick-back from that wretched Clayton Act, which in turn, was a product of the still more wre,ched FUjO fiasco. It means a new aampuign to amend thc, bill and we must get at it promptly. have written the office that I expect to deva01 a little time to getting up a brief and draft some sort of amendment and I hope that you and your associates will get your shouldars behind this and get something lone next December, if it cunnet be done now. There is little news here exce?t a very favorable reort from Dr. Sewall whom I saw last 8aturday and who says that I am mak- ing excellent progress. taint all this Winter. he has determir441/-to ke e inhthe mount- As thio place v& 1l be dose tled next month, will take tne opportunity to serious we increasing the quantity as the Doctor permi e Please toll 1 s. - burg that have ar unanevured letter from her which will roc u er.4-ation. She is the best correspondent I have, and eyNo say without qualification that it is not the only roopoe n whi ,fine is the "best ev(Jr." also ha e'tter from Bettina, but no oho Zailed to send a microsci0 sitI have not been able to read it -1 yet. opo they are not keeping you trotting hock and forth to Washington CI if you are going to indulge in any traveling, come out // here. My warmest regards to you, old man, and molly thanks for your letters which go a long way toward convincing we th* 1 am not yet out of it. Hon. Paul Warburg, Loon Lake house, Loon Lake, "ew York. BS.Jr/VeL iaithfully yours, Estes Park, Ce1.1 August 25th, 1916. Dear Warburg: In my letter of yesterday, I omitted entirely to refrer to the Kansas City Convention o fa-A erican This is the most/importan Bankers Association. eeting to be held by our members since the organization /o the // 7yetem and I feel convinced INss the-rts-skive banks \ / and the Reserve Board are a equately presented there we may suffer the ince isnien kof_ hos,i1 aclion. \,,, \ ! \ My experi of representatives / /the West at these bankers meetings actsrut: some rest int action. _.----r s hat-494-en'that the mere psesence "\ . / )51/ioringe about more conservative Cannot y'an-nnd some of your associates arrange ,...., to atten Fa m it not be a good scheme to notify the Federal sterve Banks generally that they should endeavor to have zpresentativee there! I am mighty sorry that I cannot be there myself, but our office will be represented and I hope adequately. I will write you fully about various matters next week. Sincerely yours, Hon, Paul M. Warburg, Loon Lake House, Loon Lake, New York. RS Jr/VCV FEDERAL RESERVE BOA WASH I NGTON The telegram given below is hereby confirmed. vIssistantri 2-7721 August 24, 1916. Paul M. Warburg, Loon Lake Hesse, Loon Lae, N. Y. Aenuments reported by Conference ysterAay. Changes in Senate bill are as folio s: First, L.,e;ber ban,,s'alloveXto carry voult reservs in Federal reserve banl,s with Board's auproval. Se5end, wr-iver claust, amended to re..ld Upon tae iLiorsecent of arty of .iite member b4n,s which &Lail be de zed a waiver, etc. as to its own indorsensent e:,011.7sively End qr.ote This elitiQuOte nates :lecesoity of expresseu "ialveybut it does not correct difficulty raised It bills Third, Amendment to Seetion 16 coppletely mlittai of sichai,ge ;nd ban ere' ccsloYsLces furcaa.:ed La open market are ma,le eligible as collateral. Fourth, brancE bank arverrit.ent stricken out. Fifth, me,rbar bark acceptances draAn to tarnish exchang, lifcited to filty :Lr cent of capital anl surplte of acceptimg26en.. Co lerence failed to incororate days of grace in Section fourteen, failed tc ncorporaLe provision authorizing Federal reserve bans to,acquire bills drawn by non :lember a7; pell as rLember ban-5 f,r exchange purpttseilo ani failed to incorporate provision authorizing reserve banks to receive deposrls fror non member ban ;s for collection purposes. by bankr... N GLE-C. (CONFIRMATION) (Stoma) G. L. AILISON Assistant Counsel. August 23, 1916. Sirst aocordanee -ith the provide= of paragraph (o) Of section 14 of the iederal Reserve 'Lot, the iederal Reserve iiank Of New York hereby reapeotfully maknn application for the consent of your board to open and maintain a banking aoeount with the .1.1ank of :nglund, a private corporation established under the laws of the United augdom of Great..A-itain and Ireland having its principal place of business in London, :.*:rland, and to appoint the said :Ank of ,..agland its aorrespondont, and to establish the said. 3ank of Ima its agent in the said United Kingdom. .inoompmering this applioation is a memorandum prepared by Governor Strong of this bank outlining the reasons for uthIitting the applioatien at this tile. Respect /7'414, Deputy Glove .or. Federal .ialserve Liourtt, Washington. D. O. I9 Estes Park, Col., August 29th, 1916. Dear Warburg: Yours of the 26th has just come and I am still not going to answer this and the other two lettere-i-f*T I have been a bit knocked out by some mysterioul/ use, po *bly a put it MOwn to little cold or something disagreed with x the devil's hendiwork anyway. / put me to bed and that is wh- I have b en since last 'fivers- / \ cat Itesh-s_suzgWetion Lay eye just from my earlier re, as you/ iae sue plea ' ,isu can e______ 1 I le- dce'-kii- telegraph me in advance so I can make FO-F-Tatir'accomodations. arrangement) that you may come up but it is a case of duty ver- I am crazy out here. come. Y /N\ -day. ters. fiAn-A:Ap not AiLbil, they Officially, I say, do not I Pe donally, I ,_ say, let Kansas City go hang. 1 I eidded another blast to my first letter to Glass, af- ter hearing from him that the note send you a provisions would copy for such use as you may desire in with the Kansas City speech. be lost, and connection it is the product of a fevered and distempered brain, but I would not have written it felt pretty sure of the ground. unless 1 5 To Hon. Paul M. Warburg. Aug. 29, 1916. I will be delighted to go over your manuscript but do not feel that L can "put it info shape", as you suggest. You are the great speech writer and I am simply the dull critic. My very b3st to you and all the family. Sincerely yours, Hon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. BS/VCM Estes Park, Col., September let, 1916. Dear Warburg: I have three letters from you unansweiprd, all dated from Loon Lake, the 1.1st August 26th. neon's wire about the to send me, an4 your Also, tie copy of liar- amendments, whiAhsysoui good enough own official i-elegram,..th irst of that character from you as Vice Gov.1; infernal "days of grace" whi up the chimney and gettIng,som or tivisAng me bout those o have a way of popping re and hiding, so far as the public press is conicerned.\\ I sincere hope ev4 by nan_d_i-da in Washi thing is coming smoothly for you the new organization turns out ell. /Now I would like to drop in on you. The and whi last4j )iteek or ten days I have been feeling wretched upset, I suppose it sets I felt mean for a while. It, just an unfortunate me back somewhat and certainly in an dispatch. also, has resulted some days to accumulation of mail which will take About the Aiken suggestion; he has all along been my firel choice. On the other hand, I omitted to mention in a that the development of the foreign business would make it highly desirable for us to get Kains, if he 'Would be willing to come, (which I doubt). I am writing Jay on the former letter Sept. 1, 1916. Hon. Paul M. Warburg. To subject to.-day, carrying out the program we arranged by corres- pondence some weeks ago, and you will undoubtedly hear from him about it. I suppose you realize that Kains knows the London bill market better than any of us. All and English bankers pick up information those Canadian, about Scotch English bills, no He matter where they may be carrying on their nefarious trade. also knows the usage, as well as thG technique of the business. I hope you and Jay and Treman talk it over the text time you have f a meeting together. I am glad you liked my not r- care as much for the seoon If you decide at C the subject of the notelpeue manuscript of your dress) let \ th y lass. You may o come out squarely on am awaiting anxiously for the I will adopt your suggesw tion and begin tote a few)a ticles for the papers on various e Fed\11\1R reSystem and takeagood hard lick features I // ---- ----___ at thie/Oarticular subject. f flict ship. foreign Possibly you / u with .4- of the manuscripts for 16/Itiso take won't mind if I in editing and censor... up the question of Treasury relations, business and (what interests me more now), the whole subject of our currency and than anything just Hy its defects. idea was to make it as litle technical as posoible. About Russian conditions, I must say I am not very fully informed and certainly not well enough posted just now to do any newspaper writing, nor did I see the article in Wall Street Journal to paper out here. which you referred. the I do not get that To Hon. Paul U. Warburg. Sept. 1, 1916. People who visit Russia tell me that if Russia had a year-around, ice-free port, say, for exampbe, a Mediterranean port, the development of agriculture in that country would be astonishing. Russia must go through the same period of exploitation, financial, industrial and political, consequences, of its unfortunate histok immediately following the Civil war. When her productive trade balances that4;;=47i7ia 4 elusion of the Civil war, I hay ahead fast, end in a general< about their future. but on the whole, those in inv tmen 0 ed after the con- that hewill jump e about the last Russian loan, lie on any of these foir ign loans acity begins to a e been rather optimistic I know 1,ftoWo all that ultimate4with beneficial results marked the 25 or 30 years of our build up thbeebig with we are going to lose money hat are now being placed, either hape or/those handled by the banks. I would rli,bir thatavakiifba.e--61/the securities now being issued went banks to the public han too / seems to be the case. Any/ of them, but ,a they are short I think our time loans and, frankly, I think are bettor and present less peseibility of shrinkage than much of the American stuff that the banks have formerly held when they ought not. Do not forget that you are going to send me a letter in regard to the matter of our foreign correspondents. The fate of the omnibus amendment bill is The note provision was the most important of disheartening. all and losing that makes me sick. Glass has fallen down there very -4To Sept. 1, 1916. Hon. Paul M. Warburg. badly and displays an ignorance of the whole subject of currency that is deplorable in one occupying his position. Can I now urge you to try and postpone any further action in the matter of postmasters acting as collection ag,nts! If we have to employ their services, don't let us advertise the fact, but take isolated cases, like Lyford who is amusing himself by shipping silver dollars in settlement of items, and get either the postmaster or some one else of responsibility in his town to present chocks at his counter. appreciate greatly the wafm e preesions)Of regard from the different meaers of who writs/me and hope that from time to time as tej have o.prtun1tf they will keep me in touch by drovi g me t line. Wuld you mind saying this f to some of them if you Your last you are feeling p 26th gives we the impression th.zt It made me cheerful, particsuggLet ularly at you might get out here the last of \ September -.120:11,:fail to do it if there is a possible way of r arranginglilt. would have liked seeing you before the meting and gilng over that speech with you, but that of course is y ohe i /- impossible. Some time, if you have the opportunity, would you mind whispering in Delano's ear that I consider him a loyal friend of the Federal Reserve System and one of our main standbys there in Washington. He will know what I mean, just as you do. -5To Sept. 1, 1916. Hon. Paul M. Warburg. Of Rourse, I know that nothing will induce you to throw up the job, that you are going to stick it out and that I am going to be back there with you in some shape or other to help where I If we could get the note provisions right can. Uncle Sem to pay the cost of the note issue, say for a period of years, you and I could make this Federal Reserve System the great- Without the note provisions fri.ght, we are going est thing ever. to be terribly handicapped. ,I I have a great feeling of sympatw1k others about the interpretations,4 I wish I could i sary und you and the he Clayton Act. the puzzle and have asked h I could do some work. orl\ like M tan glad yl, I out 150 pending applica- 94t helpw. a them to send me aryl e have The office advises me that the tions. and then get TremW. He is a splendid fellow and it was a gods* d that b9fould step in there when I left. e above // e little rears to send from here. Thera letters. Vy younger boy and They 1 are/ with me and I expect Ben in a few days. littl will \erriTiiime y running comments on your likary bi'here for some time as the college and school open- ings are delayed I believe by reason of the epidemic. Please give my Bettina and tell '!rs. will probably take warmest to your partner and wife and to Warburg that a letter is germinating which form in a few days. ment, I am enclosing some photographs son, giving Don't various views of the mistake one of them sleeping porch. Hon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. Rs/VCIE Meantime, for that were her amuse- taken by Miss Thomp- mansion we are occupying for a hospital ward. Aaithfully yours, It is here. just the Estes Park, Col., September 6th, 1916. Dear Warburg: Yours of the 1st just received, and a letter received or two ago from Harding, intimate t come out here I.= oth / you might -..\,.1.y for a fe.Y days after the Asivention. lease try ) and do it. I will meet you in ,Osem,azjf you pref4, to save V time, which would be the two the Park and back again\ Thank you for 41 - ,----- ,,, it wo t# talitYSrOi; to get to / / the days of c1.11&_s_aboilt grace. That poor little amendme ms to have passed through every vicissitude before f '4ng through. the bill Nw I am glad that but terribly disappointed about note issue. oltat the foreign business; of course, I can understand the hielitation which you and some of yolir associates die the amendme tril:r7gad to the ItA play in regard to starting transactions with the Bank of England until the State matter. On the Department has had ovortunity to consider the other hand, is it quite fair to conclude an rangement now with no expectation of operating under quite °leer to the Y u I am sure, agree we make that unless Bank of England? with me that the advantage of the arrangment at the present time is really more with us Dank of England. it ar- than the The amount of money we would employ would be Hon. Paul M. Warburg. To Sept. 6, 1916 small in comparison with the total of all credits are employing in this country, and on the other hand, we ,J .d accumulate our exchange unusually our bills on 4147 which they at most favorable ratee and buy favorable terms. Say $25,000,000, em- ployed as a stabilizer by some one operating carefully in sterling, will go very much further than one would imagine offhand. Nor do I believe, as you seem to infer, that the Federal Reserve System could undertake successfully the entira-buzden of exchange around parity. We need to devejo, our f ities and 1 aleititys have machinery, simply to do our share. mind that we have taken about*600 000 009.--61147 $ I of which from Eur / must return, possibl keeping some part r------ \ /a very L......---- ge part, and the Fed- ( eral Reserve Bank of Ne\ York ,A supported, tiy the banks, should be the one -'teuj.nie flow as far as regu- 0 r other reerve lation is possible. I A0evail Different held in gn countr, /Chili, Argentine, Brazil, Australia, Japan, India at I in regard to gold reserve times, I carried gold fibroad and counted it other countries, have in one way or all another as re- ' serve. At 1,he prenent time, the Bank of France is carrying 573,000,000 franca abroad in that way which, of course, it shows separately in the statement, and the Bank of Russia is carrying a very large sum abroad, ment. The Bank of which it shows in its state- England, as we know, does not carry gold out- side of the British Empire, but it does South Africa and separately count Canada as pad of its reserve. gold in Australia, -aTo Sept. 6, 1916. Hon. Paul M. Warburg. I do not feel very strongly one way or the other about this particular point at the moment, although logically if we are to effect international gold arrangelents at all, it must necessarily be upon a basis of counting gold held abroad as reserve, if the arrangement is to be of any considerable valueI In regard toithe gold held abroad by the Bank of the investigation Netherlands, I think it would be found on the Bank of the Netherlands has actually that against 7/----.--- fljatiod no e / this gold and that it does count as partial!' the notl eserve /Bank of of the bank, but the point is 17t-Alt-e,rial as to \\ c-___-- , 6-a-rryi g\ over BO the Netherlands because they 'A reserve now l . notaOssue is I and, besides that, thei the bank without spocifi \IKlecii \ Osnured by the assets of ; e case of our notes'. There never ha1i1\7 time since the days when we confiscated Tory pro ur discr greatly t diately after the Civil war, and ,Ar,t private property has not been re- ---__ spected by r-lalli_gsrente in the present war. no concern 'atever I really have about the possibility of war between England ! Ilh , 1 and this colinjtry resulting in the wholesale theft of private ., property, such as you seem to fear. 1 admit it was done by this country in a most discreditable manner about 130 years ago, and the brightest spot in Alexander Hamilton's record is the magnificent fight that he mnde in New York State to save this country from the everlasting blot on its honor that would have resulted in the violation of the treaty with England and the wholesale thievery of real estate and private property held by English citizens in this country. To Sept. 6, 1916. Hon. Paul M. Warburg. You and I would feel very much easier about this mat- ter if the note provisions Of the Act were in better shape and if we had succeeded as we might under different conditions, in accumulut.ing the greater part of the e600,000,000 that has re- received. cently been Please do not forget that this arrangement is based upon a purely selfish motive, namely, the desire to protect ourselves later on against what is almost sure pen. When this miserable war is con rded, if i ever is, I have hopes that you and I will journey to Europe AOgether and perfect these arrangements al the finishing stroke of the lhank you v r muc very much bet or to talk t is to have ing to opportunity me out he e and "AS / 'Xbest regkr-do/to ' that can be b before both take to the woods. for your:1 tter. It would be metttar-ver and I am terribly keen The best way is for you and Harda little holiday with me. Po s you, old man, and many thanks for your patietde irithis difficult foreign business. I i Faithfully yours, Li Hon. Paul M. Warburg, Federal Reserve Board. Washington, D.C. BS/VCM UNIONForm 260 WESTERN UNION Asok GEORGE W. E. ATKINS, VICE-PRESIDENT RECEIVER'S No. TEL AM NEWCOMB CARLTON, PRESIDENT TIME FILED BELVIDERE BROOKS, VICE-PRESIDENT CHECK _ SENDthe following Telegram, subject to the terms f on back hereof, which are hereby agreed to COLLECT, Estes Park, Col., Sept. 11, 1916. Paul M. Warburg, Federal Reserve Board, Washington, D. C. Sending important telegram to Jay, Shoreham Hotel regarding inter locking directors. Benj. Strong. BS/VCM 1 -Tr IMIk- AT.L TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWINka 'b . To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for cc For this, one-half the unrepeated telegram rate is charged in addition. 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Beyond these limits the Company does not undertake to make delivery, -but will, without liability, at the sender's request, as his agent and at his expense, endeavor to contract for him for such delivery at a reasonable price. No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such office by one of the Company's messengers, he acts for that purpose as the agent of the sender. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty daysafter the telegram is Sled with the Company for transmission. THE WESTERN UNION TELEGRAPH COMPANY No employee of the Company is authorized to vary the foregoing. INCORPORATED NEWCOMB CARLTON, PRESIDENT "CLASSES OF SERVICE TELEGRAMS A full-rate expedited service. 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NIGHT LETTERS DAY LETTERS A deferred day service at rates lower than the standard telegram rates as follows: One and one-half times the standard night letter rate for the transmission of 50 words or less and one-fifth of the Accepted up to midnight for delivery on the morning of the next ensuing business day, at rates still lower than standard night telegram' rates, as follows: The standard day rate for 10 words shall be charged for the transmission of 50 words or less, and one-fifth of such standard day rate for 10 words shall be chargedior each additional 10 words or initial rate for each additional 10 words or less. Subordinate to the priority of transmission and delivery of regular telegrams. Must be written in plain English. Code language not permissible. less. Must be written in plain English. Code language not perMail delivery, postage prepaid, permissible. missible. Estes Park, Colo., Ceptember 11th, 1916. Dear larburg: Yours of the 6th end 7th and the copy of the Kansas City speech are all here and I expect to return the manuscript I heve read it through once and am just getting ready to tackle it again. lt is very good indeed, but will reserve all comment until I have finished it. It has been snowing up here all nignt, just now is raining and I expect when it clears up to find the mountains prettl white with snow. This is the first touch of 'Ninter some time to..morrow. that generally sweeps over the Rockies at this season. The statement of the bank of September 5th just renchee me, snowing Due Other Federal Reserve Banks, over $48,roo,000 gross, end :'432,750,000 net, An a result of their lerge seedigs a! exchange, our silver certificates and greenbacka ere up to about $27,000,000. This is the same old difficulty which we have discussed so many times. ;With the pleth- ora of gold in New York just now, I imagine they will be able to work off the silver and greenbacks in the course of a week or two but the situation is really a bad one and throws the entire burden on New York of sorting all this money received in settlement I think we ought to straighten it out. You will notice that I mentioned this in my letter to Mr. Glass, on which of exchange. '2To Hon Paul V. "darberg. Sept. 11, 1916. would like to heve more ex ended comment than is mede in your let- ter, end I mention the matter now in the hope that you and your associates may feel justified in pointing out to !er. Glass very forcibly thts fundamental weakness in the whole situation. There seems to be three things that we can do: One is to present these silver certificates and legal tender notes to the Subtreasury ae raeidly as they accumulate and demand gold. That will raise the dust right away; the necond is to enter into arrange- ments with the big New York banks to buy exchange on the other ied- eral reserve cities. This is not a good plan, as it will be construed as retaliation by the other banks and, furthermore, will enormously increese the float, which by all means we should avoid. also breaks down the system of deferred credit. The third This plan would be to regulate the amount of sendings from the other reserve banks by a system of charees. This will be strongly resisted by the other banks, as they are now making profits out of New York exchange, par- ticularly, Chicago, and any systm of charges which we might impose in New York will have the effect of dividing their profits. am sure,you will agree with me that in settling the policy in New York in the-se matters, we heve been willing always to ignore questiors of profit in the interest of the whale system. 3ut we certainly cannot afford to ignore a situation which has the possibility of pumping our gold out in e few days or weeks and stripping us right down to silver and greenbacks. Once before, this occurred when our holdings got up to a totitof You can imagine ,000,000. what a position we would be in if this accumulation took place at a eee To Hon. Paul M. Warburg. eept. 11, 1916. time when the exchanges were adverse and New York was shipping gold to Europe. Ne would literally be swamped with silver and greenbacks and unable to meet the demands of our members for ex- port gold. Frankly* I do not think this situation is one with which we can afford to procrastinate. So much for the domestic exchenge matter. New, replying to yours of the 6th, I am keen as a brier to see you out here and your letter gives me the first real hope that you will make the trip. i expect to meet you in Denver anyway, and the only question to be decided is whether you fool able to spend the time to run up to Estes Park, which would take one day each way. We could come up by automobile if the weather wee good und you would have one of the most beautiful ride in the country. Any plan you make would satisfy me entire- ly, enj if you eey atop in Denver, I will get rooms at the Brown Palace Hotel and we can divide the time between a good chin in the hotel and some drives about the country. A letter just reeeived from rre. Warburg indicates that she is tempted to come too. If you can add to the temptation and just bring her along, I will be more than delighted. Please do not disappoint me about coming and let me know whether Harding expects to come too. He wrote me that he night come with you. A few days ago, Frenk Vanderlip telegraphed me that he expected to go to Kansas City and he and Frank Trumbull might come out here efter the Convention. As you will come before, tore is no chance of bumping heads, but I telegraphed him that you expected to come on if you could and you may hear from him about it. To Hon. Paul M. Warburg. Sept. 11, 1916. All that you say about Aiken and gains is very true indeed. I have asked Kains if he could recommend a good foreign If we could get just the right man and then make a combination. with Aiken, it would give us o splendid situation in New York. Aiken is already very well and favorably known in New York and is such s charming fellow that he would he a great addiexchange men. tion to the office. It amused me to read your explosion about Ruesit and Sam McRoberts. Russia is a good deol of a mYstery to me. I have red very little about the country and, of course, defer to your own batter knowledge. After ell, is not the groat difficulty there the character of the people, rather than the cou'htry itself? Bad politics, unreliable business principles and the indifference of the upplitr classes to commercial and industrial conditions will destroy the prospects of any country, and I suppose that is the case in Buseia. On the other hand, they undoubtedly have tremendous resources for development end some day they will get ther producoing. - I am astonished at what you say about the amendments. Carter Glass in too erratic and emotional altogether for work of the character that he his undertaken to do. He strikes me as being full of prejudicee without logic. Possibly, his own mistakes are necessary to convince him of his liMitations. I have rot yet re- ceived the final draft of the bill as passed, but when it comes will make that the excuse to write Glass again if you think that is a good plan, and give him another jab on the acceptance matter, To Hon, Paul r. e`arburg, Sept. ll, 1916, I am getting ready to prepare some of thoee articles, in feet, have made notes already for one and hope to start dietetion before you get here. While it is none of my business, let me repeat what I wrote to Vxt. Warburg yesterday. Don't take any risk in bringing Petsy down from the mountains until cold weateer has regally set in. alysis. I have a horror of the possibilities of infantile 'par- If it ill not fetal, it invsriably leaves a cripple. I hove a little cousin about Betsyle age who will never take a step, ac a result of this disease some years ago. letter let school and overytting elze go rather than risk a new epidemic, and possibly, infection. The quotation you sent me from the Economist is very interesting. I think we have got to recognize that during present conditions when the trade of the world is so terribly out off balance,. meny financial expedients must be employed to keep things I suppoee we have got to do our moderate part. I would like to see more bine appearing in New York with documents attach- ed and yet realize that wonderful progress has been made in that direction already. I suppose you know that the Bane of France and the Chamber of Commerce have a representative in New York just now doing nothing else but negotiate such credits and they have fallen in with the idea of having them opened in the right way and having bills neeotiated without renewal obligations. They tell me such credits are being arranged for certain purchasee of railroad materials -G. rot Sept. 11, 1916. Hon. Paul 4. Warburg. To purchases of copper, for financiklg Egyptiae cotton and for a good many other purposes, the aggregate amounting to a large sum, but no particular credit b Ang very extensive. um advised that some very large cotton investments this year will be carried on 90 day bills drawn in dollars. You were also advised that the 40,000,000 credit of the Bank of prance was paid off in full and a new $25,000,000 credit arranged, the same to cover the movement of new commodities. It is a little egotistical to take all the credit for influencing matters in the right way and yet 1 know from what has transpired in New York that it has been our own insistence that these bills should be drawn in the right in the development of the market to date. fashion that has resulted Our ability to say that bills were eligible, or not eligible, according to our own notion of what was the proper method, has really forced them into line. The English MIAs referred to by the Economist are of identical character with many of those being drawn in New York. You will be somewhat surprised that Jim Brown has written me that Sir F,dwerd aolden is reported to have caoitulated, at last, in the matter of dollar bills, and the possibility of English banks deliberately adopting the policy of recommending American draw- ings. Unfortunately, as stated in the article in the -conomist, the supply of bills in London has dwindled tremendously. To-day, it is not more than a quarter or a third of the normal volume, due of course, tc *the large amount of government purchases, for which To Hon. Paul M. Warburg. Sept. 11, 1916. ensh in paid; in other words, treasury bills h,ve supplanted comracrcial bills. This puts one sicie of the market, that is the inveslment side, in distinct opposition to our efforts. Pardon this long letier. It is jusi,fiod by yours of the 6th which I hnvc enjoyed very much. Do it again. With lots of good wishes, Paithfully yours, Hon. Paid. P. Warburg, Yeder41 Reserve I3oard, Washington, D. C. nspcm /71 Estes Park, Colo., 6eptember 12th, 1916. Dear Warburg: I did not realize until sitting down to go over your Kansas City address that it is a good deal eesier to make suggestions and criticisms personally than in writing. When you come to read over the manuscript, you will think possibly that I have a very pour idea of your diction. Please consider that every change suggested is merely a suggestion and not a criticism, and that most of the changes of words were made with a view to strengthening the sound of what you say rather than the substance, and to save time, I have raids practically all comments in the text on the margin. The following special comments, however, seem necessary: Page 13. In discussing banking reform, we have always considered that individual gold reserves were a source ofweakness to the System and your language on the first line of this page might appear to contradict your former statements on this subject. The incro se of nearly 400,000,000 of gold net, I believe has taken considerably more than one your for us to accumulate. The gold movement in our favor, as I recall, started in the early Summer of 1915, but the net addition of Page 17. $600,000,000 would have to cover the whole period of two years so as to includO the earlier loss of gold which was later made up by large receipts. To Sept. 12, 19161 Hon. Paul M. Warburg. Page 16. You refer to $2,500,000,000 of gold as being the country's total gold supply, but the language on page 5a, line 15, might be understood to mean that the country's total gold supply is ttl,.:),000,000. I think you mean that this sum is in circulation in addition to the t530,000,000 held by the reeerve banks. Page 19. I am not at all positive about my comment on the figure of 1500,000,000 of AldrichVreeland notes. My memory, however, ie that t388,no,000 were actually put into circulation. (Again let me apologize for numerous changes of language, which probably are not justified, but which it seemed to me might make the speech "hear" better). Page 21. AsI recall, the total deposit liabilities of national and state banks in the United States is rapidly approaching $20,000,000,000. This must be three or four times the total of the Lnglish banks. Adequate protection to the stock banks of thi* country would really necessitate assenbling reserves in our central banks three or four times the size of deposits carried by the English banks with the Bank of England. The note on page 21 in regard to the theory is simply to draw attention to the fact that this referehce to the theory is a bit obscure. Page 4a. The same note in regard to the Chronicle might appear on almost every page with equal jusitfication. Page 5a. The statement of the amount of gold with- drawn from circulation in France during the period of the war To Hon. Paul M. Warburg. Sept. 12, 1916. as 01,000,000 is really quite incorrect. What has happened in France is not directly reflected in the statement of the Bank of When the Rank of France and the Government France. made the appeal to the French peasants to deposit gold, the response was instantaneous and tremendous. last February, had been th gave me the figures showing that t260,000,000 deposited with the this appeal. When I was in France Bank of France, an the result of Since that date, these deposits liave averaged about :-5,000,000 francs a week right along. The reason why the Bank of France does not show a greater incsease in its gold Holdings io because it is shipped to London for shipment to haerica. Nobody knows just where the gold reserve of the Bank of France is now held outside of the officers of the bank and the Government. Recent reports show that nearly 600,000,000 francs surmise is, and has been right along, that there is a oonstant movement of gold from France to England; partare held abroad. My assist in It is quite incorrect to ly for security's sake and partly as a contribution to the correction of hmerloan exchange. say that only $71,000,000 has been withdrawn from circulation during the war period, because it is probably more than fear times that amount. Another point in regard to the language which you use in thbee few sentences is the failure to explain just what you mean by withdrawing gold from circulation. Some people might construe this as meaning hoarding by the people. I understand it to mean withdrawn from circulation by the central bank. -4e To Hon. Paul M. Warburg. Sept. 12, 1916. The other note on page 5a relates to the matter mentioned above on pege 18. Page 6a. Your expression "unduly early end unnecessa- rily drastic measuren of defence" strikes me as a bit inappropriate. The logic of your argument would lead to the conclus- ion that we will be forced to take emergenoy measures at the last minute wnioh, as a result, would have to be unnecessarily drastic and alerming in order to accomplish a purpose which could have been brought about easily and without shock, if undertaken Tell in advance. This all recall the days when we were sitting in the Subtreasury in New York and the Treasury Department in Washington devising all sorts of schemes to get together gold, get exchnnge, provide marine insurance and do all sorts of things, many of which would have been entirely unnecessary had our bank- ing system been in full operation, not as provided by the present statute, but as would have been possible with the Federal Reserve Act in operation as amended by recent proposals. Later on page ta you refer to surplus reserves being tied up RS the basic, for enlarged deposits. ,This might open the door to criticism, because deposit liabilities eannot increase without a corresponding increase in the loan account unles s, of courne, accompanied by a very 1erge corresponding increase in unemployed reserves. It is a minor point, but I always have in mind your friend the Chronicla and the joy with which they will pick any flaws in your address. Page 9a. I hate to read any statement from you which condones, accepts or even tolerates, the perpetuation of our bond -5To Hon. Paul M. Warburg. Sept. 12, 1916. Maybe I feel too strongly about this. The succeeding sentence, which I have marked 0. K., takes the sting out of the previous one, but does it do it enough? secured bank note. I have not the data handy to make a calculation but my impression is that if one deducts from the net liability of the Federal reserve benks on Federal reserve mtes the Page 10a. actual amount of Federal reserve notes hold in the tills of all the Federal reserve banks, along with their other vial, it will be found that there has been no he issue of Federal reserve notes at all. Page ha. The marginal note needs no explanation. It strikes me on reading the address th+ second time that you have intvoduced the subject of the Federal reserve bank notes and national bank notes between two different parts of your argument in regard to protecting the gold reserves of the reerve banks. Might not the last line of page 12a, all of 13a, all of 14a and the first two-thrids of 15a naturally come in the middle of, say, page 10a, or possibly at the end of the first paragraph on page ha? Page la. iciu seem to accept as final, the conclusion that the only method of retiring greenbacks is by the application of the accumulated profits of the Federal Reserve System. You and I should be the lest ones in the world to accept this as final. Page 12a. Some day, means must be found to eliminate the greenbacks, and / believe that once we get at it earnestly, particularly, if there is a new and Republican Congress, it can be done with less To Sept. 12, 1916, hon. Paul W. Warburg. difficulty than one would imagine. :no far, our excess profits pay only Irish dividends and won't retire any greenbacks.. The gold reserve of 0.50,000 000 behinC. the greenbacks has been increased to 0.534000,000 by the profits of the Udrichi-Vreeland currency. It would please me a lot if you would avoid mailing your colors to the meat ae to how the greenbacks may be disposed of, as some day we may be working on a plan ror their retirement and this speech might come back to worry you. ?age 3a. do not understand your reference to return,L ing a portion of the paid in capit-:1. The member banks won't want it returned whenever we pay them 6 % on the investment. I woAid be inclined to leave out this reference about a probable return of the capital. Page 6a. The sentence in the middle of the page 1.4.. plies that memberonip by state banks only results in burden, whereas, in another p6t of your speech you have strongly empha.. sized the policy of the Board in making it so easy for the state banks to take membership and that they are,maally enabled to en- joy benefits with veri little burden. 