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FIFTEEN NASSAU STREET
NEW Yo R K

August 27, 1921.

George L. Harrison, Esq.,
15 Nassau Street,
New York, N. Y.
Dear Mx.

Harrison:

Governor Strong desires the pleasure of your company
at dinner on Tuesday evening August 60

at

7:30 p. m. at the

Metropolitan Club this city, Fifth Avenue and o0th Street,
given in honor of Governor Norman and Sir Charles Addis, at
which our directors will ue present.

Dinner coats will be worn.

Also, he desires that you will keep your luncheon
engagements next week free so that all may lunch each day with
our guests at 1 o'clock in the Officers' Lunch Room. ,You, of
course, understand that no publicity should be given to any of
the above.

Sincerely yours,

07741

January 24, 1923.
Dear Harrison:

Of course, it was to be expected that you would have some pretty
uncomfortable days and nights after your operation.

discouraged by it.

I do not want you to be

I have been through that sort of thing so much myself that

I have come to believe that one's apprehensions become distorted by pain and

that the glorious day arrives when one is about again as sound as ever.

the

important thing is for you to take care of yourself and not be impatient to get
back to the bank.
To relieve your mind, let me say that the Governors' Conference program

is all under way in Miss Bleecker's hands;

the meeting will not be held until

the last of March, and by the time you get back to the bank, all the material
for the program will be ready for you to tackle.

The Porto Rican matter is

all fixed up 3.11 d a. report has gone to the Reserve Board, and Mr. Gilbart is fully

familiar with it.

Also the special 7ayrnent to the clerks has been authorized

and made, and I gather that the organization is pleased.
up but Mr. Mitchell is back on the job.

Dr. Miller is laid

After a chat with my doctor, I decided

to leave to-morrow for southern. Georgia with id Stettinius to loaf in the warm

climate and if I feel equal to it, shoot a few quail (if I g.6 them).
So please take care of yourself, and do not be restless abo tit the
bank. -- It won't run away in your absence.
Yours sincerely,

Mr. George L. liarrison
Union:Prot-es an
1514 Divisio-n

Baltimore, Md.
9S.MM



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FEDERAL RESERVE BANK
OF NEW YORK

OFITACE

CORRESPONDENCE

1 92_

To

SUBJECT:

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MISC. 4. 1-120 M-1-20

0F1-ICE CORRESPONDENCE

DATE

Mr. Harrison

Mr Beyer

Please note that Mr. Strongts address in future will be
ob Mrs. H. P. Davison,

1

3roacimoor,

Colorado Springs, Colorado.

where ell communications should be sent to him.




6

S..
1

C41(J-4v

Sept_ PO, 1925._192_

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4. 1.(,M.,2

FEDERAL RESERVE BANK
NEW YORK

FF1C
To

C 0 IR R S 11''' 0 N ENCiE

Mr. Harrison

0,om

DATE__

-

Feb. 16 9 1924.

_192_

SUDJECT-

Governor Strong

The attached figures of
our

that

iscld holdings are increasing despite the best efforts of this bank to

put Eo2d into circulation.
you

gold imports and exports discicc

au

be able to

overcome

I hope in connection with your program that

thiE

tendency not only for its effect 1,cl:on the

reserve position and to conform to our policy in that respect, but also
because it will effect us a /Erge saving in printing cost.

BS .M

att.

GOLD IMPORTS TO AHD-EH-PORTS FRCX.: THE U171-TED STATES

AND GOLD RESERVES OF FEDERAL RESERVE SYSTEM

(Zn thousandL;

Dollar's.)

o

Total Gold
,Roserves
F.R.System

-

Excr.3b

Gold

of

:

Imports

Ex-oorts

1921 Deco 28

1922 January
February
March

April
May

ne
June

July

August
September
October
November
December

Total
1923 January
February
March

April
May

June

July
Auguzt

Septe
Octolor
November

December

st-,
,-0.)

'

Impp:7,i4

(End

17,592
; 4.-.z,
_, ...
2,710

14,877
23,730

275,170

36,877

24,3a

10,392

5,559
6,533
45,332
18,866
27,406
30,655
26,941
28,433
39,010
31,929

1,732
963

1,579
3,407

2,951,44

7--,,c,v.,,...c,-2

2,975,355
2,994,776
.3,007,621
3,020,868
3,071,424
3,063,414
3,076,943
3,078,049
3,072,858
3 ,049 g451

..-

10,665
5,587

,-

1, ,s-,.t,76

644

i:0

0.7:

1,.399

32,820
8,383
15,951
9,263
46,156
19,434
27,929
32,856
27,804
29,795
39,757
32,641

1, lc-,c,
.._,,,

655
824

543
523

2,201
7863

-40';
, 1 ,,
u

, 747

:719-

42,343
18,136
23,065
3 27,,,d,

6

in

41,928
39,906
23,921
19,421
12,845
13,247

238,293

8,472

.