1 suggest putting in both sides of the picture. i'ago ha. Please pardon the facetious comments on the margin. I can almost smell the sulphur when this is read. The sentence marked to be omitted might be construed to imply that there are A let of questions pending thnt cannot be discussed in public and some newspaper might make this the basis of a story suggesting lack of harmony. Hon. Paul M. Warburg. To Page 12a. :10dt. 12, 1916. I have made a slight change in language to avoid ineonsisteney and hope it appeals to you. Rider x. The use of the wrd "secure" will certainly be eisunderefood. So many people have in mind thnt oer note issue is secured by gold that they won't catch the meaning of this footnote. Rider d. The figure of $204000,000 of gold mystifies me a bit. We have received $603,000,000 net from Furope since the Federal reserve banks opened, a greater pert of which, (if not all), has come to New York. Does this mean the amount which has been taken in by the Yederal Reserve Benk of New York and again peid out through the Gold Settlement Fund, or otherwise? If this is the meanirg, I still think the figure incorrect adcording to a statement recently sent me by the boys at the office. So much for coement on the lenguage of the speech in de- As a whole, I believe you are going to have a little difficulty in holding the attention of a large audience through your A. elaborate argument which contains mnny figures in regard to the It in a difficult and technical matter to explain and I am inclined to recommend that the middle ortion dealnote issue, etc. ing with the subject of reserve notes and national bank notes be restricted a little bit for the purpose of reading, but published just as it is now. It will be easier for you to hold the interest of a crowd of wooly bankers. The whole address is mighty good, timely and very much to A lot of thoee farmers won't understand, but it is nibt necessary they should. They will be impressed with the importance the point. To Hon. Paul Me Warburg. Sept. 12, 1916. end seriousness of the whole subject and the fact that you and your colleagues know what you are talking about and that the average country banker is very ignorant on these subjects. will undertake to say that there will not be more than 150 or 200 men in your whole audience who will grasp the importence of these matters, but all of them will be very much impressed with their own ignorance after hearing it. That is one reason why I think it is a good speech. There is one point that I would like to see in there that you hayt not mentioned: Every time we get together with member banks or with a Committee of their organization, we make some progress. Take the cooperation which developed from the meeting with the Committee that represented the t4tional Hank Section. I believe it would be a good plan to tell the Peso elation right frankly that no opportunity has been overlooked to invite the member banks into their councils and you are pre- pared to continua that policy, expecting they will cooperate with you in solving problems rather than standing on the outside and throwing stones. I congratulate you on the result of your work and hope that it takes like "mother's milk". I hope to be prepared with something on the subject of the noteissue as a q9melDP.c to the Chronicle, which will certainly criticize everything you say. In the meantime, 1 hope still more that we will have a chance to talk it over. To Non. Paul M. Warburg. Best regard3 and good luck. Faithfully yours, hon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. Sept. 12, 1916. Estee Park, Co/O., -September 15th, 1916. Dear t7arburg: The statement of September 10th just received brings out quite strongly one feature of the exchange situation which I think should have creful stay. Exactly a year ago, the float between the reserve banks was e8,000,000. It is steadily increasing and on September let was 35,000,000, September 8th, 2B ,000 Every dollar of that money is an impairment of our reserve position. I judge that it is due to two c,Juses principally; one is the practice of the interior banks in taking New York exchange, and posSibly Chicago exchange, for immediate credit at a discount; and the other is the inacmracy of the transit time allowance adopted for the new collection plan, whore not suffic- ient time is being allowed on certain items to enable us to get returns. do not think that the reserve banks to-day are justified in accumulating a float of t35,000,000, it iq equal to 7 on the reserve on all of their denosits. Th5s is just a suggestion for consideration and I will try and think of this matter to discuss with you when we meet in 9enver. Viincerely yours, Hon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. ) Estes Park, Colo., September 29th, 1916. Dear "Varburg: can't tall you what a pleasure it was to nave that visit with you in oenver. After a rather cold but delightful ride by automobile, i reached hero jesturday noon and found a great mass or m 11 to clean up, which 1 expect to tyke rather leisurely. The only trouble with your visit wac that you had to cut it too short and missed seeing the mount.,inc which I much regret. 1 an going to write you separnte letters on the difisfent topics, lith this I enclose another copy of my letter to Mr. Class. Please give my warr,est regards to the family and tell a. Warburg I am owing her a letter which will soon be written. , Lost sincerely yours, Hon. Paul P. Warburg, Federal Reserve Board, Washington, D. C. BS/VCM qg Estes Park, Colo., September 29th, 1916. Dear .4arburg: You will reaali our discuesion of the method of treating the item of organization expense in the accounts of the 12 reserve banks. This is just to remind you or ny suggestion that I think the Board might issue regulation which will ensure this item being treated uniformly by all the banks. As I recalloyou agreed with the propcsol , as sernings now justify it, thet everything be written off thic year except the item of unissued Federal reserve uote which can quite properly ho carried as an asset. The net earnings of the New York bank to date are about $280,000. Yf they keep up as they are running at present, they ought to be able to pay a dividend of 6 5 for a period of approximately nix months, after charging off $140,000 of organization expense. Very truly yours, ;7 Hon. Paul U. Warburg, Federal Aesofve Board, ftehington, D. C. 13s/vcr Estee Park, Colo., September 2Ah, 1Q16. Dear ',7arburg: in or discussion of the method of handling foreign accounts, I spoke of a letter which I had drafted for use when the time arose in arranging final details. Copy of thio letter is enclosed. It iu, of course, only tentative and I would be glad to have your views regard- ing it. Very truly yours, rburg, Federal Reeorve aoard, Teshiggton, D.. C. Hon. Paul M. BVITCY Estes Park, Colo., September 29th, 191(. Dear -aarburgi 1..-ong the mattero discurced in )onvor was the method of exlaining Federal rescrvo note action in the weekly cttemert for 1.10 press. If you will rofer to the lust paragraph of the st,,terert of "entember 16th, ;.e. 801, you will see thnt one not fomilicx with our accouniing method would fi:d it irr,olsible to strike a balance betweer the total amount of note r issued to the Fed.. oral Reserve Banks and the arovnt of collateral which is hold to seovre them. light it not be a good plan to put a little tabular ottAsment in the press rutleso so as to eliminate the :_pwrance of a difference in the account: Very truly yours, Hon. Paul M. Warbure Federal 1:eserve noard, Vishingion, O. C. rispcu Estee Park, Colo., Sentember 29th, 1916. Dear Warbu#g: About the Gold Settlement Fund and the difficulty of keeping down our holdings of silver certificates anti legal tender notes: I have just received from the office a memorandum of the way Clearing House balances have been running from June 1915 to August 1916, inclusive. The total credit balen- 000 htve been $291,516,000 and the debit balances :20,148,000, eo that payments to the New York Reserve Rank by the Clearing houee which are largely made in silver certificates and legal tender note have exceeded n net amount of e 70,000,000. This illustrates graphically the state of our difficulty. TO Would heve cleaned the city of silver end legel tenders bed it net been for the importations of eold, and only through the courtesy of J. P. 'organ & Co., and to some extent , some of the member barks, have we been able to effect exchange nd get the gold which ha o been ueed to settle with the other reserve /meshy. Through Morgan el Co. we received 453,841,000 between October 27, 1915 and June 7, 1916, when operations were suspended. Between September 6th and September 22nd, 1916, we received 455,229,000, a total of over 4109,000,000 from this source alone. The other 4160,000,000 has been made up bu exchanges with Clearing Howie members, shipments of exchange direct, shipments of silver 2Hon. Paul M. Warburg. To Sept. 29, 1916. in some cases and about every other expedient that could be de seed. The largest item, I believe, outside of the jorgan gold, has been the increased inventment account of the whole system throughout this period which, of course, has enabled us to work off some silver. T1ese figures wore not here when 1 wrote to Mr. Glass and poesibly, you will be good enough,,to show him from the above how the exchangeo oeerate and what a serious situation it might present or thl exchange:3 against us and wore we exeorting gold to Furooe at the saqle time that hew York exchange was discount in the interior. Very truly yours, Hon. Paul U. Warburg, Federal Reserve Board, Washington, D. Cl Bspcm t a Estes Park, Colo., 5eptember 29th, 191'6. Dear "arbbrg: You will recall our discussion of the basis of apportionment of invostments mo.de by the flow York Reserve 3ank. It would be a good pin,: I believe for you to take the first opportunity to talk this over 14th Mr. Treman and Yr. Jay. It seems to me that those banks which arc earning t-eir full dividends should ,:;et no part of the allottmente et all, and correepond.ngly, those not earring any dividend should get an increased proportionment. It is hardly a matter that can handle from this end, eltnough I an -,ritin5 7r. frreman about it. 'Very truly your 3, Hon. Paul M. Warburg, Federal Reserve floard, Washington, D. O. Bs/vcm Estee Park, Colo., October 3rd, 1916. Dear Warburg: Yours of the 30th from St. Louie reached me yesterday and i took the liberty of reading the greater part of it to Frank It made a great impression upon him, au it did upon me, as by the same mail we got the New York papers, giving the Vanderlip. news accounts and editorial notes on both your address and his. Vanderlip gained the impression when he was in St. Louis, (which, of course, wac before your addressvas delivered,) that the Convention was generally hostile to the System, and we could not help but draw the conclusion that your address, together with such assistance as Harding and the officers of the resorve bonks afforded, really changed the tenor of sentiment and enabled us to get by thie difficulty with great advantage to the rihole System. ' can not tell you how delighted I am Wit the outcome. It gives us a year in which to wear dewn prejudice and we must take advantage of it. I personally believe from reading the newspapers that your address had a tremendous influence so the agony of preparation and delivery was worth while. am letting mail aocumulte while Vanderlip and Trumbull are here, taking advantage of the opportunity, however, to bring Vanderlip up to date on some of the difficulties about amendments in which he is very keenly interested. You may hear from him direct on the Subject. -2To Hon. Paul Oct. 3, 1916. Warburg. .The many articles appearing in the newspapers about our currency difficulties justify I believe going ahead with some of the articles that we thought might safely be publisned, and I will let you know as soonaas the thing is in ouch snape that it seems safe to print it. We are all going down to Denver on Friday or Saturday ;aet for his echool on Sunday Grandin starts after Kains arrives. and then for a few days we will be busy packing up and i expect there will be an interval when you won't hear from me very often, leut I do hope you will write me and keep me posted on news from your end of the line end I will catch up as soon ae we are iettled in Denver. Pleese give my love to Ere. Warburg and tell her that I have a long letter in course of mental preparation which will be put on paper at the first opoortunity. I am jusi now reading Balfour's book that she sent me, in enatceee, and find it mighty good reading. Your visit out here wee a life saver and I am really counting on coaxing you out again some time this Winter. We won't have to spend the time in :Jenver if you allow reasonable tine, as the Lewiston will be °leen and One other little inn further up in the mountains if you care for a rougher view of the 'eark, and we can spend 11 the time you can spare out hors to great aevantee . 'ZJith best regards to all the members of the Board, I am, Faithfully yours, Hon. Paul M. Warburg, Federal Reserve Board, Washington, G. C. 13S/VCM I rston Park, Colo., October 11th, 1916. Dear la..5>g4.,,L 44. Mail has been iwpossible the past week whA.e Vanderlip and Trumbull were here, but I will be writing you fully in a day or two. Am moving to Denver Fridliy. shall not reply by telegraph as a long let-fer had already gone to Mr. Jay in reYour wire has been received but gard to Liken and you doubtless heard from him confirming this. Personally, I think the matler is more up to Aiken than anyone else, as I fed i sure our directors will welcome the suggestion, particularly now that Treman has become so well acquainted with If any doubt arises, I will let you know and will write him. Mr. Jay again very strongly. Beet regards. Faithfully yours, Hon. Paul W. Warburg, Federal Reserve Board, Washington, D. BS/VUM Estee Park, Cole., 6ctober 11th, 1916. Dear Warburg: I have yours of the 3rd and 6th, also, the ne:.aper articles which an very interecting, and will help in preparing more "dope." You ehould %.tve learned long bofore this that ilarding is no man to play seven-up with unless you are well.eheeled. might be able to beat him at cribbage, but not at seven-up. he is an artist at that game and I wonder he ha v not retired long ago on his profits. Llother was delighted to receive your letter and appreciated your thoughtfulness. I really think she feel some encouragement that 1 am going to get well. 'bout %be Kaheas City speech, from all quarters i hear that it was a tremehdove suceeze and certainly, barring the Chronicle, the newepaper comments have been encouraging and complimenta- impression is that it saved us from a bad setback, so you see it does pay to put in the work, eubmit to the inconveniences of the trip and particularly to keep your Voice up. ry in every Way. Vanderlip and Trumbull have been here a week, leaving I had a wonderful visit with them. Have been all over this currency problem with Venderlip, who is convinced that the time has arrived when we should take up energetically the ::-Aanday night irom Denver. To Hon. Paul M. Warburg. completion of the reform. Get, 11, 1916. The Federal Reserve System is a good basis on Which to develop it, end even if Congrecs is unwilling to deal with the matter in December, we ought to take it up actively next yeer. Unless I am mistaken, if Ur. Hughes is elected it can be made a pt of the Republican legislation program. of that must be kept in abeyance until after election. All I wrote Jay fully about Aiken some time ago and he should heve received the letter before your visit with him. There Jo no doubt that so long fte gold forme so large a pert of our circulating medium, the belances of trade originating in the gfeet would neturelly move a large part of 'Ude gold Went, but the economic position of the courtry with reference to gold I believe is a little different from that deccribed in your letter. Our enormous surplus of exports are being pnid for by Europe by three methods: let. By sellirg us back our own eecuritite, 2rd, fly berroeieg money in the open market, .rd. By evening up the bale:nese not covered by the first to methods, by actual shipmente o gold. 'rho gold receieed should be irlpounded by ell of the twelve reeerve banks; some of it, of course, would fin&rite way to other reserve banks than New York but all of it should have been retained in the 'e'ederal Reserve System instead of being distributed emong the reserve banks, by them to member banks and through menber banks to the public. The only way this can be eorrected is by giving our note issue the proper status. 00 5411N1 Hon. Paul Warburg. Oct. 11, 1916. An glad you gave NcDougal a dig for those fellows in Chicago need it. e would be better protect-5d by a large gold holdin resulting from note iosuee than by the voluntary deposit of optional reserves, which are likely to be checked out in time of trouble and give us a pinch. The articles in th Wall street Journal all helped. My article about rem:1;i fcr print:.ng and I m going to send it. to Jay for the necessary arrangements in a few This will be followed by a description or the functions of the various classes of currency now in circulation and ho; legislation should deal with this complex situation. r. Hendricks is here for a few days. J. am moving to Denver on Friday :Ind my addreE:i thGre will be 4100 Montview Boulevard. Am still behind hand wIth the mail. Please tell :q-e. Warburg tnut tht letter is still ger.minating. continuo to think of ycur visit here as a bright spot and hope you can malze me another this Winter. viith warmest regards, Faithfully yours, Hon. Paul kf, /arburg, Federal aeoerve Board, Washizvton, D. C. BOOM ,F,EDERAL RESERVE BANK OF NEW YORK October 11, 1916. P. S. OF LETTER TO PAUL M. WARBURG, ESQ., FROM AR. JAY. I enclose letter from the vice president of the National Bank of Commerce which, with his consent, I am submitting to you,and should appreciate very much your view as to our purchasing drafts with such a long series of renewals. If it is possible to ship the goods before the end of two years they will be shipped and the credit will'cease. belief that this may be possible. It is Mr. Rovensky's This credit seems to be based upon the storage of a readily marketable staple. You will remember that we have pur- chased- bills covering some shipments of railroad supplies to France which had five renewals, the credit thereby extending over eighteen months. --Te were advised to-day by Messrs. Brown Brothers & Company of the new credit of ,5,000,000. which they in conjunction with Messrs. J. P. Morgan & Co. and Messrs. Lazard Freres were about to put in effect before the Orleans Railroad of France covering the shipment of rolling stock and calling for fourimemals or a total period of fifteen months. -fill you kindly return Mr. Rovensky's letter with your reply. 1ANK NATIONAL BANK OF COMEERCE IN NEW YORK October 11, 1916. Federal Reserve Bank, New York, N. Y. Dear Sirs: A client of this bank desires to purchase hides in Buenos Aires for the purpose of exporting them eventually to Germany. As shipping facilities between the Argentine and Germany are at present disrupted, he desires to store the hides in a public warehouse in Buenos Aires until such time as he can safely make shipment. Our client desires to finance the purchase of these hides by drawing on this bank at 90 days' sight with the agreement that renewals, not exceeding 7 in nutber (making a possible total of 2 years' time) would be granted. The bills of lading or warehouse receipts controlling the hides would be held by our agents as collateral and no renewals would be granted after the goods had passed out of our control. Please advise whether drafts drawn under this arrangement would be purchasable by your bank, and oblige .Very truly yours, (signed) J. E. Rovensky Vice President. 4100 Montview Boulevard. Denver, Colorado, October 18th, 1916. Dear Warburg: /loving down from the Park of course necessitated packing the "office" and unpacking it again and for about a week I heve been out of business, so to speak. My last letter to rs. Warburg gives about all the personal news and just now there seems little else to write about as my visitors hnve all left and I an settling down to loafing at the DOW hOUSEI. Enclosed, aro two press statements which the Comptroller has sent me (I tot all of these as published), and 1 am wondering whether the policy, tnd more particularly, the conclusions, exhibited by these statements are as well-considered as they might be. I doubt that the Federal Reserve Act has had anything at all to do with the changes in bank deposits by districts, as is intimated by these circulars. The cause of the increased bank deeosits in interior cities is undoubtedly the result of the general prosperity of the country as a whole. If I were the Comptroller, I would lay emphasis on the extent to which the reserves unlocked by the Reserve Act and the imported reserves in the form of gold are being used for credit expinsion and the possibility of danger growing out of tient expansion. The reason why I an sending you these circulere To Hon. Uct. 18, 1916. Paul M. aarburgg is because they give the appearance City of one member of the Board after your addrees in Kansas pointing out the danger to the country of this expansion and another member of the Board bragging about it. am just completing that article on note issues, etc., and will probably send it to Mr. Jay this week and ask him to arrange for its publication. made very much shorter than The next one, which I think can be the first, or about the same length as the first and second, if the article is Out in two, will endeavor to light. present the currency situation in an entirely different I want to base the argument for amendments to our curren- cy laws upon the fact that we are not now proposing to inflate the currency, but to deflate it. about $1,600,000,000 and Our currency is already inflated the next job in currency reform is to so rearrange the holdings of gold that the existing currency will be put on a sound basisehAch has never heretofore been the case. Won't you write me a line about the political outlook? Every time I read Hughes speeches, I get discouraged even to the point of wondering whether it is going to be a good thing for the country to have a change of administration. Let me know if there is any special work I can do out Am still enjoying your visit and hoping for another. Beet regards to you, old man. Faithfully yours, Hen. Paul M. Warburg, Federal Reserve Board, Washington, D. C. /11-411 teeei,e1 October 20, 1916. Dear Mr. arbu : I a- sorry that we Jot cut off this morning in discussing the action of the Board in reeard to the Central Trust Company and the Bank hen the line was interrupted you were explaining that if of Commerce. either institution should liquidate the other would not profit thereby, to which I replied that this related only to the liability side. That I wanted to say further wae that I understood we all agreed as to that at the time the matter wasA.cussod in "hingtOn, ground of competition wae on the asset :ide; and that the only possible namkly, as to the use of the funds of the two institutions in the credit market. ,hile I am extremely elad that the Bank of Con eree has eel= able to retain Mr. Jarvie as a director, I have, as you know, explained the position of the Board to a umber of the le-ding bankers here and have -tated that the erinciple on which they wore considered competitors was one which I had recommended, and in every way the Board, and I know that you Delano when he was over here. I have stood behind it and understand this. I stated it also to Mr. It seems to me that the only way such a policy could be carried out we to put it into effect with complete consistency Fnd impartiality. I must say that the action of the Board in the Central Trust Company case leaves e all up in the air as to what their policy is and I really think I am entitled, as the Board's representative here, to be furniehed with a complete statement oa: what it is in order that I may know how to deal with the questions which, it seams to me, are almost f Honorable Paul M. Warburg, 142416. certain to arise on the part of other barvs in view of tbe action in the Central Trust Company case. Trusting that I shall soon receive this, I am, Respectftlly yours, Chairman. Bonorable Paul M. Warburg, Vice Governor, Federal Reserve Board, Washington, D. C. pa/Ra Washington, October 6, 1916. ANNOUNCZAENT BY TILL BOARD. Section 8 of the Clayton Act, which becomes effective on October 15th, 1916, prohibits private bankers under certain conditions from serving as officers or directors of member banks. A number of inquiries have been received asking the BoardsinterAs pretation of the language "private banker" as used in the Clayton Act. the Board is required, under the provisions of the Clayton Act, to prosecute those violating its term, it is necessary that it should make clear its interpretation of the language used in order that the banks may comply with the letter and spirit of the act. The purpose of the Act, as its title implies, was to prevent unIt is obvious, therefore, that Congress lawful restraints and monopolies. intended to prohibit common control of member banks and of private bankers member banks, and that it intended to preengaged in the same serve competition in cities of more than two hundred thousand inhabitants between member banks, private bankers, and other incorporated banks, and likewise intended to preserve competition between member banks, regardless of their location, and state banks, trust companies, or private bankers having aggregate resources of more than five million dollars. activities as In this view the Board interprets the term "private banker" to in, elude partnerships or individuals who are engaged in the banking business, as that term is generally understood, -- including those partnerships and Individuals who solicit or receive deposits subject to check, who do a foreign exchange, acceptance, loan or discount business, or who purchase and sell and distribute issues of securities by which capital is furnished for business or public enterprises. The term "privatebanker" is interpreted hot to include the ordinary stock, note, or commodity broker, unless a substantial proportion of his profits are derived from, or a substantial part of his business consists In one or more of the banking activities described, nor is it interpreted to Include partnerships or individuals using only their own funds in making loans or investments. No private banker whose partnership or firm assets aggregate more than five million dollars is eligible, under the terms of the Clayton Act, to serve as a director of any member bank, and no private banker, regardless of the amount of partnership or firm assets, is eligible to serve as a director, other officer or employee of any member bank located in a city of more then 200,000 inhabitants, if such firm or partnership is located in the same city. The Kern amendment to the Clayton Act does not authorize the Federal Reserve Board to grant permission to such private bankers to serve as officers or directors of a member bank even though it appears that they are not in substantial competition with sadh member bank. Denver, Colorado, L'otober 20th, 1916. Dear Warburg: There is no particular news since 1 last wrote you, nor have 1 heard from Jay about the Aiken matte though he has report ed all the difficulties about the Clayton At and it seems to me from what he says and from what the P as said that an amendment to take care of the situation with ?jte bankers has about as much chance as the p celluloid c.A. What did the Vres hen he said there was a conspiracy to get control of the nking system/ Did he refer to you Or to me, or 'er? So far as we are concorned in eow York y has been, as you know, to persuade the liew York e enough illative interest in the managemente bank,to_e tre the election of good directors. You can e sure that' ome one has been pumping him full of some 7( I am mighty sorry that he believes them. ridiculo snotions sing a copy of that article which has just gone to A.1". Jay. / hope the next one will be better. i Write me when you can. with beat retards, Faithfully yours, Hon. Paul U. Warburg, Federal Reserve Board, Washington, D. C. BS/VCd 14- 4100 !Iontview Boulevard. Denver, Colorado, October 25th, 1916. Dear Vier It was really very good of your to e egraph me after Ahe French credit. your conference with Jay and Curtis ilres They doubtless explhihe led to them about an announcemo t e lews which t so If1t repaid. with these matters, 1 had But in connec- great importonce to the country as a.,_sphaao ofh existence of a large volume of these bills, even1e to f finance bills, as an tion offset later on to t(h in mind the demandr tion we will have whe\a\t-ha_yar gold. It is the best pretec- e ever. shock to learn that the Syndicate managers t out cir+uJlars stating that the bills would be eligible, plrti 1 y did 30 without authority, !tnd in that connection, I wai to refresh your memory of my own attitude with both kr. Brown and Nr. Kent as well as Bonbright company in regard to the e.trlier credits. I told them in each case that we considered it our duty to make clear the meaning of the law and something of a the regulations issued by the Board so that their transactions could be made to conform to them if eligible in in character. they wanted the bills to be On the other hand, that we would take no part in the negotia4ions, would make no pleiges to buy the bills and if we did buy them, the amount would be governed by our on .m24. To Oct. 25, 1916. Ilion. Paul M. Warburg. Furthermore, that we would rules and requirements. not favor the Federal Reserve Sank investing in bills by direct purchase, that in each instance they would find and make a market for paper and if we in our own discretion the determined to buy any of its we would do so in the regular way in the pen market and not as one of the primary parties. The obje of this attitude requires no explanation. The same attitude maintained in conndwl:\ n with this eedom of Sition and .credit would have left us with p f a e held a considerable while, of course, the reserve amount of this paper, they ha ld too much by any means, considering the high ch:, dit of the acceptors. announcement of our attitude e that towards any epocific edit oou d readily be construed as a rei flection upon tiaejpro cl%4*et goodness of that transaction and, to change furthermor, , ight'embaraee us later if ocoasion arose Then egii it seems to me we cannot expect in these our policy It seems t war tiAse t a 1 credits will take the form most accept- -- Our exoorts must be paid for and the machinery of our banking system should be adjusted to meet the unusual demand, both in amount and caaraoter, that grows out of our able in times of peace. huge foreign business. I was not aware that an announcement had been made officially by the Syndicate managers and think that was a mistake, if they did it without authority. ..3.. Hon. Paul M. Warburg. To Get. 25, 1916. I do not need to tell you that the rather vigorous opinions which I hold on this matter have no relation whatever 1 to my former affiliations nor to any politioll sympathy. I Would feel just the acme about lerman credits or any other cred- matters to its and I only wish that it were possible for these \ take such shape that suggestion of discrimin sibly be muds. As the that reserve bank originating with tically all the bills America Federal ban ir hat score if to be unable or un- this country. en 1 t er from you yesterday to which I as going to(r ply in ki. 1 --\\\ "eels Willing to negotiate direct oral t I had a ni74( rmw42 banks in South th f dirimination, but unfortu- any one attempts to make charg a re handling prac- no fears are offered to us, I nately, ac you know, the Ge ion could not pos- My best regards to you, old \ man, and don't let t iW businai worry you. Ask,,Miller to shew-iou my letter to him about his Indianapolis ad r SO. Sincerely yours, Hon. Paul M. Warburg, Federal Reserve Board, Wishington, D. C. Bs/vcr DESIRED ossage ter Nign. message rtotuu ,_etter Patrons should mark an X opposite the class of service desired; OTHERWISE TH. TELEGRAM WILL BE TRANSMITTED AS A FAST DAY MESSAGE. I TI Re, E WESTERNUNION TEL 1W.- Send the following telegram, subject to the terms on back hereof, which are hereby agreed to Collect. 191_ ar,y ihank,i for your wire. Am replying by of 1unen,: wM oh the Irl ...LtV.on when t of vou to t 1 cra >ER'S ADDRESS R ANSWER Time Filed NEWCOMB CARLTON, PRESIDENT 4100 ,:o.ntvietto Boulevard,. exeb:. o ,es Lc/. - turn a bet -i. regards to all. SENDER'S TELEPHONE NUMBER York 1308. --ARAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING ikes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for compr, the e.. am rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND PAID F Ierati,. hereof it is agreed between the sender of the telegram atd this Company as follows: . The Cotapany shall not be liable for mistakes or delays in the tr,nsmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyo, for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the sum reeti rwt: ling the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in c er or obsc UrC 1. In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for thenon-delivery, of this telegram, whether by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless a greatervalue is stated in hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be pail based on such value equal to one-tenth of cent. thereof. I. The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to mach its tion. Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities or Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at hisexpense, endeavor to for him for such delivery at a reasonable price. No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such office of the Company's messengers, he acts for that purpose as the agent of the sender. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is. ith the Company for transmission. Special terms governing the transmission messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition to all of going terms. No employee of the Company is authorized to vary the foregoing. THE WESTERN UNION TELEGRAPH COMPANY ii INCORPORATED NEWCOMB CARLTON. PRESIDENT CLASSES OF SERVICE DAY MESSAGES all-rate expedited service. IT MESSAGES cepted up to 2.00 A.M. at reduced rates to be sent during the night lefivered not earlier than the morning of the ensuing business day. LETTERS leferred day service at rates lower than the standard day mesrates as follows: One and one-half times the standard Night rate for the transmission of 50 words or less and one-fifth of itial rate for each additional 10 words or less. SPECIAL TERMS APPLYING TO DAY LETTERS: further consideration of the reduced rate for this special "Day -" service, the following special terms in addition to those enu- Letter shall be delivered on the day of its date absolutely and at events; but that the Company's obligation in this respect is subje to the condition that there shall remain sufficient time for the train mission and delivery of such Day Letter on the day of its date duni regular office hours, subject to the priority of the transmission of re a ular telegrams under the conditions named above. No employee of the Company is authorized to vary the foregoing. NIGHT LETTERS Accepted up to 2.00 A.M. for delivery on the morning of the ensi business day, at rates still lower than standard night message rates follows: The standard day rate for 10 words shall be charged for the tr mission of 50 words or less, and one-fifth of such standard day rate ft words shall be charged for each additional 10 words or less. ed above are hereby agreed to: Day Letters may be forwarded by the Telegraph Company as a ed service and the transmission and delivery of such Day. Letters SPECIAL TERIPMS APPLYING TO NIGHT LETTERS: all respects, subordinate to the priority of transmission and In furtter consideration of the reduced rate for this special " Letter" service, the following special terms in addition tz Day Letters shall be written in plain English. Code language Night Letters may at the option of the Telegraph Cor be mailed at destination to the addressees, and the Compan3 ry of regular telegrams. permissible, This Day Letter may be delivered by the Telegraph Company ephoning the same to the addressee, and such delivery shall be a ete discharge of the obligation of the Telegraph Company to This Day Letter is received subject to the express understandd agreement that the Company does not undertake that a Day enumerated above are hereby agreed to: be deemed to have discharged its obligation in such cases with re to delivery by mailing such Night Letters at destination, po prepaid. Night Letters shall be written in plain English. Code Ian is not permissible. No employee of the Company is authorized to vary the foregoing. October 30th, 1916. Dear Warburg: I am dictating this reply to yours of the 23rd with your picture in front of me, which reminds me that I w uld be glad to have one if you have a spare copy kicking about the h use. Forbes' skit is all right so far as -fiThe,v glorious career are concerned, but we about your .atment of that Jekyll Is- land meeting might lead one to W t it was a conspiracy to // justice to all of the men loot the Treasury, and it is real who were interested in tha,ktdrloh pi Your letter o cross dnine containing a suggestion that you ask Dr. Mille dianapolis spee".._:_j Of show \ y letter tehim about his In writing Miller, 1 did not attempt --any argument ly. /the general economic proposal ' /( of deposit banking versus noteows as much,or more,about the history of \11,ting. \ banking develO 1S44:0 , d . The trouble is in this address he got the wrong pig by the ear and unless I am mistaken that will shift his grip to the right one. he is not the kind Aside from his argument as to the method of dealing with this surplus of gold that we are getting, I really think his speech is a very good one irideed. He has made a fine temperate analysis of the situation and iilpressed me very much. -2- To Hon. Paul Me Warburg. Oct. 30 1916. 7=, Aiken recently wrote me of Wing's suggestion wnich he sags he declined and Jay has written me in reply to my letter that he will answer my suggestion later, presumably owaiting a conference with Peabody and Woodward. Has it occurred to you that Lr. Jay himself may feel a little this suggestion! d and hurt by mentioned this discour: :n you were in think Denver. 7- I have written !ir. Jay quite franii-iu in the bakk, dwelling particularly the work own criticism without, of course, mentioning your name e can be convinced by d hop this and other preweure that one (t do it all. Now about thit Frelle}1,\C\ . My previous letter writ- , ten before yours arrivai xplaine hat our attitude had been in discussing the earlier c edits wit Brown and the others. as our oen attitu think it has --- no different r m what you and the others had us consi t ntly main necessity for been correct and ir. Washington would have do not, therefore, understand the c statement, or even any telegraphic advice, to the reserve banks, and referring specifically to the Board rather So far than to the merits of the the business, I action of am inclined to think that it acted hastily in sending the telegram, welch implied that the reserve banks were either committed or, even without commitment, were liable to employ an undue amount of their funds in investmeAts of this character. We must not forget that bueiness of this kind negotiated by state banks and private bankers only affects the reserve system to the extent that we buy the billsamd -3To Hon. Paul M. Warburg. Oct. 30, 1916. and that is a private matter among ourselves which does not justify any public announcement. I am assuming, of course, that the busi- ness is not ultra vires as to national banks. As to the goodness of the business, I presume you still agree with no that all of these dollar credits to England, France and Germany, (if the last-named were arrangin hem), are intrinsi- You and I would b th like to see the cslly good and will be paid. bills drawn if possible in the good 01 Nway, but these are war times, and a lot of old rules neoassarily have b Emergency machinery must he devi /ST1dpit into n abandoned. operation in order to avoid continuous disorgani t e exchanges. you that it would be very nice these bills so drawn that we could drive them home a but you seem to overlook the fact that even ifa rate o bills would stay here I agree with count was not guaranteed, the t the s 2h until the credits matured, the only differenc -76-Sing thatnif_ti'd foreign by the guar would risk having to pay a higher ee of disacunt they drawess wsre not protected rate. med comes when we have very much higher discount If'Nte rates for bills than at present, and higher than those on the other side, in other words when a situation develops which would justify transferring the domicile of these bills from New York to Paris or London, you must admit that exchange at such a time must be adverse to this country. Under those conditions, we must rely upon the money market working out its own relief and if we have a large volume of floating foreign it will do so of all sorts of bills, by the attraction capital identical bills, in that way largely to New York for investment in these relieving pressure on our money market* -4 To Hon. Paul M. Warburg. and on the reserve banks. Uct. SO, 1916, In the past, when Lombard Street has been working normally and exchange became adverse to London so that gold begins to move out of the Bank of England, the bank raises its rate, not so much in expectation that bills will not be arawr on London, but in the expectation that floating capital will be drawn to London to invest in bills. I really do not think your ar merit is a conclushat they can be ive one thet these credits should be in such for cancelled whenever, our rates get shorter and would in high. ordinary times. American banks, whether commercial o celled and withdrawn every have a bill market. Their ma But if credN3, xtended by n ial, are going to be can- time omoney/rtes If oar disco ity might be advance, we will never t works as it should, an es in London, in postponing advance in our rates will nance bills, but an advance the drawing of a certain/ our foreign commercial and shoald never be expecte bueine,,eb1 eaun _a--oiancellation of foreign credits. -If an advance, our diecount rates is not effective in attracting money to New k for inv tment in bills as the chief relief our \ \ / literally thrown finenciai / )1t 4 slop a discount market is away, for that is the way relief would naturally come. T do not agree with you at all that this is "unscientific, work in endeavo ?vg.etoe rotten and dangerous" financing considering the tiees we are in. The real objection that I see to the method employed in handling this business was entirely in those two paragraphs in the confidential circular. The bankers were 4ot justified in making in regard to the Federal reserve banks unlese ed the first consult- management of those banks, and particularly so, when this is the first 18 months credit which had http://fraser.stlouisfed.org/ been Federal Reserve Bank of St. Louis they had statements for 12 months only. been arrarged, the others having 5- Oct. 30, 1916. Hon. Paul M. Warburg. To I feel now just es 1 did when these matters discussed.' ie must not use a foot used three years ago in dealing with were first rule such as might have been the affairs of the We have to modify a great many things, present day. among others, finance credits, in order to meet the requirements of a trade surpassing anything known in history. I felt a great deal of concern over the Federal Reserve Board making a the Board in any way criticism o in a ti possibility of ch would statepeen c goodness involve these bills or even of its being legitimate b iWs to form, etc. an attitude by the Board I You say that be1i4ou1/7o Y fina'4 I think in spots in this reluctantly liberal, b t that it ii s you to take and in viol t on of y u \ your strong co commerce shou I constructionist. credits, you have been been a difficult attitude for Many years of training and ons a4--th'e way the bill business should be s is not-Ire conducted. infinite harm. liberal I know you Such fina nice time when prset# theories of the way d can be strictly applied. holiire_r_y- much that you and yourassociates will see fit to let this matter develop just as the and then arrange with Mr. Jay or Mr. Treman former transactions did to point or whoever was responsible for the circular that they out to rr. Kent should confer before assuming themselves to state what attitude the reserve banks will take. The President has to the committed himself so Comptroller and has made such strongly in regard a rash and unjustified statement -6To Hon. Paul U. Warburg, in regard Oct. 30, 1916. to Wall Street control of the Federal Reserve System that I believe we are going to have great trouble in getting legislation of any kind in December. I am sorry Vanderlip spoke as he did at Kansas City but you realize of course that constant men are bad men, that reiteration by the President that Wall Street is, that eome of them are, and his Bank does not refe e ce direct inspire any very cordial to the City Vanderlip. I feelings\om am inclined to agree with you that Wilerin will I did not think so until the three week last t It was mighty good of always managed to agree upon a will in this case. ;te me so fully. 0 You may connide wn this credit is ing 1100,000,000 to De ocratic pros erity. Just think out of thack. and to the family. incerely yours, Hon. Paul M. Warburg, Federal Reserve Hoard, Washington, D. C. 13S/VCM concluded - done your loyal part in add- , garde to )r1 e have tio pl these matters and I know which no doubt it will eau hae you will get be 'r4elected, although of the comfort November 3 1916. Dear Mr. Warburg: In looking over the November let Bulletin, copy of which ar- rived to-day, 1 note that on page 598 there is a table showing the Operations of the clearing plan, in the last column of whieh headed "State banks 'remitting at par" New York is reported as dealing with banks. I fear that this thirty-one figure is due to our having folloved strictly ;e have only thirty-one state banks to the wording of the heading. which we send items direct and which remit direct to us at par, but we are handling at par items on two hundred and twenty-nine state banks in this district. These are divided as follows' Members of N. Y. Clearing House, N. Y. City, Nonmembers of N. Y. Clearing house, N. Y. City, Remitting direct outside of N. Y. City, Collecting through member banks, Total - I note that eoston's figures include all the 30 69 31 99 229 state banks in the district, and undolibtedly our statistics should be presented on the same general principle. Furthermore, I note that some of the large western banks have over 1,000 state banks on the par list and I feel quite sure from our conversations with some of their officers that they do not have anything like this number of state directly to them at par. institutions remitting Undoubtedly a large proportion of collected through member banks just as in our own case. VVery truly yours, Honorable Paul M. Warburg, Vice Governor, Federal Reserve Board, Washington, D. C. FJ/RAH Chairman. them are Vovember 6th, 1916. Dear Warburg: I am glad you enjoyed the letter I w cte to rr. Yiller about his Indianapolis address. The reason why I suggested some dou t as to your standinE hitched on the note / proposition was because er degree of reliance upor the val e amendmen / member banks tc carry all their r serve < believe is justified. our much great- permitting ith reserve banks than I I thinkizt71lywe cannot rely upon anY nepRyee permanent or dependable h carried by that method, --, at least, until many y tem has a much strong than it has durin with a littl tiisend s have the Federal Reserve Sys- hold on b. king affairs in this country thi \!rarma' period. 4) easiness your possible Consequently, I view enthusiasm about what might be accompli h d by this ethod , fearing that it might even to some slight exten feet o r determinatio* to keep pushing on the note provisions of the ederal Reserve In principle, you and I Act. are in complete agreement as to the note issue ought to be hsndled; we are agreement an to whether the other plan will he how not, however, in worth much or not. I think the argument contained in the second page of your letter is claim that good so far as it goes. It may be logical enough to notes should count as reserve so long as balances do. -2-, To Hon. Psul U. Warburg. Nov. 6, 1916. The difficulty is that member banks will not give us the balances and as the law now stands they cannot count our notes as reserves. 'o not abandon the fight for the note amendment. know you won't, but I do not want you to lose even the slightest degree of enthusiasm on the subject. Faithfully yours, Hon. Paul M. Warburg, Federal Reserve Bourd, 1Nashington, D. C. BS/VCH (W' November 6th, 1916. Dear Warburg: 30th has been read Yours of October with a great deal of interest and, if I may say so, with a grea teal of sympathy for your views in the wetter of this French or, it. As I wrote you before, I tOink the b4nre hasty in Lending out their circular. said to theca justified tneir duin an unfortunate mistake of j d men were very Nothing it had ever seems to have been in all eretanding. of these matters, when you come with Kent, let me say that you can rely upon hdetin rity.a good faith to the utmost. He is, of course, inc i ed at ti to be very enthusiastic, but he is a man of great eetration/aid ability and not the would take anynfnir a v having bills the view that the future pro- ill depend later very largely upon our ket in which foreign banking capital can be invested when the exchanges turn against us and, of course, to same extent our ability to discontinue finance credits when they mature,without that do anything improper. e other hand, I hold tection of h e counter type such as these dieturbieg normal commerciel credits of the type that you and I both prefer to see develop. If this theory is at all sound, objection woul,i not lie against the -rench credit on -2!'o Hon. Paul M. Warburg. the ground of size. Nov. 6, 1916. At present, in payment for every thous- and million dollars of excess exports we to-day receive say one hundred millions of gold and nine hundred millions of finance paper. That is a great deal better than receiving one hundred millions of gold and nine hundred millions of American securities. When the trade balance turns aga nst us, as I certainly think it will, we can hand back sho t government notes, finance credits and other similar obligations than we can re-negotiate American secu444e reat oeal easier so that if the position becomes exactly reverst4 ibl we have E. pay, say, one thousand million dollars f cess i ports we can ship back one hundred millions of gold .(whether by cancelling cre rndred millions of credits, t ing capital in bills his s much les we had strain than or viting investment of bank- a:14 eet the situation with bille of this character as a safety valve. ai;;ITITolith you as tothe disposition of the matter now made betouse it hi really reached a position where this course seem everybody and avoids any unfortunate satis publicity. I really do not think that the Board should take the view that these credits with renewal privileges are anything less than legitimate under the circumstances. English banks for years have opened similar credits wit* New York banks with similar renewal privileges, not running, to be sure, as long as 18 months, but then no war conditions Justified credits of that length. -3- To Hon. Paul M. Warburg. Nov. 6, 1916. This also applies to guarantee of discount which is not unknown by any means, although possibly not as usual as the other type of credit where the drawer niust necessarily rely upon the London discount market, but we must not forget that these foreign bill drawers still view our discount market with some doubt and suspicion. They do no4know ther we are going to have rates jumping up to 130 1. as they ha et in past years, and it is most natural that they shuu ection of this charauter. On Lhe other hand, like to se our accepting banks sell the bills and no arry in their portfolios. almos', agree with Much hinges on New York State. hope we can gat at th Wilson.'s re-election. 0 ver is elected, however, uest right after results are ab known. nest rogar o you d many thanks for your letter. itTFully yours, Hon. Paul M. Federal Reserve Board, jaohington, D. 0. BS/VCH P. S. Hemphill. System and what yoou say about You do not surprise me in time on the Reserve He and 1 have disagreed every about this type of business which knows nothing contribution to the dishim to make any valuable would enable cussion. November 16th, 1916. Dear Warburg: I have not heard from you since on the subject of that French credit -Ind last effrvescence o e my pigheadedness guess not, has not finally exhausted your u and surmise th-A you have been too busy to wri The President is Congress. Why is not a proposal for the furthe is opportunity it se country by subm for retiring ately. repare enothei message to rtunity to interest him in nent of our currency? o a great service tc, the me a well-considered plan tening the retirel6ent of nation-' al bank notes e system of fixing denominations of gold eil s wnd then fortifying issues af reeery otei; to take the place of greenbacks and national bank no y accumulaii gold daring this period of its redundancy. This is so bviouily the thing to do and I feel that you w °artily with some such plan that I won't t elaborete at all. The principal thing is toget the Reserve Board and the Reserve banks committed in recommending thorough- going revision of this *lobs matter and I should think the ident would welco:le this opportunity of adding this to his Presother 2 Hon. Paul V. Warburg. 16, 1916. constructive achievements, now that he has four more years ahead of him. This letter is unofficial, but if yo A would like to h-lve me write an official letter to the B elaboratinL; plan, I tLi& I could do it in a vf,ry hor time. , Best regardn to you and the fw!il Sincerely yours, Hon. Paul L. Warburg, Federal Reserve Board, Washington, D. C. BS/VCM November 17th, 1916. Dear Warburg: My last letter to you was hardly fore I was delighted with the arrival of yo and immediately afterwards receiv the mail box bebirthday telegram tter of Novem- ber 10th. First, about the It was just like you to than I can tell you. think of sending it and You honor me by referring t nks", after having invited me to become your rietorship and ly inviting a 1 unconscious- I don't regret it and hope you don't d wishes in the Jay a am roses, About the election: 111111Vou shape of some the oAcome as high riff man and tariff. I do not feel nearly as badly u may imagine. on now do not I have never been a believe in a protective ar breeder, has enveloped the country in an isolated hothouse atmosphere that is unhealthy in the extreme and one of its results is to mislead the people of the country as to our true economic condition, which is not sound. that, I have not much use for Hughes and to encourage Presidency. think it is a Besides mistake our Supreme Court judges to cast their eyes at the As you know, I have always admired a good many -2- Hon. Paul M. Warburg. To Nov. 17, 1916. things about Alson and now that he is elected, it may be that more can be done in the particular line of our work than would have been possible had Hughes been elected, although I fear the complexion of the uouse and a possibl oadlock. Now about the main subject of yo glad you wrote me exactly as you did. I letter as soon as I have finished letter. I am 1 destroy the ask you to do the same with this. In the first plac say that I have been con- scious ever since we star bers of the Federal Reserve years ago, that the mend particularly you, have been more than patie ,e have all of us he16. 7.retty stro mportant features of the Reserve Sys nately have not always been in accord, and together erati poss frequently when we have been shown a great deal more consid- ink for me and my very positive views on these subjects than ly I was entit to write to d to receive, or have shown them. So I y exactly as I would talk with you were However, I want first to state my conviction about the present condition of this country: We are storing up Pnergies that are bound later on to make serious trouble for us. England and her Allies have apparently adopted a delib- erate policy of loading us wita gold in order that they may To Nov. 17, 1916. hon. Paul M. Warburg. continue to borrow money and buy goods from us. No serious harm would r suit from this if the expansion of our credit system took the form of foreign loans of different kinds which Expressing it in another way - if could later be recalled. $100,000,000 of gold will support $900,000 IOU of credit, we could with safety take the gold and extend e credit and ship en we may have the $1,000,000,000 of good d becaus $1,000,000,000 to pay Europe, we can hand back of obligations and $100,000 0ld, leaving ou in equilibrium. illustration of what is This is eve lopment of credit ex- . my conviction, as to the o pansion as a result of d imp not taking place. What I loans, but mor partly by forei securities and to largely in buying back our own ank loans for domestic purposes d in dvancing prices. rry the burd to c gold emands are .go The wotld is going We are going to have most of the anue the gold to be made upon us in ways that cannot ich inevitably will result in the return of now be some of this With we are inflating our credits over $100,000 0 Ain own affairs . If we must in consequence deflate our domes- tic credits, we have a hard time ahead of us. It does not make any difference whether the demands come from neutral nations or from former bell gerents. / The effect will be the same. There- fore, my whole attitude has been to encourage transactions which are not ultra vires and which will put Europe in our debt. -4To Hon. Paul M. Warburg. Nov. 17, 1916. I am satisfied that your letter was inspired very largely by an unfortunate expression used in my letter to New York, which possibly should not have been read to yo, but which, on the whole, I am glad that you saw. It related to rulings on credits to Continental banks And now, let me explain just why I feel as I do about that. The aaendment to the Federal Reserve Act provides that member anks may accept drafts, etc., drawn by banks or b n countries for the purpose of furnishing ired by the usages of trade in the Very broad powers of interpretation the Reserve Board by this amenament. O interpretation to that it is limited in its ions only in those coun- tries, such as ere t is has been a long-estab- lished custom, ederal Reserve System will always be the t Our member banks must wait until eign insti e already established customs of this haracter, in is her wOrds, until the banks of other coun- trio are doing taati Nothi in the Act be limite siness before we can start to do it. ggests to my mind that thie amendment should acation to South Am rican countries only. Sup- pose England or Fr.alce or Germany being unable to pay cash, wishes to establish a practice similar to that employed in South America? What means exist for our banks 4o join in establishing this cus- tom so that we could enjoy the benefits ;rowing out of this business? How many transactions are necessary in order to establish To Nov. 17, 1916. Hon. Paul M. Warburg. Custom grows up out of a series One or a million? a custom? of transactions of which there must be, of course, the initial How are we to take transaction and subsequent transactions. our place as international bankers if our members are debarred by law from undertaking the development of business customs with our cred- any nation of the world that raiuires the Possibly I am it system? mistaken in was intended to have generalappli your statement to the Committee suming that t ion and the re seems to indicate I am in favor of opening the 11 and which wi the law permits which are sa that rd of amendment am. But ions which bring the world to this country for banking f are inclined to It has alwa Federal Reserve Act follow a very strict int oral reserve banks to observe in requiring member banks what we practice will agree in connection reluctan egarded as sound business has th bi recognize tha abandon a goo of exchange and that you are r conditions make it necessary to ormer notions of what is exactly the right way to do a thing, in favor of methods which have become necessary by rea ing principles. of tha war and which seem to violate old bankersonally, if the law permitted, (but I do not assume to urge my opinion against yours), I would make the widest interpretation permitted by the law and bring all these big foreign banks to our doors just as rapidly as possible; get them -6- Nov. 17, 1916. Hon. Paul U. Warburg. To dependent upon us, make all the money we can out of them and hold a mortgage over their future performances so that we may protect ourselves when we need to. I agree with you entirely that there should be some limit upon the amoun4 of bills of this cu; cter which the reserve banks should carry. Whether it is or 850,000 000, is not material, but is surely sound. by pr When the Bonbright credits would not buy the bills s been wretch4, managed. e arr ed, I told Kent that we d made a market for them 1. they that he must not depend upon and had found their market 1 and urged that he pursue our money in any f of the course adopt This should five bill house ciple of a limitation dling of the bills I agree with sollie of the banks in New Yo I ing the bills to four or ways be done and the accepting o buy their own bills, but they banks should ne in m should he .0 ,000,000, 1530,000,000 prohibited from doing so. I do not agree with you absolutely as to the guarantee of d credi ularly count. That as to justi a not such an unusual condition for long discrimination against such bills, particider the history of our erratic money market and the natural fears that mi,;ht be entertained abroad in regard to being sure of discount at reasonable rates, but 1 would of course, very much prefer to see no guarantee of discount in connection with these credits, if it can be avoided. This I have always urged in these matters, and will continue to do so. -7T0 Nov. 17, 1916. Hon. Paul M. Warburt. do not I the understand why the Board failed to appreciate The Brown credit, character of this guarantee of discoutt. copy of which cussed and with the Board and which was was filed plain and explained, I am sure makes this feature the point was mAe clear when the matter w as 1 recall in a ruling as to the applicati fully dis- submitted, resulting, of Section 5200 of the Revised Statutes. In regard to the last french credit, s before know i g anything ,oard's telegram to the Reser about the the want to say that I banker's circula but I still k the Board acted rather has- completing inquiries in tily in sending as 1 understand it, so that of that matter upon the veto It ad been ex-ere f having the it ar ements th business. bly to feel that after annoyed d whicir ance But all full information. regard to the c no absolut think putting those two clauses bankers were most in in their circular, ot word of the r in New York to avoid even the rye a all the care banks in any way paties to circular should appear- these cred- be sent out that very calm- position of being a party to the trantEs,ction, ly put us i approving it and indicating our willingness to buy the bills. About a differential in rate, I am not inclined to with you, at any rate, verystrongly, on tLis point but want to ask you to think of the difficulties in the way of discrimination of that character. In the first place, our rates disagree -.8.. To Hon. Paul M. Warburg. Nov.v 17, 1916. are already so complicated that no one outside of the management of the System really understands them. The rates now shade from the minimum applying to bills of the strongest member banks drawn against actual shipments of goods, to various kinds of bills drawn and accepted by importers and exporters a endorsed by the agencies of foreign banks. Somewhere in betwe these extremes, would come these finance drafts, handled ,_a dif ent rate, The finance drafts now being drawn are in cepted by some of the strange trinsically, they are a a e only ones accan banks an kers. In- some case ter than bills which we are buying at fairly low rate made by some of the smaller institutions whose credit is n early as good as the institutions accepting these I ce dra rate difficulties would be straightened ou f the bankers could hemselves market all the drafts through okers and let market afford some test as to rates. Teir u llingness t. do so in a l!trge way mnkes our rate o treater impo at it should be. I had rather see the it a serve banks fo low the mixket just now than have them lead all of my neg ations with Bonbright, Kent and the others have I decided with tha ject in view. Uster reading your letter, to the bank in New York and recommend that they establish a.differential after further discussion of the matter with you, but will first await your reply. It certainly will hm A1111111111111 40 noharm to try this and watch the result, and I do not want _ you to feel that I am more mulish than I am. -9.- hon. Paul M. Warburg. To Nov. 17, 1916. I am really much more concerned by what your letter says in regard to the development of the System and the establishment of its policies bringing at issue the question as to whether it will You are too in the system be run by the Board or by t e New York bank. experienced in statement will that disagree these matters t v". with me the form of organizat always present this pa n of the R conflict and of authority of influence and it can only be a d by the exercise of a great deal of by looking at hese mat-tars in the broadest possi ch I am willing to confess I may not always have long cognize, that .greatest importance ganizaIon in t' oor instrument of th o go to n every time to e bank f Europe; tte minds o wit, i to carry out Washington to get needs of prestige that is enjoyed by the t that, the feeling of assurance,protec- oh should be and is constaetly growing in York bankers, will certainly fade away. agree with you that the situation can be - The ing had to be done. Ii really blish the kin strength the lam York membership in New York. ew York Reserv tion a It is of the d autoritative or- bank establish it permis shot. etant conferences and bystickimg with dealt with only by con- determination to common gebt N. plans for carrying our the purpose of its organization. would be the death of the System to have the impression It get To Nov. 17, 1916. Hon. Paul M. Warburg. abroad thttNew York was going ahead without regard to of the Board and assuming to run the whole show. the views It would be equally disastrous to have the Reserve Board assume the actual reserve banks, if management of the gional principle at all. it is a protection to the tablishment of these credits, if on the other hand, will bills. of r is to agree if we the country ts encourage the es- ey are no toadopt tra vires, and us in buying th king the have the effect ulti borrowers a course to pursue I think the s in these matters during the period can that we are to preserve the re- e charged little more This can be done ve money cost which the for commercial h betier when there is a large volume of bills a than in advance before the volume develops You ously I stick to the idea that obstacles shoul tro of th will lead to ume large sue} e way of lan teis business that any other the development of a If acme long as they are good. complete harmoney in our efforts to con- I woule welcome it heartily, and promote ggestion of yours to get results. Can appreciate more than I, who have been so much in your confidence, thal driving a team of twelve unbroken nags is a difficult ana haraseing job. I dodt want to add to your troubles a bit and particularly net at this time when I am unable to keep closely in touch and sometimes may ons wilhout adequate information. form opin- Pee Hon. Narburg. _41 e. You refer to Nov. 17, 1916. railroad acceptance credit., along the lines which you ap- the french The arrangmement in that matter rove was to a considerable extent due to my urgent representations to the Frenchman who was negotiating the matter, that guarantees of discount, etc., were unwise encourage our want to bankers to d that we enter into but I intention to withhold info u,tion o In the frankly. Brown the Board, togeth rcopied believe, in jus Reserve Bank, th ac the a m otherwise than deal ole subject was laid before he o ficers of the New York ruling ri d* bus. n the other credits would nec- Washington that I must always brand it as would have been more ky let (Went to t acted haetily do not think for a moment because er.originatee applied do iberate any t it must be a epted that they apply tot the o tandpoint, of the agreement and I ce to Kent an in the be essar rOM yo. last the Ronbright credit in identical terms, th i ed in the there was do notthink you should not ueh agreements. Your stricturesupon the method p French credit are doubtless justi le did said accurate had I law is ineffective because it cannot be irection except we are willing to trail along after foreign banks which have already blazed the trail.' the ruling as m de by the Roard is required by the if terms of the statute, I have nothing to say, but I hope that is not the eas!..,y I agree with you about-a central bank not now being possible. It would be the beet solution of some difficulties -12To Hon. Paul , Warburg. Nov. 17, 1916. but would invite others. If the Reserve System was one bank, I fear it would invite )olitical attack and be destroyed and certainly it would mean that the central bank mumag ment would be mare concentrated in the Board in Washi gton and the mama- gers of each of the twelve banks would b thing would run in a very loose-jointed fa have a central bank, it must be r cal clerks and the on. If we ever York by a Board of "eirectors on the ground and nothing woule invi reater antag- onism that such an instituti e specific business in ding to be arrived at befront of us and the better er these foreign credits tween the Reserve Boar hope it can be arranare to be encour If you ad No' York can agree ged that they y in that regard, I am sure you as to what is b likewise in adjusting rates so tro will have Board will b ectly satisfied that the System is that e amount of paper of that kind which gets hold g a check over into ts portfolio, d you can count on my doing everthing in about. If the 'bard takes the view, on o bring my Po the other that these credits should be discouraged and strictly limited, then it seems to me lhe only possible position for the i4ew lork bank is to handle these bills just the same as Nos, in conclus any others which are good, without any discrimination, because then the amount will have been so limited_ that the will not in any case prove a menace to the System. Personally, I do not -13- Hon. Paul M. Warburg. To Nov. 17, 1916. think there is the slightest chance of any trouble arising ou* kind, in of credits of this am exceedingly anxious fact, I think good will result, but to see the Board and the New York cl.r.k work in harmoney and in thorough accord. Before writing New York, won't ye letter :.vi sing me how all this5trikes you effort to work it out along the lin feasible, and then let me write them strongly e lately, who u just now laid up, urgin at d whether he estion is not I have been writing ling of some matters send me anolher subject. ortuhately le more sy7tematic han , the eveloped right away. much is done at the las Too Recent correspondence with him encourage would welcome Aiken as an associate onfidence that Aiken, who has a lot of punch, oing a little more smoothly. e disturbed because of some unfort e expression y letter of Nine to New York. am ab..lutely confide that had we both been there, this mat- ter w sted with much less difficulty and frictio 13 have been a Your l ir has gone a long way toward accomplishing what you ana.0th want, although difficult to bring about just now with 2,000 miles between us. I am dictating a little upset while in bed for I have had the last day or tw9,but expect to be right by to-morrow. this letter around all Don't ever forget that I think you entitled To Hon. Paul M. Warburg. Nov. 17, 1916. to the credit for ev?rything that has been accomplished in the last two years and none of it would have been possible had it not been for your patience and good nature, particularly with Yours faithfully, Hon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. November 17th, 1916. Dear -arburg: A rumor just reaches no that th reasury Department is considering a plonfn: i9suing go id iertificates in It seems to me that thing could be denominations of e do not so fatal to our Plans as such a vo opmen . bills, the country in want to scatter this D,2old all but want it in the renerve I 4 cannot bell -nyidered by Secretary mind dropping me Hon, 'ed ?ss BS ul r. Warburg, 1 Reserve' Board, rgton, D. C. uach plan would be even this time. Woulj you ovember 18th, 1916. Dear Warburg: Yours of the 14th enclosing copy f your letter to r. Viller has just reached me and I have with a great deal of interest. amusement if you had not saggested amused me a good deal because of d the enclosure I would no hae admitted to ly it has the very frank you have undei-taken to lamba in which your associate. also got considerable amu e evidence at the foot of page 6 and the top of t some of the doctor's remarks rather got argument about surd because I note satisfied fro len' They struck me as being ab- bservations on eforme to be that on land ow d r taining parts and following it a s)ecific sugges'ion with a some way. article, third one con- or retiring greenbacks and has- be retirement of national bank notes! it would offehd the Doctor! That is the Sincerely yours, Hon. Paul E. Warburg, Federal Reserve Board, Wnshington, D. C. ground Bank of Eng- feel about my publishing that tening http://fraser.stlouisfed.org/ BS/VCU Federal Reserve Bank of St. Louis the undertaken in ,?,rig- len the war is over will be to modify the it elastic qualities in .ote issue to re discussin t than I was there. cutting it in two Miller's bully one. I real Do you think last thing I want to do. November 20th, 1916. ear Warburg: I was delighted to receive your ter and the photo graph which I really prize. It is a good icture and exhibits that stern Warburg character, temp red with ood nature and a once. on closet. Please hang it in th It would be most couraged by if Mr. Jay any changes hinted to him " sent you at I will order one of my own sense of humor. should be dis- our organization. that I would li I have see him out here if he could ated with anyone who has a break away. higher sense o I know he is conscious of sol::e shortcomings i p and keep moving a large and complicat feal to vie ing would org t into my t he could suit me better shoes, but I am not than to going the injustice of withholding my own con you or the b s qualifications are not in that line. on that Mr. Ja I 7 woul ell him th so by sug ;ame thing exactly and indirectly have done g Aiken. This is a coldblooded world and I wish I could avoid my own res,onsibility in this matter, which is certainly not to p-rmit any mistake to be made. -2Nov,*. 