Reservoi;

of 7.op)

2,369,600
2,911,523

25,708
27,007

26,571
28,739
33,433
12,244
8,994
12,977
42,987
19,092
24,464
20,866
18,308
26,440

Incroac

--:

:

- 50,556

8,010
13,529
1,106
5,191
.'23,407

,

179,851

26,359
2,997
3,318
11,084
28,283

3,075,810
3,072,313
3,069,495
3,060,579
3,108,762
3,087,703
.3,109,666
3,120,939

c;

,--.,

1.,..f

1v-1,mber

g

-,

21 0';.'e
.

8-1.0
.,,

3,111,078
3,112,436
3,033,886

'

21,963
11,323
5 igc,
- 9.-..,1
4,752
1,35
28,550

'-:

Total
1924 January

Grand Total

February 15, 1924




28,643

322,714

45,170
643,054

.

294,071

'170

44,994

65;696

577,358

-.

3,142,717
-

34,435

58,831
273,117

-

COST
CutL;oirp

Registered Lail

4,592

5,105.47

116 500

92.3U

4,600

::27412600

260.65

aocistered Lail

3,454

c.:43,946,200

;6,701.17

Tlx:oress

1,139

3,c4,37no

2.383.8?,

49593

,969,900

J,064.99

9,193

,,402,600

;;14,365064

354

2,862,000

(year)175,000.00

::press

Total

.'.ncoming

Total

Combined Total

Daily .Lverage




COIN

OutgoinL
55

,j 89,651

2.659

7'i670

1,862.89

29714

%;8689441

%19893.19

Registered Lail
Ex:cress

Total

c;

30030

Incoming

Registered

.92

1
_9 1 67
1

(5229390

978.70

1
1
_9_ 68

5220390

979.62

Combined Total

3 7,
882::

--193909831

;;2,872.81

Daily average

150

53,500

(year)359000000

Ex:cress

Total







-

,..:osits

for no ot.

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coun tea
_

th e

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3 EL Da

.

iEif.

.coin

redetrpt On of Uzilte-cielow one hundred
irlarth.cr,

Cl V illed s3-.1a1.1 be

notes zInd
:.'land of. the

131'0 V I.

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o Orqer;

.

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2.tos t erofor C.:

ar..ouut of .c:01(1.'iYali

lc si1 not

totz.,1

"t..i.fi.3.:::tesat such tje

Lt.rCt.Ot !-tono

of

3.7.; ts is. hereby. re2ealee......

0:C




revised.
44 2:0P-,

34

39 stat.

(31

.LI ON3

L, L)OLLAR3

6'

0 c.0

ALL MONEY

v4

%

iNcLuDING Lc,

A

1

,/e., 'BULLION

=,2,

3"",,o,
IL.

:ANDINb

I4,

0%

00c.

11

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a'9

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1,19(4

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I,

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1

,0

1

,

ter.

9.oo

TOTAL PAPER MONEY

.FEDERAL RESERVE. NOTES

BANK NOTE'S

SILVER CERTIE3

1915

'

1916

)9181919
1922.
1921
192.0
Money in Circulation in the United States
(Outoide u. S. Trezist:ry and Federal Reeerve Daka).

1917

NoLes and Trez.surti kot.e.5 of b90




.....

GOLD

(..:ERTIF'.5R

KNOTE

1923

)TYPES OF PAPER CURRENCY ISSUED IN VARIOUS/
COUNTRIES
,

Enp-land
_

Bank of England notes
Currency Notes, issued for the British Treasury by Bank
England acting solely.as agent.

France
Bank of France notes.
Sweden

Riksbank

notes.

(N.YtaZRiksbank is stateowned)

:Norway
Bank of Norway notes.

.

Small State notes replacing silver coinsQ

'Denmark

Notes issued by

National Bank.

Netherlands
(1)Notes issued by the Netherlands Bank.
(2)Currency notes (silver bonds) in denominations of 2 fl., 50 cents,
and 1 fl., issued during war to supply lack of subsidiary coins.
In
process of withdrawal as coins are again put into circulation.