20, 1916. Mr. "jarburg. fa a -y last letter aboutthe French credits answers ee yours almost entirel:. I have already written to New York, E + notwithstanding what 1 said in my last letter, suggesting that they consider a differential and am referring to it in another letter to-day. :ter After reading your letter ( and this), I rally have t my sayin know you will pen inding there is so lau in this appar- little difference between us and that experi ant difference of opinion r so closely a e never failed to get to- mer differences of opini idly in this matter. gether and we are doing n a business, put r i.e bit! arm somewhere and enjoy e children ou ifference does it make or will hether Mr. Austin knows how to hund mate in r disc you and I get out of a minu Digreer it make Your helped me a last longlong letter ourselves a 1. of our for- If you lived out here for six me e undertthe h ky Mountains you would begin to realize as do that a lot these things do not count for very much. -------N \ o the subject again of discount rates, I Heferri believe ter the war we are going to have very high rates, first, abroad and then in this country. any of these credits will default, be renewed. I do not think that although some might have to I believe that rather than suffer the slightest default, England and France would pledge the last scrap of 4t , I o 4 t,-, ,., el, .. :0 A t". 'I i- W U nt ) A U. 4,' 0 .1- os , IA . m c 0 ,r Pr 13) G ...., Nov. 20, 1916. Mr. Warburg. tr C.' , c.r lit .1- 0 0 available property they possess to effect renewals at any old 0 rate. Furthermore, I m hopeful that the war is not going to last as long as some people think. Will read your letter to Glass very carefully and write you a full reply later. any thanks for your nice iette courage me. Faithfully yours, Hon. Paul M. Warburg, Federal Reserve Board Washington, D. G. BS/V0M which always en- November 21st, 1916. Dear Warburg: With this I am returning your pr osed letter of Nov- ember 14th addressed to Mr. Glass, concerni weich you ask for comments. 4ith one or two excep ment as is, to the advisability do no more than we are so ily in agree- ndment suggested that I will refer t of them. First, I do not th schedule of the be considered compl amendments can f our gold reserves without recommending: should be 1. retired and Federal issued in their Thacur y laws should be amended respect- ing the arrangement of , , \\.. 3. That f place, ent kinds denominations of dif- of paper money, e.present practice of thWrreasury in bu'jing gold should he modified so that the reserve banks can get in between the public and the Treasury Department. In this connection, one of the most interesting recent developments Las been the ability of the New York Bank to buy gold bars because of the inability of the Assay Office to take it for cash as promptly as offered. If we could pay for the gold with -2- Mr. Warburg. To our notes Nov. 21, 1916. and the Assay Office mode depositors await the smelt- get ing return, we couldAell the imported gold, almost wehout ex- omissions The abeve simply refers to ception. from your letter which it seems to me are of sufficient importance to. emphasize. I am ve 1-ecommendetion No. 3: doubtful ate ut this. It has the effect of taking the pressure an pressure which we can exert, off tt te bank3 and might result in an in efinite postponemen almost the only d trust companies ny general o movement to take full members Recommendation N strikes me as sant necesity. right simply because it hand, I do not think the under being all On the other rig that member banks shell in- creese tneir reser uivalent of the paid in th capital is pract it practicable, the statutory amount of reeer increase and that, I believe, to he unreeessarl or und , big York equal sed deposits could be ending abo upon and you reli permanently 11 find that in the New York District the CitY ha or exceed any informal arrangement elready carry excess balances with us the amount of their capital contributions. think the Board has in in dealing with this subject of a measure felen down amendments, it3 not so muen in whet they have proposed as in the method pursued to secure their enactment. The Board has undertaken alone without any outside support to influence iJessrs. Owen and Gladd and their associates, and through them, Congress. ant amendment proposed, Regarding some of the most the members of the Board heve import- differed Nov. 21, 1916. Mr. Warburg. To themselves and have not hesitated to expose their differences r. Glass and others. to This I regard as fatal to success. At different times I have di cussed the subject of amendments, particularly to our currency lams, of our Congressmen and Senators stated that if the membere of gere and in e the Reserve of the reserve banks, as well as bank throughout the country, agreed u eon 'it n a number case they have ard and the manaof experience e wiso. .f the amendsecuring ments proposed, there should ship or feeling of respon- No pri their enactment. ems to me, justify the eibility in these matte Board in the present junctur heretofor methods or "omas who called am I on the reccmmendateon of the is elread, made ration, ao admi ahe p CSSagS. upo cone or me the gram for the short session other day that of dealing with them by the as a part oft' ently, the correct, can be introduced with gram for tnis sessien had to be any chance agreed adjournment bargain at the last session, amendments, if Senator Thiwts' advice is neat with by unanimous consent. It is a very uncertain end probably hopeiese outlook for important changes. ry ments should ments belief, therefore, is that all of these amend- be studied up with the prepared strongest posoibL argu- for Submission to Glass and Owen and they should be sudported by the recomeiendations of all the twelve -4To Nov. 21, 1916. Mr. 1Iarburg. reserve banks, by endorsement from leading bankers and, if necessary, even bi a few hearings when oral statements could be made to the Senate and house Committees. am returning the letter and hope you don't mind my frank statenent af the way in which this matter impresses i would be willing to lel ever if we co 1d get the note and currency ov sions in Success to your effor-ts. Faithfully yo Hon. Paul 7. Warburg, Federal Reserve Board Washington, D. C. BS/VCM liA13. ovember 22no, 1916. Aar Warburg: You have referre in a nurber ettersto the amount of finance renewal drafts which we had our ased in hew fork for the whole System in a way which mi7ht lead e to believe that e as closel as I have wat nod it from possible and from time to t ent me showhad stater,:ent ing the bills accepted by Out of nearwe were overbuying. ly ;100,000,000 of bill in whole System, our records Ne- York show as of recent a little over p,23,000,000 of this class of pan 000,000, over y8,000,000 hear endorsemen of responsib ton to the obi ations of the inst tutions or firms, in addiawer and acceptor. position of the reserve banks is bei ned in this field of investment by constantly the ct that the nu ber of accepting institutions is incl sing as the bu books many time constantly the variety of names on our ness develops, hat it was a year or a year and a ndividual obligations not only no they were, but in many cases considerably smaller. and the half ago greater than The informetiot which you get frcn:, your statistical department is liable to be somewhat misleading, as it .does not assemble endorsements -o as to indicate name liability of the various acceAors is. probably what the single -2To Nov. 22, 1916. 'arburg. . One of the most injpottant elements in tnis acceptance business, as you know, is the amount of acceptance liability un- dertaken by amount of the various accepting houses in proportion to the their resources. 7his we have w tched with gr0 care and you will find that the total risk Beau d by Fitly one of the acceptors is so insignificant as a banking sk that all doubt t exce7tion is ar, to the goodness of tnese bills I have deferred writing you on this removed. ter until I could and inc figure hear from 4 just re- ad right along. ceived confirm the impress I would like to 2;3,000,000 of finance paper aloniLside of the paper taken h three Southern bnrks and t probably by all , including New fork, and let you be is the best. judge of whi i es ie concerned, of finance tale '25,000,00 ptp,per at se of the mat- I the t kind of paper which we get A The risk of loss on the for- from ccmyared with the risk of id be on the latloss triflin mer , ter, d it is not on ing se more le pe'r made by better Jrnate. intrinsically but it is it a bank- The little country banks send us pa- eir regular customers lending money as long as they remain o whom they expect to be their custom,:rs. It has a nominal maturity date to he sure, but is in fact rarely psid off and has no collateral behind viction it. I am writing along this line simply to indicate my conthat if any rate discrimination is to be made (and to which I have already agreed in my letters to New York), it can -3 To Mr. aarbug. Nov. a, 1116. only be justified unon the assumption that this paper in form is less desirable than commercial bills and consequently the amount should be rFeiricted by charging a higher rate. 1 have agreed and even urged that this be done largely or account of your strong feeling on the subject, my personal belief °waver, being that the amount of pper of that character alrea held is not yetlarge enough to justify discrimination. office last i have just learned of the meting at things out in fine shape week which seems to have stra and I am delighted that it Pest revrds, Warb hon. Paul Federal Res ve So Washingt November 25th, 1916. Dear Warburg: Thanks for yours of the 21 relief you have given me about those icates. of both Miller and Del One thing in that si inability to get hold of view of the given us whe gi 1 ler ma de ointed in the itude d to our note issue. haz been puzzling is easoning, logic or point tunity to do so was is Ind napolis address. we get at 'Dela Now, how ea e interested I wil hear what Your Advisory in the meantime, my di mest regards. thfully yours, . Warburg, Federal Reserve Board, Washington, D. C. Hon. P BS/VCM old certif- The rumor gave me I am terribly - and for the PO,ACE ImapTuRTc0 00. C (:)(1ToLaT ussoLko OJL.q° Hsu* 11RAI-4,AuLpnLV ,DIT.nTTX 7konLs) c., ?+ LoRwLqe- cori 8 a TuTsLos.csq MO Z4 PO4 0 M°' 410**, G R94' tr.r :VW ITS rap -Tu Tpa Eyeuu.pre) y AU %T4 7k0 Ja, '11.1.1r ROLA 1)&1'0 iTITeL wag. RIN 01 AT 04. CIL T'viiirPTTT4'1. itete' G ;0 RGT Porq 11130 tlque Tu ,PPg; IT 07. po.pp kiT7TeL u lig Doi. c_tt.4.4 1.6TTGL aye Lnw.ol. RffAG us .011 Y LI' A47, RT As rf 1:,; G. -rp ..^ f 7 !::. .p If ono ..,., o r q CeL471, Ipauica tor. Xoni.a cq, .epe syvisq ;r. 40 T November 28th, 1916. Deer Warourg: , ' Yours of the 2:3rd with enclosure and thiseLorning me newspaper contained an tion taken by the Board and the plete picture of just that has It wae characteri I deeply appreciate .. in this course even when ee ...e cloeo eite this cop, bearing on tnis ached me yesterday ccount of the ace me a very com- going on. to Wits me so frankly always do better by pursu- es and this leads me to envs te-day wtitten :relean in our cenviction,which may d irtinctiv s to the goodness of t:iese , that they are good and will be fore3gn though the tar lasts considerably longer; even, in good austicn. As I wrote you befoee, eome feet t. the point of of th bills may L e to be renewed and they may have to be renewed rates but I still believe that they will be s3mply latent all be paid and, furthermore, if the bankers are else and skillful, they will be laegely absorbed by the public end not peeve a menace to our banks. This, of course, does not meen that I would like to see the banks generally, ard paticulirly the reserve banks loaded with finance paper. 2 Nov. 28, 1916. Mr. Warburg. To Where / differ from the attitude of the Reserve Board is in sugveting a policy of repression w)..,ich is not construc- tive and which is certain if successful to cayse trouble with some disorganization the exchanges and of our foreign trade. uld it not be a stronger, wiser and ]es imid policy to ad- mit the existence of a situation which imp s certain oblige. tione upon us which it will, in fact, be d' icult for us to discharge, which even contains e that men s o so that we cp ischarge set about to fortify ou the obligations and minimi not feel very e foreign ith a erfectly normal situation bank notes 1 in regard to t reerve notei; curre if w ive it int withdrawn -eft* credits if we and very much reduce the amount of netio dealt wit Would you in the reserve banks and 80 1 more o a in 4101,4erve, no green the dangers. differentl had t1500,000,000 or r and admitting ven the silver menace can be ircul8tion to teke the piece of ucing denominalAons- I won't c mment in detail on th, most lntering nar kn tive of what h been transpiring of which you write me. in my hear at you agree with my views about the cur- rency in u would feel very much easier about all this foreign business if our currency and reserve bank reserve situation was on a sound basis. About the war situation, it is worse than and I cannot see any outcome to the deadlock. distressing Even President 3-. To Hon. Paul M. iiarburg. Nov. 28, 1916. .es--for-writing Wilson can do very little if anything with feeling so bitter between the belligerents. Don't let either ofus lose sight of the fact, however, that while the war does continue and innsruch as we can have no patt in stoppin it, a construc- tive program is safer than a program whic nterferes with the eoeration of natural laws and those which vo been accepted betrez2n nations as lawful and pro feel that .ment that I am justified in repea gold reserve in t down as being rr chuckle over aving all having an banks. kat loans are not good tection is in countryand believe our gre urope in pawn, so to spe 11111111601 irrence the state- think If these foreign are, then you can put re id srre day you can th'it and I won't hqvc g word to sql. ank you many times for writing me _o ank*y. Faithfully yours, Hon. Paul rburg, Fedcrul Reserve Boaed, Washington, D. C. Bs/vett! November 29th, 1916. Aar ..arburg:: It was necessary for m to order that rk o I was picture from the photogra,ph unable to put my name on it. This wil :ou still have it, w am in Watling on I an ever there aga Hon. Pau Fed g on, if now adorns my chiffon- ier in a most gorge Fa done if frame. fully December 2nd, 1916. Dear Warburg: I am enclosing a letter addr which I will a2preciate event that he attends Agents to be however, and should Me era]. Reserve shington, D. C. your m in the the m iting of Federa held in W be good enough to sed to r. Jay forwa He ha serve not been well ere, I will ask you to him at New York. December 2nd, 1916. Dear :arburg: Thanks for yours of the 27th ult. Of course, many of our letters b'ick They are the best we c coal barges in a sense. forth are like do in the way of discussion with 2000 miles between eed in all tha I am very much interested your letter. eed with the recent You know that I h re and I think it is policy of the Board in some o y man I know of with whom honest of me to say that you are just as frankly as agree- I feel at liberty to ex ments without the s ty o test possibi Just one at word on this ubject to express what is ave brought about an immense o absOlut our export trade; it cannot all be paid for in gold, increase nor in ft, by the'retu for its exi ume depen If these ore of our securities, so the trade in volnee upon the amount of credit we extend. eatly enlarged and are good, we insure our- selves against future disaster. letters. issension resulting. atural laws over which we really my theory of can exerci ou say in This is all repetition of former What we need to guard against is using this mass of gold to extend our domestic credits. So, in general, my view is that these foreign credits are far safer for our banks and for our country as a whole, than wild speculalion and huge inflation resulting from further additions to our gold, which are bound to To Dec. 2, 1916. Mr. Warburg. It seems as though to follow if we refuse to extend credit. a policy of repression is not only timid but will result,if the policy is effective, in development inevitably somewhat as follows: restraint rpeses; this means First, belligerent countries will poee upon imports of goods not necessary for war losses to exporters who are not dea tions, while mu- in mu n nitions makers will reap huge profits and get t Europe of As we graduall export trade. increase to our abroad the cost of all of ties We suffer their invec Hum and bend at a m at can gold bills, be gath part of And a our get rid reasonable limitations upon their government bond holdings ergies to assembling every dellar of d into the vaults of the reserve banks? the joram, undertake an gre cks and retire energetic campaign to national bank notes more by working the denominations of rapidly. 1Nou1d not his matter develop naturally eserve banks nte foreign on at home. the constructive .licy be to 1 and safeguard th the ex- of disorganized exchange, ade and curtailment of our golf urrency premium advances changes become demoralized concumers. ulk of the our paper money as you and I have frequently discussed, it seems we can put our country in an impregnable position by driving gold, not only into the reserve banks, but into the vaults of all member banks. I am tempted to illustrate my feeling by compering it with the position of his friends on shore a swimmer who is caught in a sea puss; shout to him and encourage him to bend if -3Dec. 2, 1916. Mr. Warburg. To to drown. every energy to swim against the current, he is bound with the current One cool head encouraging him to go along The policy which edge along toward shore will save his life. fellows,(and I regret to say those Solons of the Advisory you n effort to swim Council,)seem.to have adopted impresses me a g for us and will against the current, which will prove too str exhaust even the most "'powerful swimme . lead you to Don't let our disagreemon In this ma e behind the a of the suppose that I read any sin,ap.te u. It is a subn my mind. no-rd. There is nothing of at sort ject on 'thicb the bee' may will find out who was right. write me so frankly hand you would li would express you Hon. Feder , washing 1 M. Warburg, 'eserve Board D. C. some years hence you and best part of it is tht you noes me that were I on views just as freely as you December 6th, 1916. Dear Warburg: The enclosed copy of letter se itself. tion to do I would not have written him wit the Board an this Federal little rig progress. New York naturally The high call ra ee ju trouble to mak what takes place olume, you will realize when bills co f in a real crisis are that our means un drive If you will take the Bank more bills into t excee ve note ressing that I want to problem is really so impor contribute what ut an invitame copy of so, but he was good his memorandum to Delano explains d would hardly be effective imi s emergency action was taken to give reserve notes a US similar to e enjoyed by the Aldrich-Vreeland Faithfully Hon. Paul M. Warburg, '."17c1-4437-7-rekiNiZ3/40-411144:ALir, Washington, D. C. BS/VCM yours, December 13th, 1916. PERSONAL and CONFIDENTIAL. Dear Warburg: This is one of the days when out of my bile system and I as I understand the Chicago as the has Bank of New situation, i sf New York; its ex- w earning all ends. The Federal Re- day of its organization York since 4 n its power to contribute contributed everything that toward making little less Federa. Reserve Ba penses and nearly if not all serve good job of it. might ns well mak The Federal Reserve Bank of than one-half as large 1 wan a succ em dividing its invest- ments, sacrificing ion in the central market of the country vemy turh to subordinate self- ish and interest This is no for officers of because evidenc the Fe has been affor ed continuously. l Reserve Ban gold in vaults ac Bnnk of Chic to Chicago of of Eew York ulated by has of which At the present time, about $95,000,000 of note issues; the Federal Reserve about $4,000,000. their note iesue has the bank egaggeration not I presume the total cost been over $6,000 or t8,000; ours has probably been nearer $200,000. It is none of our business to criticize or interfere with the policy of the Federal Reserve Bank of Chicago so long as it does not affect our own affairs, but I find recently that -2To Hon. Paul M. Warburg. Dec. 13th, 1916. Chicago banks that have been in need of currency, particularly new bills, have fixed up some sort of an arrangement by wi.ich against New York exchange that comes to us through the Chicago Reserve Bank, they are getting through their New York correspondents Federal reserves notes of the Federal Reserve Bank of New York. 7.7y advices are not suffice tly complete thorough analysis of this matter, on the ground in New York), but I what as follows; w ich would have believe it is wo A Chica ve Bank of Chicago which checks on New York with are sent us and credite the Chicago Yedera serve Bank of Hese es a transfer of some kind on us to Chicag ter bank remits the trans- fer to its New York cor to us with the check Chicago; a.dent, say Bank Bi Bank B then comes d a re. eral reserve notes .t for, say, $100,000 of new Fed- omptly ships to Chicago Bank A. Further evi of the generous spirit exhibited by that outf reply to our recent letter about har- monious acti in regard to government bonds. ;" Chicago objects to the plan. I h on the part of been quietly watching these manoeuvers, not only Chicago but occasionally on the part of other re- serve banks that have been indulging in that time-honored pnactice of trying to beat New York., in some new scheme. Every now and then, it breaks out -3To Hon. Paul M. Warburg. Dec. 13th, 1916. Realizing that in these matters it takes time for the Board to take action, I am sending this private and personal letter that to you as a warning that"as, when and if" I get back to bank in New York, this sort of business is going to stop, if it means blacklisting those particular b antics of this kind. If I were in New York tify the Federal ReserveBank of Chic business with them of that ny, I would no- e, would do no more any kind and make it clea Conference just why we were goi being there, as I said above my grouch and tell you wha can be that indulge in when 1 get back to New Y e that posit the Governors Not give you the benefit of sure to happen as anything if this sort of thing contin- ues. After r is happening to is at any rate I hay Hon. Pa II. Warbur Federal Washington BS/VCM 4 ere to-day, you may wonder what ns that I am getting better - as I hope this letter discloses: December 13th, 1916. Dear Warburg: Some time ago, one of your letters ntained an inti- mation that favorable decision had been arrivd at in the matter ondent in of our application for the appointm London. I am just how in receipt dvices that ? y has rno.r Harding that the been informally advised verba e any position in this State Department does not matter and that the Reserve BoaT7 1 deal with it simply as serve Board is willing a banking matter. that we should corn dertake any busin This lea h woul situatio of New York, serve go ahe with the 'plan into op tion or not s as roposed but not to un- authorization by the Board. an absolutely impossible personally, as well as the Reo justifiable criticism if we should thout knowing whether we could put it d then finally have the approval of the Board with am sending you this letter,-wishing to be absolutely frank with you at all times in these matters,-simply to say that 'I am writing Mr. Treman on the subject to the effect that the informal advice of the Board with a string attached to it is not of a character that would justify me in doing anything further -2To Dec. 13, 1916. Mr. Warburg. towards completing these arrangements and that I believe the Federal ReserveBank of New York is entitled after waiting seven and a half months to a definite "yes" or "no" from the Reserve Board in response to its application r authority to appoint a cornespondent in London. This letter is sent to you personall because my as- sociates in New York may not agree am express- ing to them and it is a matter in which the bank o d take formal action rather than be dAi by me from De ver. As all questions :latter strikes me about as fol to give or withhold it business of the Re act the business. The duty of the Board is t once given, it is the go ahead and trans- s is started, if the Board in its supervisory York is d are eliminated, this eck t the Reserve Bank of New d business, it is the Board's course, to call their attention to the fact. duty, think owever, that t in the sformal way w think the I do not Board should give a conditional consent h it has in this matter and frankly I own very little consideration to me and my associates in hanging the whole matter up for over half a year. Why don't you cut the knot by approving the appointment, which is the thing to do, and then, as has always been the case in the past, have a frank general understanding about our 3 To Dec. 13, 1916. Mr. Warburg. policy which is ftexible and subject to readjustment as conditions justify* I. not like the evidence of distrust exhibited by the Board and believe that you would be just as impatient and just as disgusted as I am to be asked to do bsuiness o this character with a noose around your just as neck. You can get just as mad as I am abou this and write me frankly as I have written you s I 4a e been waiting some mpnths to get this out of my system where it has for more or less mental disturb Faithfully Hon. Paul M. Warbur Federal ReserveBo Washington, D. C BS/VCM responsible Denver, Colorado, December 15, 1916. Hon. Federalneserve Board, -eashington, D. C. Dear Warburg: You have not written me lately and I know y s and not ourings of because you are put out by mg recen dissatisfaction about the way y als have been behaving. This letter is princip s my satisfaction that .Germany has finally made a wove toy eace. as I pray it is, 2ngl world eith anything not listened t:: t. to realize that is is because you are well enough once If it is sincere, t face the civilized f the suggestion is to. a may have opportunity to I do not kaaa o may have an influence in the situatieo but let me ex/ ess frankly and honestly the following convict not only gro but from y observat What . out of my own thoughts on the subject, made abroad. France most fear is a termination of the war Which will not result in disarmament or Which will not insure so far as human arrauLlements can insure It, no recurrence of a similar kind. the war stops before one side or the other is beaten, the only real assurance of permanent peace will consist first, in disarmament and second, in a formal, definite understanding between all the great If 2. 2o - Mr. ,arburg. December 15, 1916. nations, including the United States, that dif' ences between nations will be settled without force and that ttlement, if necessary, will be imposed upon parties to dispute a combination of the neutrals. believe today that Germany could recover a prestige lost in this country art of the e if she displ ys a true willingness to disarm and to eai and enduring and binding league for peace. This peace devel ring on our future plans. c)11 and 1 should come to an agxe opportunity them frankly and try and Which should , policy of the Res System shoul ot be difficult, as to how the . e shaped. I cannot tell you howmith you ,%nd how much I need it. If yo ould only break away for a week and spend a few days with 1 wo rejoice beyond ression. In any event old man you must never rget what 1 sa in a former letter - that differences of opinion, me, us are never personal, are mostdifficult to adjust by correspondence and nothing that you could write me, expressing your views Which may be opposed to mine, would ever give rise to any personal feeling, so write me frankly in reply to mg recent letters, but better still come out here and see me if you can. http://fraser.stlouisfed.org/ BS/CC Federal Reserve Bank of St. Louis With best regards and success to the peace move. Faithfully yours, Denver, Colorado, December 19, 1916. Dear .darburg: It was a great pleasure to get your letter s the 15th. I had appointments both at the doctor's and dent t s today so have had no opportunity to dictate a rely you a careful to read very th one in 'a day or two, Which I want tfally and hat I have never felt the deliberately at home. Let me need so much of a good vie' The boys get here this wee e-going immediately away up in the mountains t will be back proba spend the Holidays and I the first o, nuary ) start the boys back to school. Please give m same to and e on my man; ry best to LI Warburg and Betsy, and the e thought I have every morning ng When I see your picture in ,Jagnificent silver frame resser. Faithfully yours, Denver, Colorado, December 21, 1916. Dear 's,arburg: This is replying to your long letter of th 5th, which I have read with great interest and agpreciation. were most satis- that t Reports of the conferences indicat other sid factory and this, of course, I get from the yOu will let me make a few frank comments, this matter CO ey to Governor Harding with your unfailing tee erienced at the Governors' One of the difficulties rankness and plain indicatiOn Conferences has been a lack mf n t-ep gether on the basis of of views by the Reeerv ther put in the position of be- a partnershio, but t ing school boys work s with unexpres All lack of nfidence. will rea ze that the gov on practi certain amount of interest, corn- work wi teachers, who bined at eacher, or a board of school under a schoo this can be banished ors as a whole are forever if the Board 7 exceedingly well informed they discuss, and desire to establish a work- t,tters ing arrangement with the pupils and tutors. criticism, and, to be frank, a certain Reeerve Board as partners rather than as between I do not say this offensively or with any hard feel- ing whatever, but it is undoubtedly a this growl of twelve men fact that technical bank detail kne.7 infinitely more about the subjects they deal with, as a rule than do the members of the Board: ihereas, on the other hand, the members of the Board have an infinitely better general point of view of the whole system than anyone of the governors can have. The 2. To - Mr. Warburg. December 21, 1916. advantages of the Board's general supervision and of the governors' technical knowledge can be made the strength of the system, if the two bodies work together, and they can be made they are kept apart. the s .. s Governor Harding is just th$ .._ of discord if n to handle this situation right and if he will start everyone of t conferences with a good, plain talk, directed rather to H I i . t than towards cracking the of authority, h 4 himself dri. Ap a 12-horse Whip team of se tell hi this along with unexampled loyalty and a le assurances from me that he ha ahead of him with certain Ti I think you know that no one success if this policy can be lirsu understamis the situat an better, or so well, as I do. It is a deli of those folio f the affection and loyalty Whic ugh to send me. ally been hp 6 quite ill, but is very def°111111' ,.,ut the whole amt of clearings. important ttters; one c are faced with three . the problem of charges outlined in the Board's other circular No. serve banks I am in constant is immediate credit of checks on Federal Re- end the third is the movement in the American Bankers lAso- ciation to destroy the work we are doing. I am very trongly and send you quite on the subject, opposed to the plan of charges outlined in 901 confidentially copy of a letter I aLn writing Hendricks which please keep for your private use. As to Seay's re- port, I must take time to study it and prepare a memorandum, which I will rir A 3. December 21, 1916. To - Mr. Warburg. send yo I think after While the object that Seay's verbos shortly. report aims at can be accomplished without forcing the System to risk the dangers that are really inherent in On Reserve Banks for exchange purposes. icted use of checks the unre -All wri e nothing more until I study his report further:. About acceptances --I am sorry ot to agree re views you express as to the way the s evidence ' -arb in every single pa overlook Banks i Riese thout any ob the law, that rinsic value t and in fer to Wh is never the New York B would develop so of lack of courage e Now York Bank was to my mind right at a time When the p plies If the to will all run off in a few The 312,000,000 of bills that you r it mature ed. are being will never amount to anything. up bills a bit, the Federal R bill held by you in the ry and we begin to pile Board gets timid every time the weeks and really, N a the facts ;hat every single ood as gold, will be paid the instant for renewal, that everyone of them comey are infinitely better in quality, in liquidity almost all the commercial paper jhich you re- off in fact and that this recent transaction by what in former days you and I have hoped that we could exhibit both here and abroad and prayed that we really amounted to something. I really think you are mistaken in your view of this matter, as well as your view in regard to the length of the paper. instance, handles only short paper. Yon will find a negligible quanitity of 60 and 90 day bills ordinarily in their The Bank of France, for portfolio. The Bank of Lngland 4. December 21, 1916., To - Mr. Warburg. does not discriminate at all against short paper Which comes ii through the bill houses. In fact, it ver;j frequently is short paper and I should a sudden turn in Say ti ordinary times is generally short paper money rates forces up the rates necessar houses carry their portfolio and makes it on which the bill on day to day 1 or them to dump o agree witn you their bills into the Bank of Ingland. about a-differential. out of deference did recommend that it be ad n New York ut against my personal to your views .judgment. Nov, the real trouble with ket in New York, .kt does not ither as to rates, maturities arise from any policy of practice of New York banks Or methods; it arise own bills.. Once they for they will persi once, the It is through rate situation would f itself and no discrimination would be needed or justified. that acceptors their own acceptances, the trouble ir1141abt th&J own acceptances. cioally, let their bills go to the market. seem to think it is a reflection on them to originates You will observe that the rience, viz.- Morgan, Brown, Heidelbach prin- The now fellows at the business have their bills offered. is because they are banks of deposit instead of fear it per- everything bearing their own ac- suaded, educated or take car were That acceptance houses, and I will take a lohb time to overcome the trouble. Instead of adopting your suggestion in regard to discriminating education, against maturities, by all means let us undertake a campaign of 5. To -Mr. s'Arburg. or anply pressure, if necessary, towards forcing the banks to discontinue December 21, 1916. the practice of buying their awn bills, and I am sure that most of our difficulties will disappear. Wont you consider t carefully before urging Treman to undertake a course which I am,qui convinced will not be effective because it misses the mark. Now about this exchequer bill opi ode, don't 1 wrangle over this because that water you realize that you e over the dam. and your as suppose hear the truth from your friends, or read it in the pre matter has created. Ou and I sal impression that the I blame Davison ly for what happened, but after hearing the story from the Board could have met the situation by stet ies of foreign governments in this market were two en those- governments and our bankers and inv rd did not propose to interfore, and that tors upervisory p directly sure co r member banks would be exorcised troller at ism and obse in the future as in the past, to in- co of the law in the way in -Which invest- hat the Board got outside of its baliwick pnd aroused suspicion as to the sincerity of its expressions. In other words, it has been universally whispered about that there is something behind it all that has not been explained. i can appreciate that you hi no difficulty in convincing those newspaper men that the Board was in a hole after Davison's call, but don't forget that newspaper men don't always say all that they think. (1, 6. - Mr. ,;arburg. December 21, 1916. The danger in my mind resulting from such affairs is that the Reserve Board would got itself into such a situation that men of the country will ignore them and the Intl ce of the Board, in- stead of being an effective one, will be rather t critic without the important of a captious influence. So much for this. I have writte I always do and know that you will take it in I an glad you spoke to Ire ody about a new Deputy more progress is Governor and cannot for the l' stand wk, not being made in New York on this Some way or other, punch does seem to be lacking eman a bit, both because he is new and becaus posii.on for one to fill tem- porarily any way. evelops, i would want him to come out here for a plain talk coveria, various ..0011.11 unate to be obliged to correspond. must never underrate Jay; his abilities, his mental power and hisortance in-the and a re t for that h k. I have q Very deep affection for him piece of his which you would feel in a re along side of him. His clief trouble is i ability to organize and coordinate his work and to make the other fellow do 90% of it. I have had some very frank correspondence with him lately and I think only his illness prevented your seeing the result of it. I ay. not going to refer to the drafts of amendments in this letter, but prepare separate memoranda on shortly. On the whole, each one, Which I will they strike me very favorably, send forward but i do hope 7. To - Mx. 7arburg, December 21, 1916. they don't reach the committeDstage until I can send you a feu sugges- tions, just to show you that my band is not entirely out of it yet. In general, there is one danger to fear f Congress and that is that they will den any amendment Which opens t door to expansion or inflation. My letter to Delano, v)hic' I hone inc with your approval, was intended to suggest the impossibility of inflatio Federal Reserve banks and I fear that the argument , nearly as ng as it might have been. oust let the Board rely upon In pushing for amendment their own efforts alone. not always agree among its own fore Glass meMbershin and when fferez associates, an amen is necessari tion behind the eff by calling in ir bankers to o stir him up, write Mc spect my opinion, or convinc that they are cerned, uence. 1 can .nwen and their lost- Get every pound of ammunieserve Banks and important you think it advisable for me to really does now and then Show some re- least has in the past, and I think he is est ones. So far as the President is conass convinced first aid McAdoo to join him, you should have no difficulty with the White House. it This is a very long letter, so take it home, mull it over and send me a reply, only When you have got plenty of time and wont be burdened.. Best regards from, Yours sincerely, Denver, Colorado, December 22, 1916. Dear Warburg: I have been studying over the proposed ans nts that you were good enough to send me and find, as you ma7y, imagin ich is not avail- require a good deal of study and in some able to inc here. They are all distinctly in the righ the memorandum, commenting on each a'- herewith must only be underst that they really .a -ection and .tely, Which I ii sending ssion of views which I am hopeful will help. Some of them strike so far as language i ittic crude, or unfinished, they have not been subjected yet to th May I also re Board will b efforts All oth t. o be before - that I hope the possible outside of its own support of the program of amendments as finally adopted. comments are in uded in the enclosed memorandums. Very sincerely yours, Hon. Paul M. 'Jiarburg, Federal Reserve Board, Washington, D. C. ES/cc EhCs. Denver, Colorado, December 24, 1916. Dear Weburg: Yitre, 'sf the 19ta is just received. Did and I were not otiennT exchanging Minim are working compliment ou oyf -klitOW ver mutual craakv kna:i those cranky along AL- rvations of mine sometimes h 1;1 a time ,giving you a ferent point view, just as yours do mi ;hat you so.' about th8 Trust Companies interests Ira the first p very. much. Ou know we kes, of this in New or very close eptance accounts hankers; as to nf tho track private dingly moderate. As to the eally do not think the time has arrived as yet 11 on thim score, except possibly bank i e a little personal discussion with oper officer of the Guaranty and the Equitable of such a charae' it uld have the a ng of a New beg]. for the ranee of being merely a routine inclutrv at the Beyond that I . business, all objects to accomplish in developing this of AliCh cannot be accomplished dealt with in their order of importance. complished is to develop volume of to at once, and bill they must be The principal object to be ac- business, even though it seems at the make one or two or throe acceptors a volume means that every avenue would not 6o just nov. reason:. We have a good many outset certaimmy bit tophoavy. Developing through which credits can be opened in 2. To Mr. Warburg, December 24, 1916. foreign countries should be employed to the maYimum at the outset. We must not regard it from the standpoint of the figures of any other acceptor so much as from the standpoint of other 4 is transpiring at the Tng minute the end of the lino where these bills origite. impression gets abroad in South America, and n iOularly id the East tors are in any where communication is so slog, t being restricted in openin, , it will chi 2s development as sure as fate. The second object to 3ng d is to develop extensive machinery abroad, and, ng its development, to use ItAdoo's [4-ia:lession we mus w curry Our horse. IrLst Co. has b any of the othe en institutions. ness of tFe Go u. I 'aou You iihink South Amen ju t recognize tha they almost al e third dev satisfac latic in that The Guaranty direction than .y are handling the bulk of the busi- Banks and a vast deal besides, and ding anything to Check that growth. 'f you look at the bills we get on the Guaranty, come through with good endorsements. ment, Which comes slowly but recently very increase the number of accepting names. astounded to see what a growth has taken place in I am the last three months. Yacility with which bills are drawn and negotiated in the East and in South America helps this development immensely and Guaranty again is doing yeoman' S work in the that regard. The fourth development is to straighten out the man:: kinks and irregularities in our own New York discount market; with this we must 3. December 24, 1916. To Mr. -,arburg. I don't believe be exceedingly patient during those early years. yo realize how effectively market when the time the New York bank can control the local cones to do so. I have endeavored to naze the evelopment in its process o sons for sugesting logical sequence as it appeals to me, and mu tions named at that either nothing be done about t present or that the matter be dealt with as one o attempt to an not to arouse commenting and tine so as y pressure or excessive rate discrImm judge that the Guaranty's From last year's expe in aficount is now at a shortly decline Pril to the abnorma;ly high that the increas id that the institution is in price of cotton history. better shape t perusal the Minutes of the Conof '2edera1 Reserve Agents. re ks and hear fro.' 'ther sources that the impression made upon nts and later , the / charac 4 I was delighted to read Harding's of 1 the governors was most favorable as to the p that he was disposed to assme and the vmy in which he had handled matters. A While I do not agree with everything he said, I do heartily agree with his expression that this System can be run without arbitrary direction from the Board, and on the other hand, without lack of coordination if we will get together, discuss matters frankly and agree as grown up men as to the policy of the system as a whole. Things look pretty bright 4. To Mx. ':,arburg. December 24, 1916. to me for the future and I hope you feel equally encouraged. We are off to the mountains hear from me for about ten days. tomorrow morning, so you wont Best regards to you and all your pals. Very sincerely yours Hon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. COPY FEDERAL RESERVE BOARD WASHINGTO N January 11, 1916. Dear Governor Strong: Thank you very much for sending me a copy of the questions that you asked your English friends, directors of the Bank of England, and for sending me a copy of Mr. Grenfell's reply. Then you go over to London, I hope you will further investigate the matter as I do not think that the replies are quite to the point. It is not the question of who is right or wrong, but it is important that we agree concerning proper principles. . I can well see from Mr. Grenfell's reply that, in answering your questions concerning finance bills, as the questions have been put by an American, he has in mind American finance bills. You may recall that, concerning those, I have always stated that I thought they were treated differently in London from finance bills of the same character drawn by a country that had a proper finance system. In the past, in the United States, there have been no commercial bills of exchange which could flow from one country to another, and, owing to the fact that large crop movements had to be anticipated, the finance bills have played a legitimate role. But, as I told you, a bill drawn, for instance, against collateral of securities by a German banking or brokerage firm on English bank- (2) ing house was not considered a desirable bill in years gone by, even when political conditions were still entirely normal between those two countries. Reading between the lines of Mr. Grenfell's letter, does he not say, as a matter of fact, that "finance bills drawn in the early part of the year have rarely been criticized, as it was felt that the same would be disposed of or replaced by Wheat and Cotton Bills in the fall. If, however, bills came forward in very large quantities at a time of wild speculation on your side, the bank has some- times issued a private warning to the market that it disapproves of same", etc., and later on he says, "If it considered finance bills for speculation were coming forward on any house in too large quantities" about the same course would be pursued. That means that, essentially, they take bills which have some commercial foundation, and it leads to the question, .what would they do if they were faced with an issue of 425,000,000, 50,000,000 or 4100,000,000 of paper drawn bya foreign government on British banks. Would they not feel - first, that the commercial character was lacking (particularly if there were agreements to renew) and - second, that there would be too much on single names? Would they not consider these bills under the head of something like speculation? Orcourse, just at present, these men over there, in formulating what might be considered the normal attitude of (3) the Bank of England, subconsciously will be influenced by their own abnormal conditions and requirements. But, be- fore you and I shall be through with our jobs, I hope that normal conditions will prevail again in Europe, and I am confident that I shall be able to prove to you that the Bank of England will object to $25,000,000 worth of bills drawn by the Government of Roumania dh British bankers and that they will stop these bills from going into the Bank of England to any large extent - not by a regulation, as we unfortunately have to issue, but simply as Ar. Grenfell describes it, by indicating that it would not favor these transactions, I feel so strongly about the principle involved here as one which Federal Reserve Banks should observe that I hope that when you are in England you will get all the light on the subject that you possibly can. Thanking you for your letters and hoping to receive some more, I am Very truly yours, (Signed) Benj. Strong,Jr., Esq., Governor, Federal Reserve Bank, New York, N. Y. Paul M. Warburg, Blue Nile ^sage . NL se three symbols Io check (number of this lea day message. Othercharacter is indicated by the I appearing after the check. WES CLASS OF SERVICE Day Letter TEL AM NEWCOM B CARLTON, PRESIDENT GEORGE W. E. ATKiNS. VICE-PRESIDENT BELVIDERE BROOKS, VICE-PRESIDENT 3IZB 404:40" I6 Y" K WASHINGTON DC Blue Night Message Rite 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. BAUF.4," 1106A JAN 15 191.6 44" NJ STRONG JR FEDERAL RESERVE BANK NEWYORK YS ROOM FOR OUR STAR-CHAMBER BOARDER.IF YOU HAVE TO T SEVENTEEN El GPTEEN H SUGGEST YDU GO THERE LAST HALF YOUR SMUCH AS SOCIALLY WE ARE BUSIER DUR ING THAT TIME LOOKING - TO SEEING ,YOU. SYMBOL Day Message FEDERAL RESERVE BOARD WAS January 29, 1916. Dear Sirs: Permit me to introduce to you the bearer of these lines, Governor Benjamin Strong, of the Federal Reserve Bank of New York. Mr. Strong is about to visit England and some parts of the Continent for the purpose of making some preliminary studies as to the best course ultimately to pursue in making arrangements for the Federal Reserve Bank of New York, and possibly some of the other Federal Reserve Banks, in opening connections in Europe. Knowing the valuable services rendered by your esteemed firm to some of the GovernLent banks for which you have acted as correspondent, I,have taken the liberty cf giving Governor Strong these lines, confident that you will be able to give him most valuable advice and hoping that possibly this preliminary conversation may lead to some connections being established between your own bank and the Federal Reserve Banks. Bespeaking for Governor Strong your courteous reception, I am, dear sirs, very faithfully yours, ei( N. M. Rothschild and Sons, London, England. FEDERAL RESERVE BOARD WASHINGTON January 22, 1916. Dear Sirs: Permit me to introduce to you Governor Benjamin Strong, of the the bearer of these lines, Federal Reserve Bank of New York. Mr. Strong is about to visit En:aand and some parts of the Continent for the purpose of making some preliminary stud- ies as to the best course ultimately to be pursued in making arrangements for the Federal Reserve Bank of New York, and possibly some of the other Federal Reserve Banks, in opening connections in Europe. Knowincrthe valuable services rendered by your esteemed firm to some of the Government banks for which you have acted as correspondents, I have taken the liberty of giving Governor Strong these lines, Confident that you will be able to give him most valuable advice and hoping that possibly this preliminary conversation may lead to some connections being established between your own bank and the Federal Reserve Banks. Bespeaking for Governor Strong your courteous reception, I am, dear sire, Very faithfully yours, Messrs. Hope & Co., 579 Keizeragracht, Amsterdam, Holland. FEDERAL RESERVE BOARD WAS January 29, 1916. My dear Sir Felix: Permit me to introduce lines, Governor to you the bearer of these Benjamin Strong, of the Federal Reserve Bank of New York. Mr. Strong is about to visit England and some parts of the Continent for the purpose of making some preliminary studies as to the best course ultimately to pursue in ,making arrangements for the Federal Reserve Bank of New York, and possible some of the other Federal Reserve Banks, in opening connections in Europe. Bespeaking for Governor Strong your courteous reception and availing myself of this opportunity of sending you, through him, personal greetings, I am ,Very f ithfully yours, Sir Felix Shuster, Union of London & Smith's Bank, Ltd., London, England. FEDERAL RESERVE BOARD WAS January 29, 1916. Dear Sirs: Permit me to introduce to you the bearer of these lines, Governor Benjamin Strong, of the Federal Reserve Bank of New York. Ir. Strong is about to visit England and some parts of the Continent for the purpose of making some preliminary studies as to the best course ultimately to pursue in making arrangements for the Federal Reserve Bank of New York, and possibly some of the other Federal Reserve Banks, in opening con- nections in Europe. Knowing the valuable services rendered by your esteemed firm to some of the Government banks for which you have acted as correspondent, I have taken the liberty of giving Governor Strong these lines, confident that you will be able to give him most valuable advice and hoping that possibly this preliminary conversation may lea to some connections being established be- tween your own bank and the Federal Reserve Banks. Bespeaking: for Governor Strong your courteous reception, I am, dear sirs, 2 Very. faithfully yours, (CCuGb_,(0-th Messrs. Samuel Montagu and Cc., Sixty Old Street, London, England. FEDERAL RESERVE BOARD WASHINGTON January 29, 1916. Dear Paul: Permit me to introduce the bearer of these lines, Governor Benjamin Strong, of the Federal Reserve Bank of New York. Governor Strong is leaving for Europe in order to find, in a preliminary way, a basis for connections which the Federal Reserve Banks will ultimately have to establish in Europe. He in- cidentally will want to inform hi self about financial conditions in England and on the Continent. Mr. Strong is a personal friend of mine, who, in the same spirit as I, joined the Federal Reserve System for the purpose of rendering a National service, and his unselfish co-operation has been of the greatest help in the development of the System and to me, personally. I bespeak for Governor Strong your friendly reception and any courtesy that you might show him and any advice that you might give him in his errand, I shall consider as personally rendered to me. Incidentally, I am happy to profit by this dportunity of sending you most cordial greetings both from Nina and myself. Hoping both you and your wife are in the best of health, with fondest regards, I am Alwa Paul Kohn-Speyer, Esq., 18 Fenchurch Street, London, E. C.; England4 faithfully yours, FEDERAL RESERVE BOARD WAS January 22, 1916. My dear Sir Ernest: Permit me to introduce the bearer of these lines, Governor Benjamin Strong, of the Federal Reserve Bank of New _York. Governor Strong is leaving for Europe in order to find, in a preliminary way, a basis for connections which the Federal Reserve Banks will ultimately have to establish in Europa. He in- cidentally will want to inform himself about financial conditions in England and on the Continent. Mr. Strong is a personal friend of mine, who, in the same spirit as I, joined the Federal Reserve System for the purpose of rendering a National service, and his unselfish co-operation has been of the greatest help in the development of the System and to me, personally. I bespeak for Governor Strong your friendly reception and any courtesy that you might show him and any advice that you might give him in his errand., I shall consider as personally rendered to me. Incidentally, I o4 happy to profit by this opportunity of sending you most cordial greetings both from Nina and myself. Hoping both you and Mrs. Cassel are in the best of health, with fondest regards - also for Mrs. Jennings - I am Always faithfully Sir Ernest Casel,K.C.M.V.C.O.,etc., Brook House, Brook Street, London, W., England. ours, FEDERAL RESERVE BOARD WAS January 22, 1216. Dear Dr. Vissering: Permit me to introduce the bearer of these lines, Governor Benjamin Strong, of the Federal Reserve Bank of New York. Governor Strong is leaving for Europe in order to find, in a preliminary way, a basis for connections which the Federal Reserve Banks will ultimately have to establish in Europe. He in- cidentally will want to inform himself about financial conditions in England and on the Continent. Mr. Strong is a personal friend of mina, who, in the same spirit as I, joined the Federal Reserve System for the purpose of rendering a National service, and his unselfish co-operation has been of the greatest help in the development of the System and to me, personally. I bespeak for Governor Strong your friendly reception and any courtesy that you might show him and any advice that you might give him in his errand, I shall consider as personally rendered to i-Je It may be that Governor Strong can discuss with you some of the difficult problems that at present puzzle both you and us, and if some satisfactory arrangements could be made between your great institution and our Federal Reserve Banks concerning certain information of actual operation, I should be only too happy. cf: (2) Inasmuch as the problems of the Federal fleserve Ban17. of New York and wor own are very much alike, I should be extreme- ly grateful to you if you would permit Governor Strong to acquaint himself very fully with your methods employed in deal ing with fo_.eign countries, as I am sure that nobody will be able to give him as useful advice as you. I assure you in advance of my sincere appreciation of any help or courtesies that you may be able to :ender to Governor Strong. Incident:41y, I am harpy to profit by this opportunity of sending you, through Mr. Strong, most cordial greetings. Very f/ithfully yours, (44' Dr. G. Vissaring, The Netherlands Bank, Amsterdam, Holland.. FEDERAL RESERVE BOARD WAS January 29, 1916. Dear Sirs: Permit me to introduce to you the bearer of these lines, Governor Benjamin Strong, of the Federal Reserve Bank of New York. Mr. Strong is about to visit England and some parts of the Continent for the purpose of making some preliminary studies as to the best course ultimately to be pursued in making arrangements for the Federal Reserve Bank of New York, and possibly some of the other Federal Reserve Banks, in opening connections in Europe. Knowing the valuable services rendered by your esteemed firm to some of the Government banks for which you have acted as corespondents, I have taken the liberty of giving Governor Strong these lines, confident that you will be able to give him ost valuable advice arid hoping that possibly this preliminary onversation may lead to some connections being established between your own bank and the Federal Reserve Banks. Bespeaking for Governor Strong your courteous reception, I am, dear sirs, Very fthfully yours, cc_e_,.tAta Messrs. Lippman, Rosenthal & Co., Amsterdam, Holland. ,PIA:e tf ft/ EIGHTEENTH STREET I1704 (a44,11 414 Puale141,'Zvpir/UPr itee, eZ7 npuzz; AtAA r 4 2ritlkeeA-, r*e411 C y2e_Lati ,/9fl'ei,e2 A,/,e/a e..Pce er,irc PidAtill Ad yea 2414 1 .44(1 ?1,U 00.114. 46044. 4-4,-- d./1701, AWA- 11;,,,i," - /0 4.4 freff-ot Aoto4e-i-- Pf-4 cY (444.6i, RA-aee 4) 4-6,e d 0,e/ g azatti tweet v22T?,;6 P/1;C6' -7 Apt-e-t, Avki-0 teA. i/ f si ae,f/eaA- e A ete.1. )1"1 P6t,t,t-4 y r fre- kt,te)t-c q p-- 7/PA>'e'.4- 11,X 11%"??2"/ vy,fitzvz ..u,66eate,e ettI ii-et-frv' .pe6ad Copy of handwritten letter 1704 Eighteenth Street April 13th 1916 Washington Dear Ben Strong, Here's a warm welcome to you! After all your surely varied experiences, I trust that you are glad to be home again, + I trust it will not be long, before we have an 8 - 10 o'clock breakfast, at the above address, so that I can hear all about your wild doings my wild husband stops his Spanish flirtations, in Buenos Aires tomorrow, to make new conquests in Chile T Peru, before coming back on May 9th. I never quite realized how far away South America is! I'm afraid I'm not born 66 be heroic! It was so nice of you, to think of us, [?] you were living, at the rate of 70 - miles an- hour, + I sent your last, interesting letter - quite unconditionally - on to Paul, hoping that it will reach him, when he gets to Callao. Knowing how busy you will be the minute you step ashore - if not before?I shall add no more than all "Itm migtty glad your back:" + my cordial greetings, from Yours sincerely [signed] Nina L. Warburg I FEDERAL RESERVE BANK OF NEW YORK Copy Translation 0. 1027 Prepared by. . TELEGRAM Depart' Interc Check by.. 19 Code used O. K. FEDERAL RESERVE BOARD WASHINGTON 9/6 May 10, 1916. Dear Governor Strong: I have your letter of May eighth, and thank you for the same. I have decided not to go to White Plains this week-end because I have agreed to be in New York on Monday, the twenty-second, to attend the dinner to be given by the Economic Club, so I expect to e there from Saturday, the twentieth, to Monday, the twentysecond. If meanwhile you find an opportunity of com- ing here, I shall be only too glad to ..velcome you. Since ely yours, 1. Benj. Strong, jr., Esq., Governor, Federal peserve Bank, New York. RIVE DERAL_ RESERVE BOARD WASHINGTON givbelow ioereby confirmed. tele .4ssistant Secretary. May 13, 1916. Benjamin strong, Jr. Federal Reserve Bank, New York City. Expeot you for dinner tomorrow. ur room is ready. PAUL WARBURG. FEDERAL RESERVE BOARD WASHINGTo 4 une 7, 1916. Dear Mr. Strong: I have your leZer of yesterday and am sorry to learn that your back is bothering you so much. Mr. Delano, Mr. Harding and I will come to your apartment in Park Avenue on Monday morning at 10:30. If my time and engagements permit, I shall come in during Saturday and 84iday and cheer you up. With best wishes for your back and for the balance of your soul aid body, I am With kind regards, Since 1y yours, Benjamin Strong., Jr., Esq., Governor, Federal Reserve Bank, 903 Park Avenue, New York. FEDERAL RESERVE BOARD WASHINGTON June 16 1916. Dear Governor Strong: Thank you for your letter of th-.9- fourteenth instant.- / Mrs. Warburg gives me the most/Cheerful accounts about you, so keep it up./ I expect to go to New York this afternoon, and shall look you up either Sunday or Monday, or both. Delano is going with me, and on the way I shall try to work out some of your Bank of England conundrums. Looking forward to the pleasure of shaking you by the paw, I am Always si c rely yours, /11R,f-Benj. Strong, jr., Governor, Federal Reserve Bank, New Ycrk. 7 FEDERAL RESERVE BOARD WAS June 22, 1916. Dear Governor Strong: Just to keep you busy and to keep you amused, I send you the enclosed. Mrs. Warburg telephoned you are getting that she saw you and that fat( With kindest regards, Sin erely yours, Benj. Strong,- jr., Esq., Governor, Federal Reserve Bank, New York. Enc. FEDERAL RESERVE BOARD FILING INIFYL WASHINGTON 1916 June 27; 1916. FEDERAL RESERVE BANK Dear Strong: I have your letter of June twenty-sixth. You say that you want samples of the currency issued in Belgium during the occupation. Are you quite sure that cancelled currency would not do just as well? Uncancelled currency will either not be obtainable or will have to be bought at its actual face value, and that may be a very expensive operation. Delano told ma that you "escaped" with him yesterday and went on a spree. I hope you enjoyed it, but you ought to get a spanking, and I am sorry that I will not see you before irou leave so that I could apply it in person. I had a very satisfactory lunch yesterday with Nash and Frew, who are now going to definitely put up the question to their counsel and their directors. So far as they are concerned, they are ready to take the jump. I an de- lighted with that and have no doubt that they will get it past thei directors, the most obstreperous one of whom I met in the morning and, A I hope, straightened out. (2) With fondest regards, Sincere X-c,cfr Co LPL Benj. Strong, jr., Esq., Care Federal Reserve Bank, New York. yours, clua7 le; ,,,i(Jr:.67,-, 1704 EIGHTEENTH STREET 64/;,Gr Ck /Lret- .1.6 4(er2/ a./ 6V-a-t-t,Z ,4fr.te ,4-erylf 471%16, /(7 ,47),(( , iitf74i _etNee.,_ el6eA,u,7 / AT 0:e (7-AG _e-K.er /tit, 1-r-cey 74./ tert,e4/ -ocke ((/iee lece.f/LL. c(12f 6e41/1' -(q}? to( A _4. eff i-tyrri-4/4 e)-r ,o/2iv-4 CO1- /49) e.(061 7 ,-(ve 4 4- iLd/2-e-4A/ --t1 ;rt/ ay dut-ee eire-7 -e.r/ivueee--'4 rre>At. /etr-WeA77 1.7 (orat/ 107 a)-47Aya 71ce-r_ 4 kia.46.,,,,,fr_ coe-, 4a4,,/ Zi-K,ow,e-./^/vey664_ 1/K-e:4 7 pP-r-fzi 4/1/-7 a,te a- /4' 1,4/f 6/10,1eKire,-- 7-"z7 eJ/2,661- 4-tX Act "eZ . 44/(e Wa-/- . a/y "--ftte 71,(14e 46. --e_a7 tr./ ((ite rere pAcvdo-/L haiz ,z,_" 6,;, 44444 44_ pf-tt( _ A/6-eid Lt-/ -/7 71, pf-t, -Xeci itabf at- t f1 er-i6c6, W tL /0-01 6r-e,r a--4 4t1,fte It ((/),)74" /tit eit-ct;4, a.tci /itce)-1 $4<,64_ e7"°4-`-e : k'''z-e--e 7(42?(' ke-/v c6A/i:tL,/' er-64,,L FEDERAL RESERVE BOARD WAS 1-IINGTON June 29, 1916. Dear Strong: I hope these lines will reach you at Denver and I hope that you got there without too much fatigue and that you are pleased with your surroundings. As a first greeting I send you a copy ofaletter which I received this morning from Mr. please you. Goff at Cleveland, which will We must now secure at least one letter of this kind a week. We have not yet heard from Mr. Frew and I wonder what they did yesterday. I note what you say about Belgian currency and I have dictated a letter to my brother today and have inquired what the cost will be for cancelled or uncancelled notes, and shall let you know as soon as I hear. We have a group of Governors here today, who are with Delano and Harding about clearings, later on at and I shall conferring meet them luncheon. If anything interesting occurs, I shall let you know. Now keep well and get fat; do not worry, and swallow raw eggs, one every half minute. With fond regards, I am Always cord ally yours Benjamin Strong, Jr., Esq., Care Dr. Oake's Sanatarium, Denver, Colorado. THE CLEVELANID TRUST COMPANY Cleveland, June 27, 1/16. Dear Yr. Warburg: Absence from the city has delayed an earlier acknowledgment of your letter of June 18th. I al greatly o- bliged to you for sending me a copy of your Atlantic City addresc, which I read with great interest and profit. For the most part I agree with all you say with regard to the desirability and duty of state institutions supporting the Federal Reserve System The matter of applying for membership has receivedcareful consideration by our officers and directors and I am very pleased to say to you in confidence that, in my opinion, such action will be authorized before the close of the year, possibly sooner. With assurances of respect and kindest regards, I am Very truly yours, (signed) F. H. Goff. Eon. Paul M. Warburg, Federal Reserve Board, Washington, D. C. FEDERAL RESERVE BOARD WAS July 6, 1916. Dear Strong: I thank you for the telegram which I received at White Plains and for the word that I received this morning. I am glad to see that you are getting along. discouraged. Donl,t get I have been, myself, in similar surroundings some years ago and I know that it takes some time to get used to them; but after awhile you will find them most peaceful and will not have any difficulty in being perfectly happy in your idleness. I thought you would be pleasaito hear about the Corn Exchange bank and therefore sent you the wire last night. I had another talk with Mr. Frew and Mr. Vaughan, one of their directors, on Monday last and they arranged with Mr. Jay that they would try to push through the application in record time. The New York committee passed upon the same yesterday and Broderick is there today and I expect to hear from New York every minute. I am very anxious to have the thing settled before I leave for my vacation. I hope to push it through tomorrow. I had a nice letter from Jack Morgan and append a copy, as it may please you to read it. I shall be in New York Monday and Tuesday and shall try to get in touch with Sabin and see what I can do. /(t kt4,e /4 0 (2) Our amendments are still hanging fire and I am somewhat disturbed over the outlook because the shipping bill may create a situation where our amendments may possibly suffer. But I hope we may be able to avoid this pitfall. Apparently trouble will be You were right about Mexico. avoided, which is a great blessing. My son left yesterday for Pagosa Pass, Colorado. therefore in your neighborhood. He is He will be on his survey trip there for five weeks and maybe he will come across you or you will come across him before he returns. The family is well and happy and we talk about you often and strange to say,-kindly. I suppose that New York advised you of the talk we had here with the Governors about the joint selling of Government bonds. They are in agreement now but the difficulty is that the market has now gone to pieces. I do not think that we can do anything until either the Government has sold its bonds or has put a quietus on the apprehension that it might contemplate to sell bonds. Without more for this time, except best wishes and most cordial greetings, I am Always s Benjamin Strong, Jr., Esq., Care Dr. Oake's Sanitarium, Denver, Colorado. rly yours Ce-ca FEDERAL RESERVE BANK OF NEW YORK July 10th, 1916. Dear Strong: I am here for the day and have had a little chat with the officers of your bank. My object in coming down town to-day was because I wanted to lunch with Charlie StL.,You may be pleased to learn that I think things are moving favorably in that direction. We talked for an hour and a half, went through the whole business with much frankness and I shall be much surprised the outcome is not a favorable one. if It may take a little time and, of course, unforseen things may happen that may give the matter another twist, but as it was left to-day, it looked pretty good to-me. I thought you would be much pleas- ed to hear this. I had a talk with Frissel, where things look less encouraging. He wants to come in but is bothered by his small stock capital and is afraid that increase might have the effect of bringing too much of his stock into the market. He evidently had some talk with the Chemical National Bank people and Porter gave them information which had a discouraging effect in this connection, but somehow or other, sooner or later, I think he will come in. FEDERAL RESERVE BANK OF NEW YORK -2- Benjamin Strong, Jr, Esq. 7/10/16. Had a talk with Kelsey of the Title Guarantee and Trust Company and set him going. We shall have to see what ill become of that. Jimmy telegraphed that he saw you and found you looking well and I was might' glad to receive this little bit of news of you. Otherwise, there is not much that I could report 0-day and am, with ki/dest regards, Always ncerely, /, / Benjamin Strong, Jr., Esq, 2825 West 32nd Avenue, 'Care Rev. F. W. Oakes, Denver, Col. PPWPCM / j) FEDERAL RESERVE BOARD WASHINGTON July 18, 1916. Dear Strong: We were delighted yesterday to receive a letter from your brother and this morning your postal arrived from Estes Park. I am mighty pleased to receive such good news about you from your brother and to know that you safely arrived at the Lewiston. I hope that everything is pleasant and I have no doubt you will now make rapid strides toward full recovery. Before coming here to Loon Lake I spent two days J.= New York and had a conference with Messrs. Treman, Rhoads and Aiken; and, of course, Messrs. Kenzel, Hendricks and Curtis were present. We discussed the Government bond situation, some clearing topics, and discount rates. I suppose you are advised as to what is happening there and I have written Mr. Treman you know more about it than I. today to keep me advised about what is happening. You will have noticed that there was a short flurry in the call loan money market. While I advised New York to Increase their acceptance rates - which they did - because I felt that they would not lose any business in doing so, I advised them to keep the call loan rate at 3%, because there is not much risk in doing that. If we get too much we can always be out of the woods within ten days - then increase the rate. I am very anxious to see the member banks get the habit of applying to the Federal Reserve Banks in just such cases as the one we went through. Acceptance rates (I think( we can probably safely put up to 2% as the lowest basis, and probably they may be able to go up higher without losing any business, and still our margin would be wide enough as against England, where they now have a six per cent rate. From the statement that I saw in the papers, which must haveembnated from Sabin, I should think that his trust comI am anxious to get back and pany is about due to come in. follow the matter up, but shall try to do so from here. I am somewhat apprehensive that we shall have trouble in getting our amendments through. trying to push them along. I am keeping at everybody, The amendments were brought up in the Senate last week, but your friends, the Republicans, played politics; and we hope that they will pass this week. It will be more difficult, however, in the House, where Mr. Glass is less enthusiastic about some of our amendments than Senator Owen. But I have made it quite clear to him that the responsibility for whatever may happen if we do not get the amendments, will be his and not ours, and I have also apta.N.4.7ed up Mr. McAdoo; so that apparently he is doing all that he can in bringing pressure upon Mr. Glass. I had a letter from Mr. Hulburt, of which I inclose a copy, which will interest you, because it shows that things are moving well all over the country. -3- We are having the usual restful time here at Loon Lake and I am sorry that I cannot give you this year an exhibition of my wretched golf, but I hope that we shall play together next year. What little is left of my family - being the wife and Bettina - are well and happy and talk of you frequently and send you their warmest love. I am glad that the various paraphanalia arrived safely and I hope that they give you some comfort. Do not feel that you have to write to me at all, but send me a word sometimes through whomever may be with you. We shall want to know how you are getting along. Please give our warmest regards to your brother and tell him how much we appreciate his letter. With warmest regards and best wishes, I am Always cordially (t_ Benjamin Strong, Jr., Esq., The Lewiston, Estes Park., Colo. yeurs, C,CCa_ (1) o ct,b) I-7 o tr CU .; COPY 112 West Adams Street shicago July seventh Nineteen Sixteen. Hon. Paul M. Warburg, c/o Federal Reserve Board, Washington, D. C. My dear Mr. Warburg: I have received your letter of June 30th and appreciate very much both the letter and the speech. I read the speech some time ago rather hurriedly and have kept it before me for further study. So far as I am personally concerned there is but one thing that stands in the way of our applying for membership in the Federal Reserve System and that is the matter of interlocking directors. We have seventeen directors, two of whom happen to be Directors of the Illinois Trust and Savings Bank of this city and another is a Director in the State Bank of Chicago. Several, I believe, are directors in New York Institutions, but I presume there would be no difficulty on that score. As a matter of fact, I do not think the Federal Reserve Board would in any way violate the amendment of the Clayton Act if this situation was allowed to continue. The law, as I understand permits the Federal Reserve Board to authorize men to act as Directors of more than one bank, provided these banks are not in substantial This, of course, gives the Board pretty wide discrecompetition. tion. Take the case, for example, of this banks and the Illinois Trust and Savings Bank. This bank has seventeen directors when the Board is full and the Illinois has eleven. Two of the Directors happen to be common to both banks, but, so far as I know the presence of these men on both Hoards has bo effect one way or the other on the competition between there banks. it, The Illinois Trust and Savings Bank is essentially a savings bank and trust company. It does not solicit comercial business and lets it be known that it does not care much for it. Its loans are confined almost entirely to loans made on collateral. We have a Savings Department in our office but it is not an important part of Ike our business, deposits in the Savings Department being only about 48,000,000. in a total of over 470,000,0OG. the case of the In. Trust probably three fourths of their deposits are savings and inactive accounts. We might be considered competitors for savings business and we are active competitors for trust business, that is particularly in the line of managing estates. I take it that the framers of the Federal Reserve Act, as well as the Clayton Act, had in mind cormercial business so . 