Germany

Reichsbank notoa
Notes issued by Banks of Baden,
Reichokassenscheino or Treasury

Bavaria, Saxony and Vurtemberg.
Notes, issued. as an emergency measure
in 1874, increased in 1913 from 120 to 240 million marks.
Issue
never large.
Darlehnskassenscheine, issued by Land Banks during the Ware to provide
credit for persons not possessed of collateral acceptable to commercial
banks.
Withdrawn in 1924.
Rentenbank notes

Notes issued by Banks of Italy, Sicily and Naples.
Notes issued directly by the Government.
Switzerland
Notes issued by Swiss National Bank.

Bol7ium



Notes issued by National Bank.

- 2 -

Notes issued by Bank of Spain.

Austria
Notes issued by. Austrian National Bank.

Japan

Notes issued by Bank of Japan
Old'Government issue in process of gradual redemption through

Bank of Japan.
Canada

Notes issued by Chartered banks.
Dominion Notes, issued directly by the Government, and largely
held by the banks as part of their assets.
Australia
Until 1920, paper currency was issued by the Treasury, but in that
year note issue was turned over to the Commonwealth Bank, which
established a separate Issue Department.
The Bank itself is owned
by the Government.

Foreign Information Section
Reports Department.
October 7, 1924.




MIIIMUM DNOMINATIONS OF PAPER CURRENCY AND PAR VALUE IN DOLLARS

2=1.2311

...,T,Dnothinations

Banknotes

Currency notes

b5

10 c.

Par Value in

024.33
2.43

France

5 francs
Sweden

1

krona

.263

atzaz
Banknotes

State notes 1 and
2 kroner, issued

5 kroner

1cB4

to replace silver

coins Small volume

V
Denmarh

1 krone

.268

Netherlands
Banknotes

Currency notes

10 florin
50 cents

4.02

401

Germany,
Reichsbank notes

10 marks

Reichskassenschoins 5 marks
Darlohnshassonscheins 1 mark

2.382

1.191
.2332

50 lira
25 lira
5 lire

1 lire

State notes
silver notes
49

9.65.
4.825
.965
.193

5 francs

.193

1 franc

prewar
Banknotes
Reduced during ,war

.193

Switzerland
.

Spain




25 pesetas
4.825
No data available as to whether any reduction was made during
the war.
Prewar

Par Value 1s

Denominations

Japan
yon

04985

Canada

Dominion notes 25 conts.
Banknotes

Foreisn Information Section
Reports Department
October 10, 1924




05

ebraary

'.1!)24.

a
'have be a ':;civ.1.11Le,i. bj iic

rvico c

0,:.1(.;11.13,- that the IV.nt

:Immo :tat oly en t er u)::en

20 cold -0 o 5. rt-ze

,:z.etIuce -;:22,000,000 monthly, to oont tulle f or six tionths,

without in aau way into:-.-forinL; Wit h the silvei. dollar colnaz7e

proan ana

i ti100,7. t 710 CO

s.-2.;ATriation3.

xl.;:r '07C

rae

my

-.;e. believo that; it is. 11-2ertnnt tr.t tit()

!'f Int 9

chould imodlately CatrXMCO Mint Irk: [30 id in ac,-,:erdance with tills,
t 1-rt,te.
riu7Iths

no net Inol-ease of Gold coin at tin ond of six
be ,scrao ,;132,0000 000, ::41.2 amount so,1011.1r,.t loss th:m,

;Tour Currency....:0:!Il1ttoo
advisable. 5.n .11.000rC

ton.

iill later royart to bo nocessary or
with the consral

that it hZ

rood

'."e, are rs.:1%1n:.; this Dro/ilinrj rei,ort mrely bec:use

"telieve 'chore should be no CoIsy I inalk;uratin3 the raintla:: :)roc;rnri.
Ciar
clt,,,y2.

rort cL...snot )ro2orly be ixtuarod for a woo:: or ten
ho-:;o7or, volt os.ro to discu:-T, :anyo

the at...tuxes or

5.t

on .1.c.J1 this 2:resent reccatton i:7,;oed., we Ct1 of colarso




to- do so.

.

COPY
riltEASURY D1.2.fiRT11:2NT

The United States Assay office at New York.
0w York, N. Y.

Close of Business November 19, 1923

Circulated

Denominations.

10,000s
5,000s

360,760,000.
67,180,000.
6,880,000.

500s

929,0100-

50s,

120,000.
65,000.
29,000.

Total

rew

1000s

'00s

2s

lOs

Odd notes

360,760,000
87,180,000
8,880,000
929 ,000

3,320,000
2,065,000

3,20.0,000

2,000,000
5,040,000
5,000,000

-5,089,000
5,000,000
7 ,820

7,820-

435,970,820

451,210,820

15,240,000

-y
Gold Coin

Circulated

2 1/2
s

45,000
2,990,000.
2,215,000.

20 s

33,495 4000

5s

1.)

Total

38,745,000.

e.

r

6)(I)

,
,

-14

j)


5T541
http://fraser.stlouisfed.org/
Federal Reserve Bank of//(.,/ /
St. Louis

"
A




Ti11

C:(,:11.4IJ,TjL

;IQ

D.Z,i)Li=2

12, 1.
ra the r;.,
Brouchton

Oolliao

iss

r. pei.roe
n.11 Honerve

Reaervo

Bickford, of cloveland
.r. Lmorson, of Dallas
Harrison, of How York

Lr.Nettorstrom, of ahica00
eoordert
Mr. NenmAiln




EXHIBITS.

1.

Currency Distribution and Pa7ment Policy for Federal Reserve
Banks -- Confidential Memorandum of April 26, 1922.

2.

Circulation Statement.
July 1, 1922
January 1, 1923
July 1, 1923
January 1, 1924

3.

Paper Currency Outstanding by Denominations.
June 30, 1922.
December 31, 1922.
June 30, 1923.
December 31, 1923.

Transactions in One Dollar Notes at Federal Reserve Banks.
July 1, 1922--June 30, 1923.
July'l, 1923--December 31, 1923.
The Monetary System of the
Description of Paper

United States.

Currency

Issues.

CCNFIDENTIAL

For officials of Treasury Department, Federal aesorve Board,
and Federal Reserve Banks.-

CO.2,1=Y fUJriAia;:iL

She committee on currency supply and distribution, with membership represe-A-

ing the Treasury and tlo Federal le-zorve Board, at a meting in tho office of the
Commissioner of tile Public Debt, in larch, 1922, with reorctentation from Vederol
aoserve 'dunks present in accordance with a minute adopted by the conference of
Governors or the Federal Reserve Banks held in %,aahingtOn in October, 11, adopted
throe specific recommendations.

The Z;corotary of the Treasury and the .-Aideral .1:acrvo

Beard have considered tee o rocom=ndatiens and., after a further confereaco with t

ommittee and after further study of the mholo currency situation, have agreed u'o.

re following program shich it is believed will further

th

effective, sound,

economical distribution of currency throu,I.,-. the Federal Reserve Lagke. in order,

however, that the execution of the proara.:. will attain its MLNILUM COOd, it is

necessary that eaoh Fo.ieral Reserve Badk agree to adopt and ualformly c,..,rry out the

procedure or pelicies outlined heroin. !Zhey are:

I.

iiM,,;$ a Ci4as.=

.?aper currency tendered for redemption in ordor to be classed as fit for r;..L

circulation must be fairly clean so that its class, denomination and ienuinoness

cLn

be determined without difficulty, and must contain a suffioient amount of life,, or

Nasing" to permit its being handled with facility. It Lhould not contain heavy
cronsos yJnich break the fibre of_tho-riaper and indicate that disintecrstion has
gun.

fit note when held 47 one end In ono hand and pressed into a slii;htly

concave shape lengthwise should sustain itself substantially onft line with the L.;:rd4

It should not prosont

lia.p or roo-like; alpeerance. If a note has retained a ft,ir

amount of the original strength or

it is sat unless it is 50 hLdly soiled

a3 to be offensive, or is torn, purforated o- otherwise mutilatod.



J',X1E.Siflg Or

0
0

lu.s not brolei nor so....ious7y ttatatent.,:d the note ei.00s not
.

.

comi:-

it

unfit. :o-called .&=;.. ears" or bent corners do not ren:or notes uaflt.
Tbo standard of fitness defined i.1;OVE3 shall --)7)1:y to all forms and

deaomintions of cireulatiti3 currency.
cad. oo,th deneminc,Iica orpa. or curroncy

Tost exwaInations of ei.:;eh

presented Zor reae:aption by eaeh ,?edcral aeserve

be 17de under the

Lenora' supervision or the Treasury and FeOer-1 Zesorve 2;eard 3urruncy Co=ittoot

and the results of suet" exLLintions will 'be reported at tho end of each month
to the iederal Reserve 'Board for t.c1 in.fc=ation and :..;uitlanee of Federal ileeerv

li.