63 1--,i.4 tr tm 0-3 H 0 tP0 '0 M ad, 0 75 0 0 . as banks are concerned and gave no consideration to trust business f this kind, or savings business. So far as savings business is concerned, there is practically no competition anywhere. All good kux bank, as you know, pay substantially the same rate. This bank is essentially a commercial bank, having nearly as much com-ercial business as all the other state banks in Chicago. Inasmuch as these two banks are not substantially competing so far as commercial business is concerned, I am wondering if the Federal Reserve Board would not strain the technical point in our favor, in view of the fact that the spirit of the law would be in no way violated by so doing. I agree in a general way with your criticism of state trust companies for not entering the systev. I have never ever that this bank is open to such criticism. The law of silent as to the reserves of state banks, and each bank is own devices in the respect, with such moral suasion as can by the State Auditor and Clearing House Assn. banks and felt, howIl-inois is left to its be applied Notwithstanding this, it has been the practice of this bank, I believe, since its organization to aarry substantial reserves, averaging more than the law requires of the national banks. At the present time, for example, we are carrying a larger cash reserve than would be required if we were members of the Federal Reserve Syatem. We have never required assistance in times of stress and have always been glad to join in assisting our neighbors at such times. So far as I know, no good customer of this bank has ever had his credit line reduced in a time of panic. I do think, however, that we ought to do our part in unifying the banking system of the country under the Federal Reserve Acy but do not think that our joining the System would in any substantial way benefit either the bank or its clients and I do not think we should be penalized if it can be avoided. I should appreciate it very much if you will give me your views Ai this subject at an early date as I am in correspondence with several large state banks and trust companies with a view of our all joining together. With kindest regards Very sincerely yours (Sgd) E. D. Hulbert. I haveeshown this letter to Mr. Keep, V.Pt of the III. Trust Svp He says it might have been made stronger as that bank refuses to corm. accts. ? I congratulate you on getting the Coma Exch. P.S. Bank. take of N. Y. FEDERAL RESERVE BOARD WASHINGTON Loon Lake, New York. July 31, 1916. Dear Strong: I wrote you yesterday a personal note and have received today your typewritten letter of July 24th. I am glad to see from your letter that you are settling down to business; that you are permitted to do some little work regularly. That will be a great help to us and will be some help to you in whiling away the weary hours. I wrote Sabin from here, sending him the new ruling by the Board, which I had brought about during my short visit in Washington, which permits member banks not to count as outstanding their own acceptances in excess of the 50% or 100% limit if the excess amount beyond the limit is held by the accepting banks themselves. This was something that bothered Sabin and I am glad that I could satisfy him on this point. You may also be interested in the copy of the letter which we wrote Breckinridge Jones; in which we go a little step further than in the past in stating frankly that state banks and trust companies operate under charters of their own states and that we do not mean to restrict these charter rights when once a bank is admitted, and that we feel that we should not restrict any of their charter rights which pertain to true banking functions. Breckinridge Jones thought that if we give a satisfactory ruling in this respect that he and aicago banks - quite a number of them - would come in. He had raised the point that the law did not permit us at all to prescribe regulations interferring with the charter rights of State banks and trust companies, because that would be legislation which Congress had no power to delegate to us. We have not conceded that point and it would be dangerous for us to do so; but I think we have met his point of view by our letter. Our amendments appear to be making headway, but they have not yet quite passed the Senate. That should now, however, be soon. You ask whether it would not be a good thing to write to the President or to Colonel House on the subject of amendments. I do not think it is necessary, nor do I think it would help any. If you wrote, however, to Senator Owen or Mr. Glass - particularly the latter - it might do some good. Money seems to be easier again, but there seems to be no end of what Europe will borrow from us and the way they are handling our market by steadying it by remittances of gold whenever necessary, is simply marvellous. I cannot suppress the suspicion that a good deal of the gold that we are receiving is Russian. Russia shows in her public statements an increase of her loans during the war of about one-half of France and Germany and about one-third of England. With all that, no country has been forced to buy as much abroad as -3- Russia. It is only possible that either she does not show all her loans - some of which she may have contracted with her allies - or she has been paying by sending gold and does not show a loss of gold in her statements. Or maybe it is that she has been doing both of these things. Before you left you told me that New York is looking for a permanent Deputy Governor. Have you ever considered whether Governor Aiken of Boston would not be a proper man? He is de- voted to you - so much so that I am inclined to think he might be willing to be your second in New York instead of being first He has enthusiasm and snap and has a pleasant in Boston. way in meeting people. I think that during your absence he would undoubtedly do well and after your return I think you would find him a delightful associate; and I know he would enjoy nothing more than to be working with you. Anyway, I have not said anything about this to any one of the New York men, as I should like to know before I do anything, how you feel about the subject. If you thought well of it, I would try to sound out Aiken before mentioning it to anybody in New York. Did you hear that poor Billy Porter has had a stroke of apoplexy some time ago? While I hear he is now on a fair road to recovery, it is a terrible blow for so young and active a man. With best wishes and warmest regards, and hoping to hear -4- from you soon, I am Always cordially yours, 9a,ix% Benajmin Strong, Jr., Esq., Care "The Lewiston" Estes Patk, Colo. Inc.* August 1st. Just after dictating this letter, Mr. Warburg was called to Washington - leaving at 10 P.M. - on amendment He will return Friday. matters. W. JPY FEDERAL RESERVF BOARD WASHINCTON July 25, 1916. !Jr. Breckinridge Jones, President, Mississippi Valley Trust Co., St. Louis, Missouri. Sir: Your memorandum in reference to Circular No. 14 and Regu- lation M, Series of 1915, which relate to State banks and trust companies as members of the Federal Reserve System, has been submitted to aniconsidered by the Board. It appears that you are of the opinion that many of the State banks and trust companies are apprehensive that membership in the System may involve an undue restriction of their corporate activities as a result of future regulations of the Board and you feel that some assurance should be given to applying banks that, as members, their status, so far as the exercise of legitimate banking and trust company powers id con- cerned, should be more definitely determined. As the extent of the Board's power to adopt any specific regulation involves a questio# of law which must be determined by the facts in each case, it is of course impracticable to outline definitely the scope of all future regulations. In order, however, that the attitude of the Board may be made clear I am instructed to state to you that the Board understands that it is not its function to urdertake to impose on the activities of member banks any restrictions that are not contemplated by the Act, but only to prescribe such regulations as are designed to carry out the purposes of the Act. -2 - There are a great many decisions of our courts dealing with the subject of the scope og authority of administrative bodies to promulgate regulations. The principles establish- ed by these decisions will, of course, be adhered to by the Board in adopting regulations. While Congress could not delegate its power to make a law, it can, as stated in Field v.Clark, 148 U.S. 649, 694, "make a law to delegate a power to determine some fact or state of things upon which the law makes or intends to make its own action depend," or, as expressed in the case of Lockets Appeal, 72 Pa. St. 491, 498 "The legislature cannot delegate its power to make law, but it can make a law to delegate a power to determine some fact or state of things upon which the law makes or intends to make its own action depend. To deny this, would be to stop the wheels of Government. There are many things upon which wise and usefyl legislation must depend which cannot be known to the lawmaking power and must therefore be a subject of inqui ry and determination outside of the halls of legislation." The Board does not feel that it is one of its functions to undertake to restrict State banks and trust companies in the exercise of true banking or trust companyTowers as defined by the laws of the state in which they are created. In pass- ing upon the applications of State banks and trust companies, however, it believes it to be its duty to admit only those institutions which are solvent and sound and whose membership will not constitute an element of weakness in the System. The Board does not consider that it is a prerequisite to the admission of Amy State bank or trust company that it should possess any certain amount of paper eligible for rediscount with a Federal reserve bank. Congress has provided that the o tro r, c, PIT N 0 w U)q.t 14 W Q, tr (11 C4 121 " Q. çt tr m tr. (0 -3- C4 0; * - privileges and advantages of membership may be extended to State banks and trust companies thus creating one compact banking the system while still preserving the integrity of both/State and and national system. Leaving aside any question of their duty to the country, it is manifestly to the best interest of every strong and sound State bank and trust company to contribute its share to the strength and protective power of the Federal Reserve System by subscribing to the capital stock of its Federal reserve bank and by maintaining its required reserve. This is true whether the State bank or trust com- pany has a small proportion of its assets in liquid paper eligible for rediscount or has any paper of such description at all. The fact that it has little eligible paper would not of itself make its membership an element of weakness or danger and it is obvious that as a member of the System it would be in a fosition to contract for loans and to obtain cash from other member banks having paper eligible for redis- count and thus indirectly to obtain the desired accormodation. The ability to lend assistance to member banks directly and indirectly will be increased as the strength of the System and lending power of the Federal reserve banks are increased. There is no reason why such assistance should not be given freely to a member State bank while in times of stress the non-member banks may find the member banks less disposed or able ix) give them this indirect assistance. It is, of course, indispensable that any paper offered for rediscount to a Federal reserve bank should conform to the provisions of the Act and of the regulations of the Board. M t3) 0 ,ns o ti) - o ,4 -4- ° 13) cs. is clear, however, that a Federal reserve bank will have to 0 p look all the more carefully into the status of a State member bank asking for rediscounts if such State bank or trust company exerc4ses banking functions that are likely to interfere with the liquidity of such State member institution or that may lead to over-extension. In other words, the Board might consider the exercise of extraordinary powers, such as might make an applying State bank or trust co. an undesirable member, a sufficient reason to refuse the grant of the application. After such State bank or trust company, however, has become a member bank, the Board does not expect to interfere with the exercise of those banking and trust company powers authorized by its charter. If the exercise of such power should, however, tend to interfere with the liquid and sound condition of a State bank or trust co. member, the Federal reserve bank would, of course, be justified in taking due precaution in dealing with the applications for rediscount by such State bank or trust company. For your confidential information, I may add that the reissue for 1916 of the Board's regulation (which has been kept In abeyance pending action of Congress upon the amendments proposed by the Federal Reserve Board) does not contemplate the reissue of the circular which accompanied Regulation M, covering the admission of State banks. Regulation M will be reissued with some slight modifications which will be in keeping with the general thoughts expressed in this letter. Respectfully, Governor. Memo. for Mr. Strong: This copy has not been compared with original for verification. - FEDERAL RESERV40 M.RD WASHING *( Loon Lake, N. Y. Dear Strong: Your letters of August let and 3rd have been received and Bettimalso received a letter from you hailed with delight. which has filled her with pride and glee. I shall be very happy to read your memorandum on the foreign correspondents question and shall write you frankly my thoughts concerning the same. I do not think I have written you since my last trip to Washington, where I went to talk amendments with Glass. I send you herewith for your amusement the latest draft as the thing We have put Glass wise that certain changes passed the Senate. will still have to be made and I hope he may be able to get them through. He told me that he could probably not get the domestic branch paragraph in this lot of amendments as he had some kind of an understanding with Mann not to connect the foreign and domesand I saw Mann/talked to him, but tic branches in one amendment. without much success. He is opposed to branches on account of ;7- the Illinois situation, where no branches are allowed. Glass promised that if he could not get the domestic branch clause in this amendment, he would immediately introduce it in another amendment - and inasmuch as it has passed the Senate, I hope he may be able to get it through in that way. The power to count 5% of deposits as reserves if held in Federal Reserve notes got lost in the Senate. opposition to it. There is too much However, Glass is very much in favor of -2- of having an- amount of the reserve kept as balance with Fed- eral Reserve Banks in the option of member banks, and I hope that will go, and he proposed to put that back, though in the last minute it was left out in the Senate. I found Glass very shakeyas to the power of Federal Reserve Banks to issue notes against gold, but I hope I straightened him out on that. They were to go into conference yesterday and I expect then that quick action will be taken on the whole matter. You will see that included in the amendments is the power of Federal Reserve Banks to open accounts for foreign correspendents. That will give us an opportunity to begin corres- pondence with foreign countries. I hope that you and I may finally agree on what the best steps will be in the matter. As to collections and Postmaster-General, I fully agree with you. I had taken your point of view not to make any noise about collections from postmasters, but I had hardly gone when McAdoo got away with it, as usual, because he thought he had a good thing for the Secretary of the Treasury to advertise. You may have noticed the form of the statement that was given out. It was all Secretary of the Treasury, and the result was just as could have been foreseen, and as you foresaw it a long time ago - a 'general kick and then a quick run on the part of those who had put the thing out. If he had done the reasonable thing, simply presented here and there some checks to the postmasters, we could have had the desired results without creating any stir. -3- As to the governorship question, the thing must be decided today or tomorrow and there is no use writing, filling paged with that any more, because when this reaches you the decisions ought to have been reached. We have, I believe, maneuvered well and got all influences to play upon the President that may be expected to have any effect upon him. It is now with him to do the reasonable thing or the unreasonable thing, and we have to meet as best we can whatever may be the outcome. I had a letter from Dr. Miller, in which he wrote that some weeks ago he wrote me asking your address, wanting to write to you, but his letter has never reached me. As everybody's else, you have his fullest friendship and sympathy and he joins us all in hoping that you may soon be on deck again. I miss you at golf and oth?.rwise, to which fact Mrs. Warburg can bear witness. I had to send'Bettina to a specialist because her eyes were absolutely ruined after she had finished reading your letter. With warmest regards from all of us and thanking you again for your nice letters, which I hope will continue to come frequentr ly, I am Always sincerely yours, Benj. Strong Jr., Esq., "The Lewiston" Estes Park, Colo. , 4 a 0 FEDERAL RESERVE BOA1RD WAS HAGTON 471 Selo Loon Lake, New York, August 9, 1916. Dear Strong: I wrote you yesterday and hope that my letter reached you. This morning I have your letter of August fifth, which I was delighted to receive. I am glad to know that the Aiken suggestion struck you well. Of course, Jay is the man to be spoken to first, after return. out? Would you suggest the matter to him and draw him Or would you rather that I should do it? the matter would better come from you. I rather think It is true Aiken would be a bad loss for Boston, but the Boston matter is pretty well in hand now and of course we should have to try to find a good successor for him there. During your absence New York will need some one who has snap and imagination and some ton,. Gtetorey of leadership. Treman is excellent in many respects but, as you may well realize, there may be danger that things may slow down too much and the staff and member banks and would-be member banks may lose interest. There is no hurry about this, as both you and I can crack the whip and keep things going, but on the whole, I think a man like Aiken would be a most welcome addition at this time. / -2- I read your letter to Mr. Glass and think it is admirable. I am delighted that you wrote it. And that reminds me of a thing that I forgot to write you yesterday. If you feel strong enough and if it would not tire you too much, I think you have a wonderful opportunity while you are thereto write every now and then a letter to r-6 the newspapers-w44-eh-A,7m publishlfig some articles. thinking, for instance, of the Financial Chronicle. ticles that this man writes are BO I am The ar- abominably stupid that any one who will go to the pains of answering the arguments will have no end of fun. The difficulty is, not to write a good argument, but not to write too good an argument and show up the stupidity of the man and make a permanent enemy of him. But some reply ought to be written and if you think you should not sign the ilo4-e4. in your own name, somebody else might put them in; but I believe that it would be a very excellent matter for you to sign them. Think of the nonsense the man wrote when he did not see the difference between money with= drawn and locked up in the Treasury and money transferred from the member banks to the Federal Reserve Bank47-1-ere by indirect method the money can at once return to the market by rediscount of short paper by member banks. Think of the other stupidity when this man does not differentiate between reserves to be kept by member banks and reserves to be kept by Federal Reserve Banks. -3- I had a letter a few days ago from Mr. Welton, written on behalf of the American Bankers' Association, urging me to address their meeting at Kansas City on the subject of reserves. That is not a stupid suggestion, and I may possi- bly do it if I can get out of another engagement which I have a few days before at Cincinnati to address the American Institute of Banking. I am keeping this matter pending, as much will depend upon the decision that the President will make with respect to the governorship. If we should get in- to a row, my speeches will have a very different tendency from now on from what they had in the past, for whatever may be the remainder of my incumbency. Another thing that I think somebody should write about is Russian conditions. I think that the City Bank is taking a very grave responsibility in boosting that country in the way they are doing it. Wall Street Journal. I do not know whether you take the If you have, look at the issue of August 7th, page five, and you will find there a compilation of per capita debt of the warring nations. I shall inclose a memorandum in which I shall give a rough outline of what I think ought to be said in this respect. Of course it would be absolutely impossible for me to say anything in this connection, though this is not a question of pro-Ally or anti-Ally feeling. I do not think that so long as the foreign loans are good it is anybody's business to sound a 4-- note of warning, but when we are going to be persuaded to make loans that are likely to be bad, I feel that some one ought to get busy and prevent disaster. If you could devote yourself to matters-of this kind during your exile, sometimes using your own name and sometimes possibly suggesting your thoughts to others, I think you could do a lot of good and, incidentally, keep your mind occupied. It is raining pitch forks today and this may account for the second letter within so short a time. The family is well and happy and sends you best love. We almost got burned up yesterday on the way, our motor catching fire, but the bad pennies turned up all right, none the worse for wear. I am glad you had a line from Jim. I shall be happy to see him back here. With the most cordial greetings and good wishes, I am Always f ithfully yours, Benjamin Strong, Jr., Esq., "The Lewiston" Estes Park, Colo. *Inc. V. C FEDERAL RESERVE f 3 RD ;$1, WASHINGTIsi ".?1,00enake, N. Y. A't.ist 26, 1916. Dear 4 Strong: I do not recall when I wrote you last, but it is quite some time ago and I am sorry that I neglected my correspond- ence with you. However, as my women will have kept you advised, I had to go to Washington in between, and came back just for a week, and expect to leave tomorrow to go "Laundryville" for another year's work. back to beautiful I hope I shall be to come back here for a week the middle of September and then possibly go from here to Cincinnati and Kansas City, where I shall have to make some speeches on the 21st and 23rd. of September. have in mind, if I can, to escape from the Bankers' Association at Kansas City as early as possible, and go to see you for a day: permit, But I am not quite sure that time will so do not expect me until I shall give you the defin- ite word. It is this devil of a speech which has kept me busy here this week. I tried vary hard to get out of it, but they would not let me, and so I have concocted something, dealing primarily with the subject of reserves and Federal reserve notes as reserves. The thing is still in very crude form and as soon as I get back to Washington and am able to put (2) in the statistical material that is missing, I shall send you a copy and shall be very happy indeed to have you lick it into shape. I received news from Washington two days ago that the Conf-rence committee has agreed on its report about our amendments. They passed a good many most desirable things, such as foreign branches; power to accept for domestic transactions (though they limited this to drafts secured by readily marketable staples); mortgage loans; power of Federal Re- serve Banks to take fifteen-day notes of member banksito open toreign accounts for their correspondents; for member banks to accept finance drafts; power for member banks to keep as a cash balance with the Federal Reserve Banks any part of their required vault cash reserve. a batch of good results, This is quite They struck out the domestic branch and the power of Federal Reserve Banks to issue notes against gold/i7 The waiver amendment was somewhat changed it was not completely stricken out. I inclose you here- with copy of Mr. Harrison's telegram, which tells the whole story. I shall send you from Washington a printed copy of the amendments as soon as they are finally passed by both houses, That, after all the hard work we did,the gold note issue amendment was lost is a most disheartening blow; but there is nothing to do but try again. Maybe if we get a (3) Republican House in the fall,(and I think that is not at all unlikely) we can do more. So far Glass's power ap- pears to be absolute and in spite of all the effort that I made and in spite of all the pressure that Mr. McAdoo brought upon Glass, we evidently failed. Still, we have made quite substantial headway, and have to be satisfied to move step by step. I do not recall at all whether I wrote you about the governorship question. I am of course delighted to have Harding take Hamlin's place; but the principle adopted is It is perfectly rotten that a man like Delano all wrong. who worked like a steer and who two years ago was entitled to think that his designation as vice-governor was meant as a compliment, is now being demoted and that quite arbitrarily Harding and I are promoted - if, indeed, my desig- nation can be considered as such. The way the thing is now being handled, a vice-governorship is what in slang we would term a "lemon". as Delano If I an to be treated on the same basis next year, a vice-governorship is not a step to- ward governorship, but a step away from it, and next year two new men would again be appointed - in that case, Miller and Hamlin! That is, of course, quite idiotic and we must move to have the law amended in this respect. Governor- ships should rotate automatically by lam and there should be no such humiliating condition as there is now, There the man (4) who might curry favor with the President or the Secretary of the Treasury might be likely to be advanced, while the man showing independence is likely to be demoted. In it- self the thing is immaterial, because we must have a sufficient pride not to feel ourselves better or worse according to whether or not people who do not understand our work think it advisable to give or not to give us a title; but as toward the world, that does not understand the situation as we do, the thing is stupid, galling and humiliating, and will prevent in the future men of independence from joining the Board - and that, after all, is the only thitg in which I an concerned, and why mind that, no I have made up my matter what people may think about my own interest in the matter, I am going to fight this thing through. Of course, our best.chance would have been to throw this thing into the elebtion campaign, but, some how or other, we feel that we should hot do that; but we are going to take it up in Congress in the fall and we have already laid some wires in this direction. whole question. Delano acted like a brick in the He has developed splendidly and I believe that this latest intermezzo's brought him, Harding and 15,/ very close together. I am going back tomorrow because the Clayton Act applications have to be acted upon, and Miller will be back, so (5) that for a week we shall have a full Board, after which Delano will be gone for several weeks. business is not an easy matter. thorns. This Clayton Act It is a problem full of I expect to have a little talk with Jay at New York day after tomorrow on my way through, and my plan is to have the Federal Reserve Agents at Washington to advise with us when we finally pass upon these applicationsT any how, those of the larger and more important cities. I have had sev-ral opportunities in New York to discuss matters with Yr. Trewan, and the more I see of him the better I like him. He is level-headed and is a gentleman, even though he is somewhat lacking in aggressiveness. Peabody appeared to take quite an active part in Jay's absence, and I was very much pleased to see him do so. Let me hear from you again soon. a great joy to me. i Your letters 4-t,VO411&-1,17 417' itte41 /14-t-'- are.always With warmest'regards,in which my women folk join, I am Always coially yours, Benjamin Strong, Jr., Esq., "The Lewiston" Estes Park, Colorado. *Inc. Form SYMBOL Mn WESTE CLASS OF SERVICE SYMBOL Day Message Day Letter NL .nose three symbols a the check (number of s is a day message. Otherharacter is indicated by tho TENEk appearing after the check. ,sw 4 AM CARLTON. PRESIDENT Blue Night Message WESTERN UNION Nite 10 UNION k..? 21 Nite NL Night Wier If none of tleso three symbols appears after th a check number of words)this isa day message. Otherwise its character is indicated by the symbol appearing after the check. RECEIVED AT 3 6D R 30 GOVT WASHINGTON DC AUG 3TTH ON BENJAMIN STRONG 11e4tAM 1916 JR ESTESPARK COLO AYS OF GRACE RESTORED AMENDMENT 0 BY HOUSE TUESDAY BOARD TO SECTION FOURTEEN AMENDMENTS AGREED SENDS ITS GOOD WISHES ft PAUL M WARBURG VICE GOVERNOR 1026AM FEDERAL RESERVE BOARD WASI-IINGTON September 1, 1916. Dear Strong: I received yesterday your letter of August twentyfifth, in which you express your thoughts concerning the advisability of my going to the Kansas City Convention. I am glad that my 1,6044T thoughts in this respect crossed yours. You will meanwhile have received my letter in which I told you of our plans. I spoke last night with Jay, and he said that maybe he would make/i= a point of going out. You got a telegram yesterday from Mr. Allen concerning days of grace. I was pleased to tell you that these three,days of grace had been smuggled in by/grace of the clerk Of the committee, who stated that it was a clerical error that the provision had been left out, he taking the blame upon himself. The amendments have now passed both houses and we are awaiting the President's signature. As to the Bank of England memorandum: Curti I met Jay, and Treman in New York on my way back, and we had a "Clayton Act dinner" together. Curtiss went with me to Washington and showed me on the way your (2) memorandum and the application to the Board. the matter fully. We discussed some members were in favor of tabling the entire proposition at this time as they did not think the time opportune for sending our money abroad. I put the motion that authority should be given to the New York Bank to sign the contract provided, however, that New York should agree not to exercise its right to put this contract into operation before the end of the war, as provided under Section 9, et:r=*fttil the Board ha; been con- sulted again concerning the proper time and conditions 41/1/a-tt, to put the contract into operation, and, furthormora, JA:L_Qrder toglue the Board o communicateJwith the State Department concerning the propriety of such action g-rtvi.aalar-ly during the war. (Mr. McAdoo, who is absent just now, had written the Board that he advised that we should communicate with the State Department before takThis motion of mine prevailed, and a ing any steps.) committee was appointed (on which I had announced that I would not -1±514;245110 and Delano. serve) consisting of Harding, Hamlin This committee made promptly an appointment with Secretary Lansing and placed your memorandum and application in his hands without, I understand, much further comment. Lansing said that this was a matter to (3) which he wanted to give a great deal of careful thought and that we should hear from him after a little while. I trust that all this is satisfactory to you. I have not much to say with respect to your memo/-; randum except that I thinkAyou want to consider carefully the propriety of counting foreign credits or foreign ear-marked gold as reserve. It may be interesting to you to know that the Bank of the Netherlands carries the gold that it has ear-marked in New York as foreign credits - not as gold reserve. After all, we must bear in mind that we are the reserve banks of the country and that if gold is required it should be available. while you and I see the advantages of creating an organization by which gold held in foreign countries might also be called reserve, we differ in this respect: that I think to count gold held in foreign countries as reserve is somewhat irregular, and if we want to take that step we will have to take all possible precautions concerning the property right in such gold. If, on the one hand, we take it that the Bank of England is a private institution our gold with them would no more be free from seizure than gold held with any other stock bank in case we get into a war or complication with England. should My conten- (4) tion has been that there must be treaties that will hold even in case of war between the nations. while I grant that these international treaties cannot well be concluded at this time, I do not see that there is any particular hurry for them either. While England has thrown in- to the scales not the credit of the Bank of England, which would be insufficient, but the credit of its government secured by the foreign bond holdings of the nation, our measly 4125,000,000 more or less will not be able to stem the tide one way or the other if England's heroic methods do not take effect any more. The machin- ery that you have in mind is a very pretty one in case of peace. ,'In case of conditions like the present, how- ever, it would be but a drop in the bucket. It would be entirely impossible for us, in the teeth of present conditions, to attempt to stabilize exchange. Our entire free gold reserve is at present about $250,000,000 and we cannot take a very large proportion Of this gold and put it abroad so that I think your estimate of t25,000,000 is about correct, and I do not think that would carry us very far. I do think it would have a very good effect for the future if the contract be signed, no matter whether or not we shall be in a position to operate ( 5 ) in the near future. We can leave that matter open for further discussion and watch conditions as they arise. From the sentimental point of view, I think it is ad- visable to grasp the hand that the Bank of England is holding out to us, even though, as you know, there are several features in the contract with which personally I do not quite sympathize, but that fact is a minor matter. Very si,rIcerely yours, 62Ja Benj. Strong, jr., Esq., Estes Park, Colorado. / FEDERAL RESERVE B OAR D WASHINGTON qe Septembe4p6, 1216. Dear Strong: I have just received your letter of September first with the photographs, which look very attractive, and I was glad to see and your own face and to see from theJ-that you are up and about looking well. I was very sorry to learn from your letter that you have had a little set-back, but I hope by the time this reaches you that will be past history. I received the copy of your letter to Glass. I am half through it, but have so much to do that I have not been able to complete it. I shall write you fully about it as soon as I get the time. A draft of my speech will probably go forward to you tonight and I shall be happy to have your comments as early as possible. It is well possible that I shall see you before I deliver it at Kansas City, but after I have delivered it at Cincinnati. shall have to speak there on September twenty-second; I leave there for St. Louis; hope to reach Denver on the twenty-fifth of Sixth; spend two days with you; and then be in Kansas City on Thursday night or Friday morning, i.