1,11%; CY Dil;LUBUTL-

In Order that tne standardo Of fitness in tho cireulz,tion outstanding in 1..1.
-11:ceorve '1-letriots 1ILI

nerly uniform as pessible9 and la

order tnat there r.T.,..17

be 1.1, uniform f,elicy ia all,,aistriots as to tno diforont

kinds of currency to

be

put into clr:eulationv :new euxrency abould bodistrited

threul the Federal oarv

anaz:a' not direct from tho Treasury ozeopt for

purely local needs.

III.

0:ILLaO11,,,Y:=Z:2 02 DIVkia=

OF CUZICY

pz,vento of currency, ohold distridute

Federal 4osorve Banks, in

currency in the following order of pr6ference:
(a)

51s and over

National an notes.
Pedo=1 :-.3a:r0V0
(Z)

Notoz
(4)- U.
(C) Foc--,oral aeaerve

notee.

:enc,era).

(G) Gold eertific&tes,
too L.- aximum denel;dna-ion of nz.tion/ bknotos9

cortifieL,t0:;

and leeal tenders iseovz.'._cnts la denoalnatioas ni6hor thaa that

;e=ount

must bo mde in Yeaerol 2coorve notes and Gold certificates, in the order named.




L's .

(1),ral .:;ozer7c 'oar:3c
or :::ortifietel...
;:otes
(5) u.
,t1

it iz believe.i tnat national bank eirculation ultimately will be eliE.::d
entirely, it iz felt tla.t this nay be a,scomplIchod only throuuh Cowossional
and not otherwise.

zhould not aiscriLi.nato aealact the natio
Loale. 2o40m1 Reoerve
tanIt currency, whothor it or unfit, either in respect to its rozeipt for deposit

or In respect to it shipmont to tile .2.1,a;217y for roaon2,tion. rfho s'anclard oines& prescribed in paraEraph I r:..u.st apply eally to mAtional bank:currency
other forozo or currens,
4.,+

it hoz boon osti=tod that the nori roiuire=onts for thz vl
tions of aurrancy arv,roxirate ::4'.)(1,00,00C. it iz bolioved that *o Car az it is
loally 1;ossible United f.A:atos carrency of those annonithatiens should consist or

ailvor certificates, LAy excoaz of ki=and over Supply bin 6 filled by the issue
Unitea Z1tL=tcs notes i1ot;a1 ten.sierz) rathor than aay Other form of currency.
1.7

It j, believed that

Tonuer:i.;

forai of currency slay be eliviinatod ot =141 appropriat

Ume in the future bat thO,t until ol.minatoU it shoo:1e be aie policy of the Tessar,:

to confine the printinc and circulation of Unitoatatos notes to the danoinations

of 0.,

:;-;.2,

,1.,, and 0.0, -with proforaaco fcr the J..Lnd );;') deuomintions, au

reciuired.




In 'view of tL'...1 fact that the Dresent prcwraz) of the Trez,Z,Ltezi

3,mplato.z;

bo

retirei2eat, within the n6r futu!:o, of zal -2ittzLL4 ;.0t certifiotes agin2t

Ott.1.21;;

v;Ilioh Peden:a -.7,rvo

pay out

such bank notes on

L.11 :i'ecral :.o,zerve

should

cr:r tD use tham up Lncl TIL.ve thor2

pem;rently retired durimL the period Then the '4;reasury is pvi.c off the et.r-

tificz:tes.

oither th4 i.cr1Herorve ;;;:aks

t0 VoUeral :61c:serve :.;e1,rel should

more order fot tie pritdz; e

viii.

ã.1,,,Z04100 241ak

2oserve

(j tdinfacsirve .z.-Luk should uaviLo the
Feaerzl Reserve Boord or the ez.oLlzIt:; Of Poucra

tion dik-t it desires to ilve

i

not,is in each df3nelnInz.-

rellczwa stoc2io.unicaued notes, speeify,

'new mun of each done=inL.tio:-. zo be ilaa in 7.24ilIcton. erdors for prin:
or ieoaor:-il .:teservo notes ...choulJ
41e2eed

4414:,,tio, so tit ny ae;:icionoy in the

icnstoc;'4- of ;z1;1

print s.:,:fficient a=eutts to bri:1L

ba t,:41ta:;lou.71t to oal ordor tu

tO the

Z,;t

(b) EanufLeturing

,.y4.,zor, however,

stLni.lIcturina prozTram of the-

serve 1.;:lkcuL

L.nd.advise theli'eder.ca Rosorva

'J,o:ird of the amounts of eLCh(iomotii, of

requisition SranHashinon
such osti=k,tos 4t hand,

printed 2or ciic

th




yeL,f,

LA-,::a.rv.o motes tht it will
lond,.:r ;,4Jar.

:4th

5ooi_1:2,LrvoLi.u4rd will pl4ec, orders to 114;vc

Jevropor proportion of the a.;eunts O

denemin:Aien v/Lie4 the Lz:,-nlc. eu.

mc,inder of

,=-1

tho c:_:.:zalricior of t-i

ir

resLrve stock durin

Priutin, oa.chYo:',eroa

of 1:::2;2,z-,,vino

befoe .7une Is

e ri4ailitc;to the

0J it will --,lithdrc from the 1:;asiliton

-;

the 1;z.14-,a;.so

Yo,ierai

eL:ch

vu

y tir,xt durinc th6 re-

rimd_l it noaest:iaxv to inarease cr

0
CP

decrease its estihatos it should so a.Vise tLe llorti by teleL:ram on the last
a4.4vj Of «47

expects to

nth

tilit; the .. ount Of ei414, dfl

ithdra..0 fres1t

menthe Oi the /on.

atiO

ziohit

:aehirit'ton resorvo stock durinu the remihing

Les.,r4 will then adJut printin,s, orders accordinuly.

iatheuz

this proi;razvalay result in a tenlperary increase in the recervo stock
, of aoble of tho banks over and above the fixed =ininfm fiure4 it will accom-

plish on orderly operation of the prihtitic prooesa for tho balance of the year,
as4 will leave 04,1h l'edaral Zeserire 3aak with its &treed

of notos at the aad of the oaleadar year.

rCsOrve 1,;t0C-24

plan :41)4irtIc( ea the ioeoral

2.Qz2rve Tiord's letter Z-Z031 of J..pril 11, 192241
14.Di'ef.:;iL-.1,TZG11

U412i.; ;_:1.;."6 iL:117./Y BY

Patcatatoa CUrrC41.

i2azerve Baalt will advise the Federal

nescrve Board (for head office aad each branch separately) of the arnunts of
and 4;2 bills astia.4ted to be l'iursicieat for ona month' t reserve supply ithd will
=ea' plaoa orders with the Board (for head office and each branch separately) to
caz:a resarvea o:A.Leae, 4xouats4

the ;federal accerve Zoard

Eereeftor, each bunk will telegraph to

tho last Laziness 6.ay of each month ule amount or

ouch der;e1,1anaZien pf 41 14 41 notes Whitod ttutos currency) ostilzatad 410 aar-

fieient to maantala ro.sorvo sto0441 at the -.lead orrice and branches at the fixed

ardera to t,ec iodoral Acsorve Board for United I;tates currency

O.;

4.46 t, .44

frem the Treasury must be eurfinou solely to the 1 anci 2 denamivatione, sad
.7;alt hot include requisitions riia hifrjher denominations, but if at tiny tiEro the
Treasury finds it ntioastAkrj Lmae: the law

to

issue United titat4p notes or other

of 'United ftutes currency in atanaminations above




and 424 cach notes

- 6will De
azaept ti(

which win

tho twolvo i'e;;01*1 actsrve

tht= out Acuntoilp14ed In p.!:rraph

fl1

W.

CC.2:.T012
1.11a5.

L. 2,DDY,
.51J1'41.4

Cs

s

Currozag OomzAtta.

pr1i:.69




A. W4 Lta.101I4
:-;tacretalry

I. V. C. lding,
c,avarzivr..

0
0

.

.