-There I am slated to speak on Friday, the twenty-ninth. This is my present plan, but I am not quite sure that I shall be able to carry it out, and I shall keep you advised as to further happenings. (2) I am interested in what you say about Aiken and Kains. I think that of the two, there is no doubt that Aiken will be the better man for what you have in mind. Keine is a charming fel- low, of whom I am very fond, but after having been with him for two months in South America, I think I know him pretty well, and I do not think that he has the keenness of perception that Aiken has for the real problems of the Federal Reserve System. I think he is lacking in enthusiasm and vision in this respect - the very things that Aiken has. Moreover, Kains has not been a country banker, while Aiken combines the experience of a country banker with. that of the banking knowledge he has acquired in Boston. There is no doubt that as far as foreign relations are concerned Kains would be excellent, but as far as that problem is concerned you can get a.good foreign exchange man who will contribute that knowledge. Kains is a splendid "mixer", but too much of a "mix- er", and would in the long run be on terms of familiarity with all New York - no doubt about that - but I doubt that he could pre- serve the degree of dignity in that respect that Aiken might maintain. Aiken is capable of cultivating cordial and friendly rela- tions without, at the same time, carrying into them the golf club or smoking room atmosphere that Kains is apt to carry. That is part of Kains's charm, but in this case I think it is also part of his shortcomings. Jay will be here day after tomorrow with (J3) a load of Clayton applications and I shall then take an opportunity of discussing this matter with him. I have not done so in the past because I wanted to hear your views first. About Russian conditions I do not agree with you. I think .\ that people generally labor under a misapprehension about Russia. They think that this country has not had an outlet for her goods. Samuel McRoberts - big fool - writes in his article, "Even if the war had not brought the fair prospect of the fulfillment of Russia's long fostered ambition for an outlet for its commodities' through the BosphorWs, etc." He apparently does not realize that Odessa is one of the principal ports of Russia and that durinv times of peace Russia has never had any difficulty, whatsoever, in getting all her goods through the Bosphords and carrying on a most lively trade in that way. It shows how superficial and reckless this man is in making his statements, and what chances the American people take in following a man of that type in making their investments. As to the Federal Reserve amerndments, I agree with you. thing is most disheartening. The We have received another blow since. After the Senate record showed the conference report as agreed upon by the conference and passed by the Senate, Carter Glass got it into his head in the last minute that he wanted to restrict the power given to accept for domestic transactionsto 500 of the capital and surplus of the banks. civu-Lwai He thereforeAstruck out the Board's (4) power to grant the 100% limit , but in doing so, overlooked the fact that he was interferring also with the Board's power to grant this permission for transactions involving the importation or exportation of goods. When the bill was sent over to us from the White House to be passed upon before it was signed by the President, we discovered this mess, of which we had had no indication before, and at once got hold of Glass, who frankly acknowledged that he made a mistake and tried to undo it, but he and Owen agreed that it was impossible to undo it at this stage of the session. They all advised us, however, to close our eyes and disregard the consequences until the fall, when they will put the 100% limit back. This is the worst kind of mess and we shall have to worry along as best -c'e can until Congress convenes. Ohl what unmitigated joy it is to do business under Government tutelage: I hope that when you get my speech you will find that it is time for you to write-some articles. But please bear in mind that your health is worth more than any amendmlnt to the Federal Reserve Act. Write enough to keep yourself busy and amused, but do not for a minute think of beginning to work hard if that can interfere with the rest and recuperation which ought to be your main concern. I shall be glad to give Delano your message. He deserves to get it. I am glad to know that your boy and girl are with you. co (5) They will be splendid company and will help you to while away the weary hours. With no more for today, I am,(s the President always says,) "Cordially an Sincerely yours," Benjamin Strong, Jr., Esq., The Lewiston, Estes Park, Colo. Sapienti sat. From the London Economist, August 19, 1916. In the middle of the week a rumour Tent abroad that large batches of Argentine bills might shortly be expect Edi and the market seemed to expect some scheme for financing Argentina by means of London credits. This impression, which was difficult to reconcile with the facts of the position, was corrected by the appearance of a Treasury Minute, which shows that the British Government's purchases of sugar and meat abroad are to be financed by bills of not more than six months' cureency drawn on London banks and banking houses. The total drawn for meat in any one month is not to exceed 2 1/2 millions, and the total outstanding at any time is not to exceed 10 millions for meat and 5 millions for sugar. No bills drawn under this arrangement are to mature later than October 31, 1217. The acceptors will receive a com- mission of 1/4 per crit. on three months' and 1/2 per cent. on six months' bills. The bills will be a welcome addition dwindled supply of bank paper. to the 9k/ FEDERAL RESERVE BOARD W,_,MpHINGTON eiNo September 7, 1916. zoy_- Dear Strong: The copy of the draft of my speech which was forwarded to you last evening was incomplete. and would thank you to make the Page 6, line 5: I enclose some riders following changes: Change "1909" to "1910". Page 9, line 5: Change second word "of" to "or". 17 Page 12, line 10: After word "reserves" insert "or gold exports of alarming proportions". Page 17: Where it reads "Take statement Jacobson No. 2" insert Rider A. Page 20, next to last line. 4 Page 22. Change "gold" to "specie". Illustration consists of Rider B followed immediately by Rider X, Rider C to appear as foot note to Rider B. 4 Page 23. Line 5 Of text, change "national bank circulation" to "other kinds of currency". V/ Page 24. Precede paragraph beginning "Take our present" with Rider D and insert Rider E where illustration is called for. V V Page 4a, next to last line, change "705/0" to "60%". Page 5a, line line line line Page 6a. 11: 13: 14: 15: France $71,000,000; Germany $230,000,000; $799,000,000 Franceaand $364,000,000 Germany; $530,000,000; "about $1,970,000,000. Paragraph should be in line 3 5 of that at top of page beginning "The question" inserted as sentence after word "anyhow" of succeeding paragraph. Amount in line paragraph should be $272,000,000. Page 13a, line 2: change 114,000,000 to $16,000,000 line 3: change 166,000,000 to $164,000,000 line 8: change 108 millions to 100 millions. (2 Page 14a, line 4: ) Change $166,000,000 to $164,000,000. Page 2A, line 3, insert in the blank "after November 21, 1917," Page 5A, line 9, change "34" to "35". Very Benj. Strong, jr., Esq., Estes Park, Denver, Colorado. Enc. y yours, FEDERAL RESERVE BOARD WASHINGTON September 18, 1916. Dear Strong: I received your letter of September 12 with comments upon my speech. I have only one fault to is that you thought it find with youlletter, and that necessary to apolpgize for changes when you know that I appreciate most or suggestions cOrdially any criticism I am very/grateful to you for hav- from you. ing gone to the trouble of going .through the speech so carefully. Almost all of your suggestions have been embodied in the address, barring only One or tao little things where my time did not permit me tO recast the matter. many of your criticisms h letter arrived and your same lines. A great otA/1 already been 406004.e before your orrections and ours were on the In a great/many cases your point was very well taken and I was very gAad to act upon your suuestions. As to the French gold, the figure had lalanwhlle been changed to '0.25,000 00. Mr. Jacobson made quite some study of this matter but si tanfortunately, the report of the Banque i.e France does not4give a sufficient clue because the export statistics do not ehow what of the country for England. old withdrawn left the I have finally decided to put the whole paragraph into lse definite language in order to make it less vulnerable. (s) I had no intention of inflicting the whole speech upon I have cut out for the reading a long-suffering audience. almost all the inflation argument then it will and the national bank still take between three fourths chapters. Even of an hour and an hour to read the stuff, which is too much for me and too much for the audience, but I am very much puzzled how to condense it more. I shall be most happy Thank you for your telegram. to meet you at Denver, but I sincerely hope that you are not doing a stupid thing in coming down. fer to spend three days with you instead of losing two on the trip to and from Estes Park. you are not doing Of course, I pre- On the other hand, I hope anything that may progress of your health. interfere with the good Whatever you arrange will be satis- factory to me. I am looking forward to the pleasure of "chewing the .rag with you". As to your letter to.Mr. Glass and as tt the bothersome question of regulati r the accumulation of silver certifi- cates in New York, I shall talk with you fully when I get there. I thought your letter was admirable. I shall also tell you more about the Clayton Act, which was a lard nut to crack, but I hope we have found a settlement of the matter which will give general satisfaction even though, of course, there will be grumbling in some corners. With cordial greetings, Always http://fraser.stlouisfed.org/ Beni.Strong, jr.,Esq., Federal Reserve Bank of St. Louis nnl sin 0i06., DIRECTORS. W. M e C. MARTI N, CHAIRMAN OF THE BOARD AND FEDERAL RESERVE AGENT. OFFICERS. ROLLA EL LS, FEDERAL RESERVE 13AN K GOVERNOR. W.W.HOXTON, DEPUTY GOVERNOR AND CASHIER. JAMES G. Mc CONKEY, COUNSEL AND SECRETARY. OF T.0 .TU PP ER, VICE-CHAIRMAN OF THE BOARD AND DEPUTY FEDERAL RESERVE AGENT. JOHN W. BOEH N E. EVANSVILLE.INO. D.0 . BIGGS. Ni. LOUIS. MO. OSCAR FEN LEY, LOUISvILLE,KT. WALK ER HILL, ST.LOUIS. ST. LOUIS, MO. W. Es. PLUN K ETT, LiTTLEROCN,R, LE ROY PERCY, GREENVILLE,MISS. FRANK 0.WATTS, ST. LOUIS, MO. '../ . s e September 30, 1916. /c2 0 Governor Benj. Strong, Long's Peak Inn, Estes Park, Colo. Dear Strong: I hope you got the telegram I sent you yesterday from Kansas City, after the delivery of my speech. less. The delivery was prompt and pain- I kept up my voice, thinking of your Scotch story. Though the hall was Very large, the accoustics were good, and I had no difficulty to get away with the address. It was better received than any paper I have ever read, and I had a real ovation after I was through. A very Iarge number of men came to me on the platform, and a small number of State bankers stated that they saw a different light and some said that they would come in. ::,any of the country National bankers were most complimentary, and said that they would act upon my suggestion with reference to their gold. was there, and moved a vote of thanks for me. George Reynolds He said that he had given orders to reverse the gold holdings of his bank. Up to now he had about ten or eleven millions in bank and twenty or thirty millions in vault ( I think those were his figures), but he had given orders to reverse the figures and keep two-thirds in bank and one-third in vault. Pretty good - isn't it? Similar sentiments were expressed by various bankers, and I am really quite encouraged. The best result of the meeting is that there was really developed a real and most welcome spirit towards the 'Federal Reserve System. The country bankers, who had. come to the convention with the evident desire of expressing L RESERVE BANK OF ST. LOUIS SHE displeasure with the System, and who had begun by formulating motions along these lines, finally ended by bringing in a motion of approval of the Federal Reserve System, and the only thing they did was that they ap- pointed a committee to go to Congress and ask for a change in the law, permitting member banks to charge a maximum of 0..00 per thousand when remitting for their own checks. Harding was called upon to speak upon this motion on Thursday, and I am told he made an excellent speech. was very much pleased with it. Everybody He made a frank statement, saying that we were not a legislative body, but an executive body, and if they wanted to make a change in the law, they had the right of every American citizen to go to Congress and see what they could do. He managed to pass the buck to Congress this way, and everybody was pleased. hAAir The new chairmen of the various sections spoke to us. The4Presi- dent of the Association, Mr. P. W. Goebel, of Kansas City, Kans., was very cordial, and stated that if he could co-operate in any way, he would only be too pleased to do so. He is an old countryman of mine, and I had no dif- ficulty in making friends with him. The Chairman of the National Bank Sec- tion, Mr. J. S. Calfee, of dt. Louie, expressed similar sentiments. the new Vice-President of the Association, whom I had already met in tha't city. ar. So did C. A. Rinsch, of Cincinnati, Mr. Stoddard Jess, of Los Angeles, who wants to be remembered to you, made a very satisfactorg talk, in as much as he is the new Chairman of the Clearing House Section. He brought up the question of effecting an arrangement enabling the clearing houses to turn in their gold to the Federal reserve banks, 1...s*agua..t.along the very lines that you and I had discussed. I explained to him what I thought could be done, and and this he promised to doq-. I spent a good deal of time with the Governors of the various Banks present. Hendricks was there, too, and I think their presence had a very good RESERVE BANK OF ST. LOWS 3. effect in bringing about the proper spirit. I hope you got back to Estes Park without being affected by the rough weather. In Kansas City, it was beautiful, and here it is getting a little warmer. 7/Lot,i's el)-4 Pte, - With kindest regards and best wishes, V Yours sine ely, FEDERAL RESERVE BOARD WASHINGTON Octdlnice3, Dear Strong: I hope you got the letter which I wrote you from St. Louis. I got home safely - playing Seven-Up with Harding all the way, which made my trip cost me 5 more for which I cannot charge the Federal Reserve System. I found my family well. united. Te are glad to be re- They all send you their best regards. This morning I find a dozen letters from you and am delighted to have then. I cannot answer them to- day because Jay, Curtis and Cotton are here and we shall spend the morning Clayton problems. ith them discussing In the afternoon we have some Clay- ton hearings with some people who want to protest against our decisions. I hope to be able to write you fully in a day or two. I had a very nice letter from your lother, who was delighted to receive the good news about you. I suppose that you had Vanderlip's visit meanwhile (2) and I hope you enjoyed it. Hi z speech in Kansas City is said to have been very good, but it was not over- warm insofar as the Federal Reserve System was concerned. With a fond hand-shake, Alway sincerely your Benj. Strong, jr., Esq., Estes park, Colorado. (COPY) FEDEEAL RESERVE BOARD WASHINGTON October 5, 1916. Mr. Pierre Jay, Chairman, Federal Reserve Bank, New York. Dear Mr. Jay: Referring to the subject of our conversation Tuesday afternoon I have to report that the matter is still in the hands of the State Department, and there is no immediate prospect of getting a favorable ruling. In fact, I believe that if the matter should be forced, the decision would be unfavorable, so I would advise that you find some way to temporize, either by writing your friends on the other side asking about some matters of detail, or in such other way as you can. Mean- while I will watch the situation closely at this end ani push for action at the earliest opportune moment. Very truly yours, (Signed) P. M. Warburg. FEDERAL RESERVE BOARD WASHINGTON October 6, 1916. Dear Strong: Since I wrote you a few days ago I have been so driven that I did not get a chance to attend to my correspondence and, therefore, I have delayed writing you with reference to your various 1. tters. I expect to be in New York on rionday, in order to register as a good citizen, and I shall then take up with Jay the question of the apportionment of investments. I shall also discuss with him some of the other questions that you mention in your correspondence, and shall write you again more fully when I return. As to the gold and silver clearing, I cannot help feeling that the fact that gold came into New York and was credited to the other Federal Reserve Banks is probably only a natural economic development in view of the fact that these interior districts produce so much *hat Europe is buying at present and that the gold, to a certain extent, is streaming into the United States in payment for these very things that these districts produce. As long as the gold remains in one of the other Federal Reserve Banks (2) I do not see any harm in its being transferred from one district to another. The difficulty arises, however, when it begins to go into circulation in those districts because Federal Reserve notes are not issued there and the settlement takes place in gold certificates. a I had good chance to discuss this question at Kansas City, where McDougal,Wold, Aiken,`444ins'(of San Francisco) and Hart (of Philadelphia) dined with me. It gave me a chance to give McDougal a dig about their stinginess in not issuing Federal Reserve notes, and I think I made some impression upon him. In St. Louis, I dis- cussed the same thing at the bank,with Watts and Hill present, and I think you will find there will be a change in the attitude of all these banks. we discussed the same matter at Kansas City. Of course, I am go- ing to study this question of silver certificates very closely and will let you know what I find. The Wall Street Journal last week had an article about the status of various issues of money, which I send you enclosed. I also send you copies of articles which appeared in the same paper dealing with my speech. Note particularly the one of October fifth, sailing into the Commercial & Financial Chronicle (3) which may be of interest to you. what this idiot wrote. Of course, you saw It would be fine if he could be taken to account, though I think he is hopeless. His criticism of , my argWeX, does not take up any ar- gument of mine but is siLiply dealing in general asser- tions which it is quite futile to attempt to refute. Have you shaped up your article or what are you planning in this connection? With heartiest good wishes and kirik 7t regards, Very sincer k/Lt 1,7,697 J'Utf eY27-7 &CO:)2, 7r1/11-e'l- IL/4 Benj. Strong, jr., Esq., Estes Park, Colordao. Enc. y yours, 1,tA...e/t 4ete,t_ Ltd dee-,14/1-, . WA% UNION WESTERNUNION TER DAY THEO. N. VAIL. PRESIDENT RECEIVED AT ' , D6J 74 BLUE , WASHINGTON D C - 140PM CT 10 1916 BENJ STRONG JR., THE LEWISTON HOTn 11111 ESTES PARK, COLO. SPENT YESTERDAY IN NEWYORK HA E YOU WRITTEN JAY ABOUT AIKEN JAY APPEARS iliko BE READY TO REPORT BUT THINK HIS HAND WOULD BE GREATLY STRENGHTENED BY A LETTER FROM YOU AIKEN HERE TZIDAY TOLD ME WING HAD MADE HIM VERY ATTRACTIVE OFFER TO JOIN HIS BANK V I: _ DISCUSSED MATTER FULLY AND AlkEN / ILL DECLINE THINK HOWEVER IF YOU FAV PROCEED FAIRLY AND PROMPTLY FONDEST PLAN WE REGARDS HOPE YOU ARE WELL PAUL M ':JARBUR ..'"---------...--'"----- 305PM. VE. BANK W YORK FMKZAL RESERVE BOARD WASHINGTON October 12, 1916. Dear Sir: Your letter of October 11th has been received, enclosing a letter from the rational Bank of Commerce in New York, inquiring whether or not the purchase of hides in the Argentine, to be warehoused there and to be carried until after the war, could be financed by acceptances drawn upon a New York member bank. The bills of lading or warehouse receipts. controlling the hides would be held by the agent of the accepting bank as a collateral and no renewals would be granted after the goods had passed out of the control of the accepting bank. In reply, I beg to state that the New York member bank could give its acceptance for the transaction indicated, as they are given to finance a transaction involving the exportation of goods; in accordance with the board's ruling of September 1, 1915, page 268, Federal Reserve Bulletin, 1915. Very truly yours, (signed) aul Pierre Jay, Esq., Federal Reserve Agent, New York, 71arburg. FEDER RESERVE BOARD 420?.Apt"HINGTON October 23, 1916. ly dear Strong: I have before me your letter of October 20th, inclosing copy of your first article, which I shall take home and study tonight. I retaliate by sending you herewith a copy of Dr. Miller's speech, which I have not had an opportunity to read in its final form, but I suspect that you and I shall find some spots with which we shall not be in accord. About Aiken, I telephoned Jay on Saturday and he told me that he that had spoken to Peabody, but only in a hurried way, and Woodward had been away; but he expected to take the matter up energetically-this week. to make much progress during ly, that is not his method. I have my doubts that he is going the next few days, as, unfortunateIt takes a whole lot of patience but I have no doubt that finally he will pull the latter off all right. In all fairness to him, I must say that he has had his hands Pull with Clayton matters, in which he has been very intelligent, though all the election and the time tardy. Furthermore, that keeps him busy. of New York directors is taking place just now I suppose he,is all up 'in the air today about the which the Board found it necessary to take with one-hundred million dollar credit attitude reference to be negotiated by the to the (2) Guaranty Trust, the Bankers Trust and Bonbright. When we dis- cussed the first credits of this kind, you remember I pointed out the dangers of opening the door in this way, but finally you urged us not to close the door and to leave it to the discretion of the New York Bank to discriminate at the proper moment if the thing should outgrow safe proportions. I am sorry that you were not here last week, because not only do I believe that you might have seen the thing coming, but I also think that you would have been the first to recognize that it was time to protect the system. I inclose herewith a copy of the telegram 3hich we sent Jay and the other Federal Reserve Agents. The point is this - since the Brown credit there have been two or three new credits, with which you are familiar, bringing the total of these acceptances up to about fifty milThen with this new credit lions. of one hundred millions - ninety day bills to be renewed five times and a definiteagreement on the part of the acceptors to advance the money at 5e0 and eo acceptance commission for three months, secured by French Government bonds, he441-44mon made payable in dollars so as to coincide with the maturity of the eighteen months' credit. die The Board in its considerations/regarded entirely the question of whether or not this was a French Government credit, but considered only the question of whether or not it was safe tiethe Federal Reserve Banks to have the impression go out that they would stand ready to hold the bag for 4100,000,000 of these 0 o (3) bills. There was unanimity in the Board that we could not As a matter of take the responsibility of standing "pat". fact, these are eighteen months' cash advances made by the who has no interest accepting bank to the French borrower, whatever in the rediscounting of these acceptances. He draws upon the American bank as a matter of accommodation so as to enable this American bank in the Federal Reserve System. cepting banks will its convenience to soak Whenever money is easy, the ac- carry their own acceptances, but when a sharp turn will come, there may be $150,000,000 of acceptances falling down upon the Federal Reserve System ably more, because if we do not call a halt doubt that similar credits will follow. 1.1d prob- now there is no The vicious part of it is that, while I should be delighted to see this country accept $500,000,000 to finance foreign trade, I should want it to be accepted in a way that puts the burden of the discount operation upon the foreigners, so that in case we find ourselves obliged to protect ourselves and to raise the discount rate we could force back the foreigner to use acceptance credits in his own country. However, whenever, as in this instance, the acceptor take)the entire burden of the financing, we might raise our discount rate to 20% and we would be hitting oay our own banks without being able to re-transfer the burden to the other side of the water. That is unscientific, rotten and danger- ous financing, and while Mr. Kent, in a letter addressed to Mr. Jay, thought he was doing wonderful pioneer work in educating (4) our banks to use the acceptance facilities, I think that it is mighty poor educating - in all of which I am certain that you and I are in accord. This kind of eighteen months' borrowing on such a scale as that proposed ought to appeal to the investment market, but should not be dumped on the discount market. If thatpolicy should be permitted, theBe finance credits would ultimately 'dictate the discount rates to the detriment of the normal bus- iness of the country, and it would be"putting the cart before horse." Of course, we would not want to interfere at all with the member banks' right to accept for this kind of transaction; but we want would-be acceptors to understand the situation before they commit themselves. You know that I am a liberal con- structionist and that I made a pretty arduous fight in order to secure for banks the right to accept for renewals; but when I see how foolish the banks are and at once abuse their privileges, I can understand how Government officials gradually turn into strict constructionists. What you say about the Comptroller's statements is quite in line with my own thought about the subject. As a matter of fact, I wrote the Comptroller at once when hie latest statement was published that I did not agree with his conclusions, but his answer was that he did not agree with mine. His point of view is plainly to analyze the figures which he gets, not from the point of view of safety for the Federal Reserve System, but (5) in order to find material from a political point of view to boost the benefits of the system. It is most regrettable and Is one of the things that we shall have to take up with Congress during the next session. You ask what the President meant when he said there was a conspiracy to get control of the new banking system. I think this remark was called forth by Vanderlip's criticism of the system at Kansas City. He spoke there of the fallacy of de- centralization and stated that a good system had been spoiled by too much political administration. These remarks were most unfortunate, as was the comment made by the President; but what the latter meant to say was that Wall Street, if the Republicans were elected, would want to establish a central bank and then get control of the system. That, at least, is as I undetstood it. As to the political outlook, I know as much about it as you do. Everybody is simply guessing. My own that Wilson will be elected. With kind regards and hoping that you will continue to enjoy your new and pretty Denver residence, and with cordial regards from all the members of the Board and of the W"rburg family, I am Alway, sincerely yours Le Benjamin Strong, Jr., Fag., 1400 Montview Boulevard, Denver, Colo. 856 COPY OF TELEGRAM SENT TO ALL FEDERAL RESERVE AGENTS October 23, 1916. Board is advised that an acceptance credit approximating one hundred million dollars, drawn on American banks and trust companies, is about to be concluded, on ninety day drafts, subject to five renewals, the accepting banks committing themselves to advance the money to the foreign borrowers at five and one-half per cent per annum, plus acceptance commission of one-fourth per cent for each three months. In view of widely circulated press statements that these acCeptances will be eligible for rediscount or purchase by Federal reserve banks, ;Board deems it its duty to point out thatlanking prudence and obligations toward general commercial interests of the country require that Federal reserve banks should not acquire acceptances of this character beyond a oonservative amount, This view is consistent with the Board's pOlicy in the past, and while it Wishes, through all legitimate means, i.e promote the development of the American acceptance market and to further the growth of our export trade, and while it wishes to avoid any attitude of interference with the powers of member banks in this respect, Board feels nevertheless that it should be clearly understood that these acceptances which represent obligations for cash advances aggregating a very large amount, by the acceptors for eighteen months, cannot properly be regarded as paper self-liquidating within a period of ninety days. If offered in excessie amounts, Federal Reserve Banks may ID obliged to discriminate against or to exclude entirely acceptances of this character. Board feels that prospective acceptors should have a clear understanding of this. if S. 'JIM) SYMBOL age Blue WESTE WESTERN upon Nita Message NL f these three symbols the check number of Letter is aday message. Otheratracter is indicated by th e TEL wv-i.s- yr LI ION AM NEWCOMB CARLTON, PRIMIDIENT CLASS OF SERVICE SYN. Day Message Day Lett, BILN Night Message Nita Night Letter NL If none of these three symbols appears after the check number of wordsithis is aday message. Otherwise its character is Indicated by the symbol appearing after the check. appearing after the check. ..:CEIVED AT 915-919 SEVENTEENTH STREET, DENVER, COLO. ALWAYS OPEN. 25 RI 2 IC B475CH SHEET TWO BE SENT OUT IN DAY Ofi .TWO WI LL CORRECT WRONG : IMPRESS ION CREATED BY Fi RST C I RCULAR/HARDING EXPECTS TO SPEAK AT NEWYOrRK NEXT WEEK AND EXPECTS THEN TO GI VE GENERAL TALK' ABOUT' ACCEPTANCES AND CAN 'THEN DEAL WI:TN QUESTION FULLY ON BROAD LINES WITHOUT' APPEARING TO 'HI'T ANY / C PARTICULAR.TRANSACTION:WE ARE NOT' DEALING WITH POWER OF ,.MEMBER BANK ( ACCEPT' WE ONLY THINK IT' OUR DUTY TO MAKE IT CLEAR THAT WE'CANNOT BE 'EXPECTED TO HOLD THE BAG FOR .TRANSACTIONS OF, THIS CHARACTER AND .TKAI SCOPE/THIS WILL NOT' HAVE AN ALARMING BUT QUITE 'THE CONTRARY :A / REASSURING EFFECT' UPON MOST.Q OUR MEMBER BANKS:AREACTIONS RECEIVED TODAY FROM SEVERAL OF OUR OWN"BANKS IN IIVERY . 1 - .THAT WAY KINDEST' REGARDS 1-4rburg. IMPORTANT CENTERS, 4 Li _ ostIOL. sage Letter Blue t Message Nita Jigh, Letter NL none of these three symbols 'ears after the check number of srds1this is a day message. OtherIse Its character is indicated by the if ESTE Li ION TEL zrev M Plc Le 44:I4F, Nit WEStERNUNION NEWCOMB CARLTON, PRESIDENT ymbol appearing after the check. :CEIVED AT 915-919 SEVENTEENTH STREET, DENVER, COLD. B475CH '223 GOVT N I TE WASHINGTON D C 24 BENJ STRONG JR Auypt,ys OPEN.- CLASS OF SERVICE SYMBOI.. Day Message Day Letter Blue Night Message Nite . NL Night Letter 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. -WIS 6'Cl4; 25. A4 2 149 713 4100 MONTV I EW BLVD DENVER COLO' YESTERDAY JAY AND CRT'S WROTE YOU FULLY HAD CONFERENCE HERL TODAY WITH BUT IT' IS PLAIN DUTY 'TO PREVENT' DON'T\ WORRY SHALL NOT SWING BIG STICK KiND OF PAPER SWAMPED WITH UNDULY LARGE'AMOUNI"THIS SYSTEM FROM BEING To BE MEMBERS TO BE GI v EN -ser woun , AND IF, THAT IS SO FAIR NOTICE OUGHT FOUR LATTER SENT' OUT C I RCULARS 'TO SYNDIC ATE IT IS UNFORTUNATE THAT WOULD BE EL I G I BLE/PT CAN /OF STATING THAT ACCEPTANCES 'THOUSAND BANKS, TO ITS NEXT CIRCULAR LETTER ARRANGED THAT SYNDIC ATE IN PROBABLY BE - ; ;# 1 -C3 FEDERAL RESERVE BOARD X.,"11rvvASHINGTON October 30, 1916. Dear Strong: I received today your letter of October 2 th, about the French credits, and I was very much interested to read your views. I am particularly glad to have them because I am frank to say that it was not easy for me to deal with this matter according to my own conscience, surmising from the telegram that you sent to your New York associates that you were not quite in sympathy with what we were doing. I am glad to see from your letter that we are not so far apart as I was afraid we might be. You have meanwhile received my letter. I am confident that if you had been in New York and seen the thing coming, and we had exchanged views in time, a good deal of trouble might have been avoided. Some of the difficulties arise from the fact that we have not been willing, as you correctly say, to look into these credits but simply deal with them by general regulations. Unfortunately, the fact that the two banking institutions stated in their circular that this paper would be Federal Reserve thousand banks, forced eligible for rediscount with the Banks and sent the circular our hand; and we had to four to take some notice. 41* 0 0 (2) The matter has Kent and Hemphill been fairly satisfactorily settled. were here on Saturday. The latter made a fool of himself while Kent impressed me as being very sin- cere and serious in his aims. He and I had quite a discuss- ion before the Board about what acceptances ought to be and not to be, what they ought a new light. and I believe that I gave him I shall be very happy to see him again and I only wish that he discuss this matter further with him. had come before. They told us that theiictiiishrunk from $100,000,000 to $20,000,000 and that they had applications for only $18,000,000 ,and that probably they would make up the rest themselves so that the topmost they could offer the French - if that much - would be of the fact were no more $50,000,000. In view that as far as outsiders were concerned there than $20,000,000, we finally decided today not to force them to revise their statement by sending a second circular, nor to make a public statement ourselves. Harding is going to deliver a speech Wednesday at New York and will make a very general statement about acceptances without men- tioning any names, and he will fully explain what we think is right and what we think is wrong. he says about acceptances on pages nine You will find what to nineteen. I am frank to say that I never realized before that there was a definite agreement in all these credits on the (3) part of the acceptor to carry his own drafts at a given rate. As we are now informed, substantially the same stipul tions existed in the other French credits. About thoee4 credits we never received any information except,a al 214U12-0-4 few weeks ago,c we received a synopsis which did not mention this phase of the arrangements at all. It is clear to me, as I wrote you the other day, that a definite agreement on the part of an acceptor to provide money for eighteen months at 6i% renders the acceptance a subterfuge for the mere purpose of the possible accommodation given to the acceptor for his benefit. The drawer is not interested any more at all in the entire acceptance manipulation. Of course, there was a strong tendency in the Board to eetee, go to the other extreme tiev. and declare these acceptances 4 as ineligible. I.took the view that that would be over-doing it entirely - that renewals in themselves were 11g111:mate, provided they took the proper form, but that as a 4 matter of 2.1icy, the banks should protect themselveaA4-the market from an over-dose of such renewals and from an abuse of the acceptance facilities. That view finally prevailed. On the whole, I am glad to say, there was complete unanimity on the part of the members of the Board in dealing with this matter. (4 ) It may interest you to know that both Boston and Philadelphia had advised their member banks that they should not expect that the banks would hold the bag for these acceptances - even before the Board had sent its telegram; and Chicago's view you can best judge from the fact that they over-reached themselves to the extent of declaring these acceptances ineligible for open market operations, a point of view from which we shall have to make them retract. Other Federal Reserve Banks expressed themselves at once as in entire harmony with our views and ',eke) in full acobrd with what we want I believe that Jay, alss is 4 to achieve - even though I believe at times he was afraid that the "big stick" vould be swung too energetically. Though at some times it looked that way, this has been avoided and I think the matter has been handled and settled in the best possible manner. It is necessary, however, that the banks protect themselves, and I am rather inclined to think that it would be advisable to treat unendorsed finance drafts of this nature on a basis a little less advantageous than the regular commercial paper. I think a rate one-fourth per cent higher will at this time be sufficient, just as an indication of the policy of the banks, and it would then permit us, (5) whenever it should become necessary, to discriminate more or less. Miller told me that he had received your letter and I expect to see it tomorrow. This is enough for one mail. soon again I expect to write you and I hope that meanwhile you have not fretted about this matter, which I think has been disposed of to the best interest of the system. With kinect regards, I am Always einc rely yours, Benjamin Strong, Jr., Esq., 4100 Montview Boulevard, Denver, Colorado. 