112.00:11.1,3

.1r,.1.::'2ING GOLD

1c42,41, the total deposit and note liabilities of the
The total gold rosar:
of the systors as of the
date otmountod to ;:3,1,1:::.',717,000. This reproBanta a gold. reserve of ?f-',.71; z.ligainot the agrog7ate note and doposit
liability of all twelve .20,1eral 11o:servoLau.
hosiedoral aosorvo
as.of January 80 indIcate1 that: the total reserves a;ainst the
coribined liabilities ware l3,, but this figu.vo tool:. into cons l.oration
the "lawful !money" reserve C.2 well as gold.
the point of view of
the.17..1Ol1e, those rep Or tc a'ccrvec of the system give an inacourato
impression of the -payable gold rove s of the system, since the groator
bull: of the gold hold by the 2cdorai Resortro Bonin, inaluang the "x'od,::-;ral
Rosoarvo agents, is in cold bullion. In fact, on ..11.,..nuory .51, 1924, the to to1
On

Fedora]. Ilosorvo system ag,grec?atoti :9013,599,000.

"Loaatoroont

.)a.,-,able gold. hold by the 2oderal Reserve Banim cad agonto cnouuted to
632,604,000.
Of this amount, z',2072000 consisted of gold coin and.
-

the balance,
consistod of gold certificates. .2:he tvio to cotha?, corsprisiac,-; the =tiro hand. to htzad su-oply of cold, represmit only,

of I:4,013,599,000 of doposit and note liabilities of the several
While one of the individoc0 ban74s hz.i.s a reserve
of gold coin sad certificates equal to about 25,!, of its total note s:o.d
deposit liabilities, .mor..y of the oths have ices than 5;.;, er..d two of thom,
loss than
2cbioral Reserve Ban:.co.

In Vie''.1 of these facts, and in view of the v.:attar° of the obligations of the foderal as:servo Banizs which hold the r000rvo doi)o3 its of the
consaorcial b1-17s, of the country, it appeared to the Corzsittco to be
vitally ilnrior taat to consider oono plan wiloroby the reserve sto
pvablo
gold in each i'ederal 2lesorve anni: night be incroszed to so porcentogo
appromLnatins^ a =ore Conservativo recognition of the nature of the liabilities of a reserve irmttution. Various figaros were consid.crod, but it was

finally concluded that ?Lilo tho final choice szszt be more az loss arbitrary, it would be both satisfactory and practicablo to establish a resor-,c
of ;old coin snd cortiAcatec in the reserve banl= oov.o.1 to about 20,4, of
the total note and deposit iiabiLitss of thesyc.,tcra as atholo., Of this
20,J, it was concludod that about 1/3 should omsist of coin and 2/3 of

certificates.

The fond-al-LI; table :=2ro7x1ro,1 upon the basis of the fic7o.res already

referred to abovo, will portray -raphioally the -irosont posit ion of the
.fcboral2esorvo Banks in this regard,Aond will indicate the amount of coin
and. certificates to be mintod or prinfed on the basis of the proposal of the
c ommit tee.




fri
,

'
11,/

nOtO
DoT

it r/ .

,

J4

o

o

0000

022,514,090

. 1,001,035,000

Ar

"
7

it
Coin lz..t./:, .1.71'\

e,

COrti 1:4=t05,

fe4

of.`koo o

11.;.1

42'7,677,000

14-gy

632,604,000

Col

/
lit*r IL:it -Do rceztace ef ,to tr.
to.liabilities . ..., . .
i. I, I b --4 -

;old

li-

If

)======.=,===

JN
. aik,\,,.

,

'..-- 0"'0, BY TM; 00"11:122Th

,,

;Ueto-an&-:':2o:::csZtt7ri,rzLVJA9,t

2011111 cold coin and certificates
/A
,

16b. 1/ 3

Proposed increase in coin

1

J

30297200000

535,1,17,000

=

should bo in C3in.

=
=

o: NtiliCh 2/3 should be in certirlo:tes
fitt:i 4

-I 'i'fl: .::;,'::. ...; , 300,...A

,...

267 573,000
62 Ct-6,000

c' -f-4/1,,,J'Ykl,,,I. r r;,

.

,

" cortificateell .. .

",' ...

107,2ri-0,000

c.'