6.04-ey,f ,,;g fp:A // _ a. , 66 Y6AY-. ai (eAc4 osi FEDERAL RESERVE BOARD WASHINGTON 4/0,, -1.976, October 31, 1916. Dear Strong: I have just read your letter to Mr. Miller and want drop you a line to tell you how much I enjoyed it. most excellent and very helpful. One paragraph to It is a convincing presentation, which will be in your letter (which I have not before me) amused me very muoh - or rather, puzzled me. You say that but you are not quite sure/that I am getting away from you on the question of the issue of notes against gold and that you hope I shall stay "put" with you on this proposition. I cannot imagine at all why any such doubt could have originated in your mind. My fight for issue of notes against gold and notes as reserve money anti-dates,by several tion of the Federal Reserve Act. years, the crea- I did say at some time that the most important thing to secure was the power to have vault money kept with the Federal Reserve Banks as a balance and counted as reserve. But I ir.s only willineto strike for this amendment first because I felt certain that when once we had crossed this line, the next step would follow almost automatically. What will now happen is this: Either the banks will put their vault money into the Federal Reserve Banks and retain only a small proportion in their vaults (in that case the entire (s) argument of the terrible inflation that would ensue if the remaining comparatively small amount were that would be kept/in Federal Reserve notes,would fall to the ground); or, the alternative, that banks will not be able to increase their bal- ances very much because they need so large an amount of till money that it is clearly shown that the additional strength necessary for the Federal Reserve Banks without permitting the notes to be cannot be counted secured as reserves. It would also show that as long as the law discriminates between Federal Reserve notes and lawful money the banks, too, will discriminate in favor of lawful money against the Federal Re_ Serve Bank balance. In addition to all that, we have now the argument which cannot be the entire vault beaten, that money to go into when the law permits Federal Reserve Banks and have that counted as reserve money, there cannot be any logic at all or any business that unguaranteed balance cause inflation while a few reason why should be reserve money and not Federal Reserve notes taken from the balance and kept in vault should be considered as a source of danger. , My feeling was simply that the first amendment we could secure without much difficulty, and that this amendment once would soon have to follow. your head that I was going to But I hope you never got it into abandon the fight for this most necessary perfection of our system. Cordially yours, Jr., Esq., Benjamin Strong, 4100 Montview Boulevard, Denver, Colo. Dictated but not read "put overa, the rest e Mto1/4 4:fit:11U179(1;444!'V./h. ,A,Arb I PO November 10, 1916. Dear Mr. Jay: When in New York a few days ago you 3hoved me a :atter received from Governor Strong in which he took .u.e with the Board for haviwf ruled adversely in the question of the application of the Mechanics & Metals National Bank for permission to aocept for three months' drafts drawn for the purpose of furn!shinr dollar exchange by banks or bankers in France or England. I told you that I had peronally secured thia Aldment and that I felt responsible to sesAthat it 4,s not now abused. I doubt very much Alether.you or Governor Strong have ever read my oorrespondence. with Senator Crxen or my testimony before the Coniittee on Banking and Currency in thin respect. If Governor Strong had, I am sure that he could not have insinuated to the Board that we should permit British and French banks, on the f=trength of this nmendment, to go ahead and draw any kind of a finance bill, and that he would not have characterized as ridiculous the Bo:,,,%1's ruling in this respect. If we did at Governor Strong asks us to do we would open the door wide for any kind of (a) finance draft from Europe, and, as a matter of fact, we would have nullified all the provieione in the act which try to restrict the power of American banks to accept only for oertain nell pecified transaction's. If I lent my hand to any such ruling, I eould feel et-tia ,e0 e tvk that I had broken faith with those who enacted the 1w, In my letter to Senator Owen, which apeears on page 67 or the enclosed copy of the hearings, you will find the following paragraph: "I an fully consciouc of the fact that a draft of this kind, if permitted, might be clacsidied as closely aperoaching or being a speciee of the finance draft; but to the extent as above outlined I think this draft has to be sanctioned in order to place our banks on a per with the Britioh banke and other foreign banks operating in South and Central America. If Oongreca eill truet the Federal Reaerve Board to oupervise theze transactions and keep them within proper bounds, I believe that an amendment as here proposed -eculd rebove a greet handicap now burdening the Amerioan banks, ehile any abuae of Chase facilities could be stopped at any time by the Federal Reserve Board." On pagee 73 to 76 you'Alli find my testimony with referenoe to this particular amendment, and, on page 76, you will find that I said: "But because we realize that this is not a thing that should be done promiscuously and should not be abused ee heve put in both, for the accepting end for the purehasing of eccptanoes the poeer of the Board to regulate and euperviae it." (3) Governor Strong honestly believes that it would be the beat for the growth of our acceptance system if there are no reetriction whateoever - a n ngland - and if our member banks could be permitted to accept according to the requirements of trade and finance, leaving it to the businene judgment of the central banks and the bank1n E comeunity in general to regulate any abuoe. That, of course, is the ideal way for the development of banking wherever such development is safe and permitted by the law. We must remain conscious, however, of the fact that we are operating under a lam and that we must not exclusively be 31eided by what we vieh but that, as citizens and, to be sure, a@ a government body, it is our duty to live up to the reetrictions of the law. We should not be astonished to find that the member banks from time to time will try to beat the law. But if the Federal Reaerve Board and the Federal fleeerve Bankn should adopt that attitude it would be the en 1 of the ehole eyetem. I am sending a copy of this letter to Governor Strong. Very truly yours, Pierre Jay, Esq., Federal. Reserve Agent, Now York. p FEDERAL RESERVE BOARD WASHINGTON November 14, 1916. Dear Strong: I wrote you a few days ago and send you herewith copy of a letter which I have written to Dr. Miller. I thought it might amuse you to read the same. I have received a couple of nice letters of yours and shall reply to the, in a few days. With kindest regards, Sincerely yours, Benj. Strong, jr,, Esq., 4100 Montview Boulevard, Denver, Colorado. Enc. FEDERAL R RVE BOARD WASH November 16, 1916. Dear Strong: I have not yet answered your letter of October 30th. Your request for a photograph of mine is highly flattering, and I am sending you one under separate cover, upon the condition that you sand me one of yours. If you should find, however, that looking at my face will interfere with your digestiontso that you do not put on five pounds a month, please turn that photo of mine to the wall or dispose of it in any other proper way. I am afraid that you are right that Mr. Jay might feel little bit discouraged. But our minds evidently met, be- cause when he was here I spoke to him along the same lines, telling him how impossible it would be for him to carry on this work alone and as he was over-crowded, I believe that ne sees the necessity. I fear, however, that in spite of all that,he does not feel quite happy at the thought of playing second fiddle to anybody but you - though he is too decent and proud a fellow to say that in so many words. Unfortunately, however, he is not enough of an executive and I feel very keenly that it is high time that some aggressive second in command were put into the bank. (2) About French credits, I regret that we do not understand each other, but evidently we do not very well. We did not make any public announcement, but it was plainly our duty to put would-be member-bank participants in the French credit on notice, inasmuch as the circular of the Bankers Trust and the Guaranty Trust was misleading. As you noticed, there is no scarcity of short loans made to European belligerent countries and as long as the country and its investors think that it is safe for them to buy these loans, we are securing just what you desire - that is to say, maturing foreign credits with which we can protect ourselves if the tide should turn. These credits are increasing at such a rate and the banks and the public will be so filled with them that it certainly is not necessary to involve in these investments the ultima ratio of our country's reserve money - that is, the Federal Reserve System. For foreign acceptance credits in the regular way, or even somewhat irregular, we want to open our acceptance facilities as wide as we possibly can. But there is no sense whatever in getting this acceptance market overloaded with essentially investment paper when the investment market itself is so wide open and in a fair way to be overloaded. Bedause other countries are at war and have to forget every rule of sound banking, we need not lose all direction and do the same. Our responsibility is even greater in this respect because we are now laying the foundation for future business (3) methods and have a great responsibility upon our hands in not teaching our country poor banking methods. There is no nec- essity for doing so and it would be nothing less than reckless. What you say about the power cf discount rates is only partly true. It is true that the higher discount rates draw money into a market for the purpose of buying bills drawn on that market. But at the same time the volume of bills drawn on the market is being strongly reduced, owing to high interest rates. I know what I am talking about because when still a banker in New York and in Germany I covered our long bills on London and used other credits whenever the interest rate in London was raised to a point where our margin against the home market was wiped out. As to my being "reluctantly liberal" in the acceptance business you are quite right - I am a liberal constructionist for any kind of a legitimate acceptance. I have been fighting for that, as you know, against practically every member of the Board, who, in the beginning, all thought it was dangerous to permit the bankers acceptances to absorb too farge a portion of the Federal Reserve Banks' funds. But I have consistently opposed any abuse of the acceptance business by the finance draft, and your point of view has been more responsible for that than anything else. I have felt all along that you do not see the dangers of having the acceptance market filled with "investment acceptances" in the same light as I do, and I feel (4) that recent events have fully justified my fears, and all my colleagues have come around to seeing this thing more in the same light as I did a year ago. Your point of view was then that we could keep these finance drafts within proper limits. We were then dealing with the one comparatively small credit and at that time I think you would have said that you were certain that you would only get a small portion of that. There is now over one hundred millions of these credits and we have about thirty millions of these drafts in our system. But there has been no indication that the Bunk of New York of its own accord found it necessary to begin to discriminate against this paper and to state in so many words how far it wished to go. Quite the contrary, all that we have been getting from that quarter and from you are expressions to the effect that the Board was interfering with the free development of the acceptance business in trying to keep this thing within reasonable bounds. As a matter of fact, even yesterday I re- ceived a letter from--Mr. Austin in which he says that he does not know how to discriminate; that New York des not know how to do it either. If that be true (and of course I think it is silly) how does New York expect to make good its plan of protecting the system from an overflow of these drafts? and if they cannot, would not those be right who say that these bills must be absolutely excluded, because if they are not, the 0 (5) legitimate business of the country will have to pay the price because in that case every new twenty-five, fifty, or one-hundred million dollar credit would force up the discount rate for all the legitimate bankers' acceptances of the country, which ought to be encouraged. Think it over a little more, old man, and don't forget that we are not at war and that it is our duty to remain strong and healthy for the time after the war. I inclose a copy of a tentative letter which I have addressed to Mr. Glass without having any intention of sending it. I wrote it only for the purpose of getting Messrs Harding, Delano, Miller and myself in line on what we want to secure during the next session of Congress. If you think that there are any amendments which are necessary which.I have forgotten, please give me the benefit of your suggestions. With kind regards and b st wishes, I am ' Alway Benjamin Strong, Jr., Esq., 4100 Montview Boulevard, Denver, Colorado. *inc. sincerely yo re, rE SYMBOL Day Message Day Letter Night Message 1 1 fr, NL If none of these three symbols TE,Ilf.: Mears after the check number of Day Letter symbol appearing after the check. 1- words) this is a day message. Otherwise Its character is indicated by the symbol appearing after the check. OPEN YOTIO , 23 80, tc/led to K WASHINGTON DC 420P NOV 16 191*e o ENJAM I N STRONG JR 924 4100 MONTVIEW BLVD 'DAY IS THE SECOND B I RTHDAY OF DENVER COLO IA BANKS BEST WISHES R THEIR FURTHER GROWTH A,ND GOOD LUCK TO YOU IN ,ITIE NEW YEAR G K 317PM Nite Night Letter NL If none of these three symbols appears after the check number of CARLTON. PRESIDENT 24,1419 Seventeenth lECEIVED AT AM Blue Night Message gift! words) this Ise day message. Otherwise its character is indicated by the 245NY SQ UNION SYMBOL Day Message WESTERN UNION Nite Night Lotter WESTE 47.2ba-boa. Blue CLASS OF SERVICE FEDERAL RESERVE BOARD ON 4/ s'a WASHIN .d4 97;ce' v9ir, <9/, November 21, 1916. 0 Dear Strong: I just received your two letters of November seventeenth. Let me answer the business letter first. There is nothing in the rumor that the Treasury wants to issue gold certificates of the denomination of 5. Mr. Treman advised me of this, and when I investigated the matter I found it was absolute nonsense. The Treasury wants to coop- erate with us all they can in issuing the large denominations. Mr. Malburn is absolutely splendid in this matter. Nothing comprehensive can be done, however, as long as Federal Reserve notes are not reserve money. Unfortunately, I have not 80 far been able to get Mr. Miller and Mr. Delano to cooperate with me fully on.these lines. I shall write to you fully about this matter and about your charming fourteen page letter, which Iqlave just finished reading and which gave me no end of pleasure. The whole matter you refer to therein has meanwhile been put into pretty good shape. I shall write to you probably tomorrow at great length about it as today we have the Advisory Council here and my time is pretty well taken up. I am awfully sorry to learn that you have had a little set-back. I hope it does not amount to anything and that, by (2) the time this reaches you, you will be up and about again. The sixteenth I spent in New York and dropped in at the bank, where I happened to find Treman, also Sailer, Kenzel and Curtis. Aiken and Rhoads - I believe we had a very use- ful chat together in which later on Mr. Peabody and Mr. Wood- ward joined. I found your sweet telegram when I got home, and thank you most sincerely for it. You are over-stating the case by a long shot, and I should like to return the compliment to you. But the main thing is, when the next birthday comes, A-4- we shall have you back again in the front rank. With warmest regards, in which Nina and Bettina join, I am Always co dially yours, Benj. Strong, jr., Esq., 4100 Montview Boulevard, Denver, Colorado. Tovember WNTIWITTIAV Uy der Ur. ?reptant hmrs your- let0er of November Und end thank you very A for the same. 1 sincerely appracite your biW.k.yld encouraging zeplarke -,'4out what we Axe try na to accomplish here. 4x,r4 very norry to learn that M. jay in laid -up acain and 1 hope that he v411 be better again in a fes lays. A. patently he has taken a cheasea4a detting out too early - a 1 thing that he out to have avoided. Tour sucoostion that I orite lr:o about our recent conforeLce hero sith the Aelvloory Council I4M hany to act up,on; all the more aim, oiling to the abentIce of Mx. U.::4.3a41 froa tke cont6rence, you, slight otherwise not be adeised as to stat transpired. I am incloning hereuith a covy of the 4Aatement giv to the press at the end of te oonference a rerort Ithich no doubt you have seen in the papers. I migb% add, because it is or considerable. interest, tht,t it reference to the first topic - that ie, 1 transfer Council Roservt;, of wait money to t added that this development vvould be tosatIy facilitated by nrthg an 'amendment permitting the member banks to count 7ederal Reserve notes as resevee. All members prent favorld such ma amendment with the exception only of Ir. Rowe of Cincinnati. Ur. Morgan and. !jr, ewinney ware not present. le know that nr. lioran is in favor of such au a&endsent. I not quite posted o4 tc Mr. Swinneyos position in the matter. A free discussion of this topic ensued witn the Board, in which both sides of the problem were fully developed. There is one additional racsamendation which may be of interest to you, as follows: *The Council reccends that to the exoetions oonr. tained in Section SJOZ R 8 e Lzended by Section i of the Feleral Reserve Act the following w.ould be adaed. 45 a sixth exception: *6th. Liabilities at; an end(Tser on acepted bills of exchange. =tuf1:4 owned by the associ tion and ;s.edisocunted ut home or abroad.** atn diPoussion was on the general financial situation; a topic witn which there are closely connected the questione of reserves, old importations and torelen loansi also the question of foreier acceptc.nos ere its. To begin with the latter, the Council unresrvedly creed the position tp,ken by the Board, aa exzesseci in The Governor Mrdingle a(Wress in Ne* York. They even 7ent fur- ther that that a 'position tich i4 not quite shared by the Board.I stir believe that the position which ve took is (3) just - that is to nay that we hmid not go to the ex- tree*: of declaring tete° bills Aei1i but simply to deal a matter of ;:olicv. I do not think that the ...int of view taken by the Council, that these acceetacees mi ht be eligible for rodiecount when offered by oember banks, but ohould not be taken in the open market, is a. logical one e any how, not as a matter of ruling. that they mermt to say th therii mac that inasmuch As some member banks now had thee bills, they ought to have Ma opportunity in ceee of need to rediscount tAe) parer. They did not feel that such obligation, even though it might be only a moral one, existed towart non-me ber eanks, ene they were in eeneral aoeord that these .acceptarcee were not a %eery dneirable investment for Federal Reserve Banks, and that their use should not be freely. encouraaed. Ae to the eniral finanoial eituation, it W68 pointed out that money was not so easy ao it looked; that in most of districts member banks were now lending up pretty veil to their local reserve limits and that it would not st all surpriee the etehere of the Council if In the near future Fedveal Reserve Banks would be mere freely resorted to. As a matter of fact, in some dietricts, particularly In Boeton, banks are pretty -real loaned up and rediscount et thie time pretty freely nith the Federal Reeerve Bea*. itr in ioatione you have seen in Nee York. (4) It wh.s also stated that in ooze dintricts ban had been investing P., little bit too freely in fweign lots, z,nd that it wts time thtst the 1341.rd sounded A Litte or warning Axst rurther loan axvInsion and locicing up of funds. Tic question ToirAt discussed wLether or not dte Yoyember 16, 71,717, should be aavatced so us to terminate soonthe vractice of counting alences with correspondents in rev rive and central reserve cities a& reserves. If tha final tiore, as colltemplated for November, iSI7, took pince to4ay, the cec4sh retrves wovld be wiped out t'xid it world be found tit, as e eat er of fnct, tte batis are pretty well loned up to their lezza limite. The so-cillied sxss reserves* 7?ith rofm,rve azents of &bout 46CiC,4(10 would tben appear sr what, in fact, they are, bank Oa/Knees which have been lnve6ted in loans tay corzespondent re,saxvo sonts. It wr,s firly felt the,t it tould be to tbs boot advsntmEe of the entire Cinancial sitution ir Cones would ezipowar the Feder?.1 Reserve Board, with sixty day*, notice, V; put this fiaal °image into effect. It would put all the 'banks on notice and -emove 80011 atisconceptions 8 to the existing financial situation. It edanerally felt that a step or this kind would have 00*4 erect in expididine the theory that further importations of gold must of necesity uring inflations (5) banks theaselves have the power to u certain extent of dwAlingwith this danger by keeping the reserves higher; and there are other ways ami zeans cf dealing with an .overflew of gold eo A6 to keep it out of harm's way. On the other hand, the feeling was freely espreod. that some cool thought ought to prevail in dealing Pith foreign loans; thAt they oucht to be closely ocrutinized and, that we should not overlook the that that,if ti e wax net on for a long period, even the strongest &monot the European powers at the end be in a financial situation which would be Th critical - to say the least and which would. force those who now believe themselves. to Se making' ehot loans, to ac- cept ion 6 term bonds in payment of these hew pparently short Inveotwents. It 11-6 stUd that sooror or later this unnatural- ly atizulated export trade roulo come to atop and that it vouad be better to bring it down cradually to a nemal scope than to keep it up by an urtificial atimulation of foreign that when peace bhould ue eet7,bli3hed there would off and not a perpendicular drop. It was thought that at the end of the war there would be east orrOrtunitiee ror the United Stat to act as the world's banker and to do ita share in the ox k of reconstruction than to begin; and that vo should ase to it th t ret keep ourselves strong for that moiscat und be careful not to be a grtdtal fUi (6) E;et involved so -deeply this ti .w 4t,1 to become the .:2art.- A3 r of the tel. ieente to such an sztont that when peace Amid be restored * should, be in, the position of hailli; dependent upon our debtors Uther thsn of bean& .17,Ten4ent and: choosing our own cour,74. The Botxd did not feel that it should tvke the rPtporbibilit. of advising the investors and it vas thought that afa in AZ thore WsViei a nwtural prooesa of financing out foraign trade by a bacrlow of zecuritiev into the hands or the inve;rtors, the United St%teit Iere doing, in effect a 'eh busine44$ which could only be ooneidered u healthy On . A similar relult vou d be reached by fere/F.1i lor,nn secured by out olifn sooritiev. 'Von, however, our trade is to be maintained, by the granting of practically unlimited amvunto of uneccured loans to belligerent nations and particularly when these loans ate to be put into a form appealing to our 4a4ks ratter than to Inveztcra, the Board teals i;hat uch a devflopment rould not be a ';'ealthy one undor pt con,litibneg, While in form these short term, uni7,:od foreign bonds or notes may a.r:'.ear ter of fact, the result will be the. in the aggrer,at. . ,r4 a matlinny hundreds el zillions, or possibly an amount which. might apvroaCh a billion, would Ole icolced up by it hanks in zm nvestment which eould have to he .$, coan, through to the end of the (7) 7,;ar and it ?oovld. then probably bava to be turned. into long term 911tourities. The Advieory Council nenthrs oxreesed teir uhreorvad opinion to tile ofTect that this was not adviaable and. that a further lock up of funds by the buni4e of the country in such a manner could. only be considered with eerious.Alegivings. In etrioteet confident,* The Kr. D.vison %as here lavA Fatv,rday. he dieouseed with the Board the que.1-Aion of the British Reohequer bonds aru:i in thibi entirely informal conference views Tere ',:levelopsti by the Govern** and members of tbe Board on tEee)o very lines and it we a great satienction to the Board to see Vlat the Adviecry Council sembere, who Independently considered the vituation, reached eANctly the same conolutione. Vory truly yo R. H. Trea4,n, X5q., Deputy Gov: rnors Feder41 Reeerve Bank; Re% York, ,( Signed) PAUL M. WARE.URG ri FEDERAL RESERVE BOARD ,AT.ASHIN 44.1!,. ,6eA 410k, ~8494 November 23, 1916. Dear Strong: I have just finished dictating a letter to Mr. Treman, in which I give him the meat of our last conference with the Advisory Council and also of our meeting with Mr. Davison, who was here last Saturday. As you know, there has been going on quite an active press campaign, the object of which was to show that unless we granted foreign credits quite freely the country ran the risk of being choked with gold with the attendant consequences of inflation of prices and credits. Mr. Davison came over last Saturday and had a talk with the Board and expanded upon this theory. He ad- vised the Board that Morgan's had planned to offer 41100,- 000,000 of British bonds payable in dollars which were to mature in scattered maturities falling between three months and one year, it being apparently the plan to arrange the maturities so that .S10,000,000 would mature each week and then be renewed which would indicate, as he did not deny, that, provided the banks would take it, they would follow this first issue with others and place a 0 (2) here about $500,000,000 of these exchequer bonds. When these would have been placed, of course, they might consider the placing of more. But, for the time being he said, the British Government would not want to place more than a weekly maturity of $10,000,000. Davison took the point of view that they only wanted to do what was good for the country, but that the British Government was buying about .i,10,000,000 worth a day, and if we did not place these loans we were taking the responsibility of cutting down the trade of the country a very serious responsibility as we were now in a fair way of becoming the masters of the world,* -end-that-the 'The more we stimu- lated this trade,and the more loans we made to these foreign countries kt/nal GovernOr Harding (who had taken the precaution during these last weeks to place himself in touch with the leading authorities in questions of foreign policy in order to be sure that we were acting in fullest accord with what generally would be considered the best interest of the country) pointed out to Mr. Davison that there was some danger of a creditor becoming so much involved with one debtor that finally, no matter whether the creditor wanted to or not, he would have to go in deeper and (3) 'deeper. In other words, while you thought you had the bull by the tail, as a matter of fact, the bull had you by the tail. In this case, it is John Bull who would have us by the tail. England has now outstanding in short loans an amount which must be as large as between one and two billions of pounds. How these are to be funded, nobody knows. England's per capita debt next year will have multiplied by seven as against the beginning of the war. The con- tinuaticn of the war, therefore, appears madness, and as long as nobody knows how long this madness will last, there is no saying in what condition Europe will be when the war ceases. The feeling generally appears to be breaking through here at Washington (and I think also 60-iree, amongst a substantial part of the oloarer elements of the country) that the end of this war will be a draw; that the sooner it ends the better, and that continuing the war means only a needless and fruitless sacrifice of life and treasure. To think that this war must go on to keep our trade going is an abomination. To think that it ought to be the duty of the Government or the Federal Reserve Board to prevent disastrous economic consequences by prolonging it is unjustifiable. And we said to Mr. Davison that it was the general feeling that (4) we had grown enough and that we should be in a position of contemplating the breaking out of peace without a thought of alarm; that to our mind it was better to let this extraordinary trade gradually go down to more nearly normal proportions than to have it stop with a vengeance. Davison himself said that he thought there were $500,000,000 or $no,000,000 of first c;ass American securities which were held back which we might still receive in payment of goods that we are sending. We all feel that the export trade would not stop at once but trizifttEatietnd would possibly take smaller proportions and. 474/71u,elt pay for it with our securities and maybe, to a certain extent, with shipments of gold. As long as Europe sells us secured investments and as long as the investors take them there is no harm done. Altogether, We do not feel that we have the duty of protecting the investor;but we are concerned in the strength of the banking situation, and it was generally felt that these exchequer bonds, while they were made up in a form which made them appear self-liquidating, were as a matter of fact what in the aggregatelconstitute a lockup of the funds of our banks and in the end would probably have to be turned into long term bonds. When the war is over, it may or may not be good policy to grant these long term (5) and unsecured foreign loans, but we feel that first we should know whether and when and how the war will be over. As to the gold danger, the Board feels that there are many ways 1.ai which it can be dealt with. We have $700,000,000 of national bank notes which could be withdrawn if our gold circulation should increase too fast. We have greenbacks the gold cover of which could be provided very acceptably. We have a Government that will have to borrow sooner or later and should come4ito the market and borrow at this time4to lock up the gold. We could induce our member banks, either by voluntary agreement or by law, temporarily to keep hiehtr reserves. And, fin- ally, we could, as a beginning, advance the date of November, 1917, so 'as to compel our reserve transfers early next year. The latter proposition appeared to appeal to Davison, who, on the whole, placed himself in a position of only wanting to do what was best for;the country, and it was very satisfactory to us that the Advisory Council had independently reached the same conclusions as to the general situation. Forgan stated that they were all down to the lowest point of reserves. In New England the strongest banks are rediscounting quite freely with the Federal Reserve Bank. In New York we have noticed that, in spite of the (6) increase of the acceptance rate, we are getting our material quite freely, and, while it is true that our gold holdings have increased, our loan pyramid has increased in proportion; and while our cash reserve in 1914 was 12.8 it is now 13.6, so that as a matter of fact, we are where we were and there is serious danger in letting the thought go out that it is safe for us to pump into our financial structure a dose of one half a billion or a billion of self perpetuating foreign bonds. The discussion with Davison was very pleasant and -eed. zaaoked to no definite conclusions, which I believe he wanted to avoid. view. He understood, however, our point of While he pointed out to us that we had a duty to finance this trade, he could not answer us when we pointed out that we were financing ten days according to his own statement and that he could figure out for himself the tremendous amounts that this country would have to take in foreign loans if his argument were to prevail that this trade ought to be c nt nue by continuing loans. He answered that, of course, they would not go beyond a reasonable amount, but I believe we have lost what was our standard for what is reasonable and what unreasonable; and, moreover, the further we go the more difficult it will be to stop. (7) Men like Wing, Rue, Forgan and Fleishhacker all shared these views, and as to the foreign acceptance credits they went in their recommendation even further than the Board wishes to go. They recommended that these acceptances should not be purchased in the open market while they might be taken when necessary as rediscounts from member banks. They all felt that in this question of acceptances the Board had acted splendidly, even though they apparently felt we had not gone quite far enough. I know that there are two sides to the arguments It is not an easy matter at this time to decide what is right or wrong, but apparently the general consensus of opinion is getting around to the point of view that we should not over do this foreign business at this time and that the harm would not lie so much in the influx .44 of gold as in the over stimulation of our trade leading to enormously increased prices, thereby increasing the volume of credits with the entire chain of increased cost of living, wages, etc. I could write volumes about this without being able Lf..4 to exhaust the subject, aAd for fear of exhausting myself and my stenographic staff, I\A*1344better stop. Let me only tell you again how much I enjoyed your (8) letter and how glad I am that this whole business has been entirely cleared up. I shall write you in long hand as soon as I get the time. It is too bad that Jay is laid up at this time, but he expects to be all right for the meeting here on December fourth. Alw s cordially yours, /t, Benj. Strong, Jr., Esq., 4100 Montview Boulevard, Denver, Colorado. Enc. FEDERAL RESERVE BOARD WAS 4;04: D s Jo9a. 19/6 November 27, 1916. Dear Strong: I halre your letter of November twenty-second, which is "carrying coals to Newcastle". Inasmuch, however, as this article is very expensive just now, it is very welcome - as is every line from you. There cannot, of course, be any two opinions about thet(goodness of these renewal acceptances. We discussed this point fully at New York. The ac- ceptance of the City Bank is as good in the case of a renewal draft as in the case of a bill drawn from South America. It is only in order to prevent an over supply of this kind of paper and because it is essentially not based upon a commercial transaction but upon a perfectly unlimited government credit behind the transactions that the system must protect itself against an over supply of this paper; and when I say "system" I do not mean the Federal Reserve Banks alone but the entire discount market, which will be blessed, as I understand, with another $30,000,000 credit of this kind so that our banks will be carrying about $150,000,000 of paper of this (2) character. I have never, in talking to others, raised the question of4responsibility, and I have followed quite carefully the conservative methods of your bank in watching Ithdorsements and liabilities. the slightest concern on that score. I have not You appear to deal, however, only with those acceptances that were bought in New York, but, as a matter of fact, quite a batch of that paper has been coming in at other Federal Reserve Banks, particularly in Boston, San Francisco and Philadelphia, so that, as I stated before, we have about $30,000,000. Ate I do not care, whether we have 125,000,000 or 0,000,000. The reason why I think it is necessary that we should discriminate is that I think it is proper that we should put the banks on notice that this output of foreign credits running for eighteen months is a thing that ought to be kept within reasonable limits and in which they must not rely too much upon the assistance of the Federal Reserve Banks. As I wrote you the other day, there was not one member of the Advisory Council that did not agree in these thoughts. I am afraid that you will not be in harmony either with what we are doing with respect to (3) the British and French treasury bills which Morgan's expect to offer to the banks of the country to the tune of $500,000,000 or, if the banks are willing to take it, up to a billion. While you may think I am the chief devil, you are mistaken in that. The Board is unanimous in its present attitude concerning,this matter; and some of my colleagues have been much more'aggresive in the matter than I. The Board will advise the New York bank, cithcr JJcc,e,v taaa*-e4 in a few days thatit has no objection to having the contract with the Bank of England perfected substantially on the lines drawn by yourbut that the Board wants to be consulted again if it is planned to go into substantial operations before the conclusion of peace. So there is at least some news that will cheer you: As to the rest, I believe that the Board is acting wisely if it puts the principle of safety first and United States first before the so-called question of our national duties in the fight for "civilization". Very sinpuely Benj. Strong, jr., Esq., 4100 Montview Boulevard, Denver, Colorado. vos, " hOlieFRAL RESERVE BOARD ev 1:,(6.,"\ tl 4 . WASHINGTON December 19, 1916. Dear Strong; Since I wrote you last Saturday I received several letters from you, dated December 13th and 15th, which I was very glad to receive; even though I noticeithat you had some cranky notions in your head, some of which I hope my last letter has destroyed and about the balance of which I shall write you fully as soon as I get a breathing spell. Don't get it into your head that we are getting afraid about our end of the situation. From that point of view we have not begun to worry yet. Whatever we are doing is being done from the point of view that we should not get into a condition that we might have to be afraid. The object of these lines is only to ask you what is your view about-non-member banks' accepting in excess of 1CO% of their capital and surplus? Shoyld we try to use our influence in case they should accept in excess Of'this limit? -hat do you think? acceptances are up to The Guaranty Trust Company's 52,000,000 ( Capital, surplus and undivided profits C45,180,000); the Equitable Trust Company is up to 12,600,000 (Capital, surplus, and undivided prof- its 412,813,000). (2) Of course we do not want to be small about it and watch this thing with a ruler, but I should like to know what is your general thought about this problem. I hope I shall be able to write you very shortly and am, Always s Benjar4n Strong, Jr., Esq., 4100 M'ntview Boulevard, Denver, Colorado. cerely yours,