,

To provide this increase in both coin ann certificates, it would
be necessary to coin not only the .."3:2,S46,000 estimated to be aceosshry
to build up the requisite suly in the 1.;`ederf.11 Reserve -Ban:as, but it mull
.

also be necessary to coin the 236333,000 essential under the law ac a
b-sis for the issue of -.307,::,"?0,000 additional certificates. In other
we -rds

to sa )1.)1'y the Federal Reserve '3a:2:al w it la the proposed amount of

coin and certificates, it would be necessary to coin ,';',99,179,000, of which
apnroximately c:;63 000,000 would .--o to the reserve bans and ,;36,000,000
to the T.reasury. s On Jantuti7 -30, 1E424, the total ,-old coin held by the
Treasury was 33V,41'6,000. The total atuou-nt of cold certificates out-

4

was ')999,707,000-. Undx....r the prosent requirements of the law,
3-.2.:1 t of gold coin was on that date a:2..):.-ozirrate1y only .,',..69000,000 in

encess of tho ezaount required as a basis for aortificates. This =wont
Is so in traificant that it was not considered in dotorm1nin3 tho araount
of 2clditional aold coin necessary as a basti .1..'or the additional certificates
roc o=randol by the cozamit toe to be supplied t o the 1.`odera1 Re 3 0 rvo:-..n:::s.

If the recommendations of the conaittee outlined above are carrieJ. out
the sold statorten.t of ti4c Treasury would be c.hanvd as follows:




A,
c

t,4

3 ,/, (it 6,0 0
1;71 ")(
111

d

r'.

c,

)

f

on.

/6 6, ri

,

0-6-c

7

Z:1,1).767.;, 27=1? 0.004,,c2aci,Htlio

as the committee r000rmaands, the cold

coin holdings of the '2reasury fit--.o'ol2"-sho-CLId not be loss tiu;.m. .1::303,000,000,

it would be necessary to coin ;:al. additional ;'c1 25,000,000 to ro,-;et
s t ogether viith the srunt aoady reco nor: rtdo d to
present de fi c i t

provide the 'federal Reserve Banks ,z.rith the proposed amount of coin and
certificate.s, would involvea !...salci coinago pro;ran ofappro:f.matoly
:2225,000,000.

corraittee Irtt been advised that it si7 2l be possible for

the Lint Service 3.71113diately to enter upon a ;-:'.20 gold c oinaga Irogram
to ixcoduco ;,-2290009000 monthly to continue f orcix months, without in

any -v.7ay interforino; with the silver-dollar coins.e program end without
neoessi tating any overt into or any zithI1tioal a-opropr 1 at ions.: rolhe
committee has already re-commanded in a prolininary report that the idinls
should immediately cora:Lone° minting gold in accorchmee with this estimto.
If the Lint s produso the 'full emount of the estime.te-i; :.,;a32,000,003,
'will have boon mintcA at the end of six months. Mte 2.7. it is ttadorstooc1

that the !Lint 3ervice would 'have t o devote the better part of its efforts.
to the coinage of subsidiary silver, even assuming tint it will not be
possible to continue minting any gold for the balance of the year after the
eI:vose of those six months, it will moan that only :.293,003,000 in ;,:;:old
coin will have to bo minted next yesr in. order f 'ally to complete the
1-srogran recommended by the committee.
If in obtaining the ultimate
results desired, it is necessary fa s amo of those reserve
which
now hold gold coin to redeposit that coin with the'.2:.:eacury in ottlar to
permit of the 'orint-Ing of gold certificates, that is a mattor in -Which
federal Reserve aozIks will no doubt C 07)3 re:,;(3 with a viol to facilitating
tho ultimate accomplishment of the c omitted' s "Er 0Srara. 3o,
should be doomed desirable to haw:: to,:ae of tIto reserve ban=

also, if it

hold .relatively large supplies of gold certificates, ship some of those
certificates to other 2e-dera3. TZ3SOrVe Banks. holding a rolatvolysi1
sup/y, that also is a matter in which 1?locleral Reserve Ban'izs will no
doubt co-operate. It my be that in the 7.)-zrocess of c ampleting the
cotaaittee'o program, other ohi2ts between the 12reasury and the re. erve
banks, or vice versa, -.P.Lay be advisablo;. but those are merely matters of
detail incidental to the main purpose of the cormitteelis program.
2C1dIza3 .02

In addition :to the printing of certificates already referred
of gold certificates in the denomination of lO 2O, 5O, mid;2;100,
±gaun. i000,000, 000.

to above, the ca.moittee reap:limo:ads the establishment of a reserve stoca:
.

,

On Janusry 31, 1924, the .'.1reas-zry' s reserve of gold ce2.*.ti ficates,
including the amount held in the row Yori.:..1.ssay Office, e.;grogn..tod
1.7..)00,3.30,000.
Of this amolzat, howovor, only ,,;97,614,000 wore in donor:I:tat ions of -2:100 and rat-dor. '.11,Lother or not re-servo b-,' ,t3cnerzy

establish the policy of voluntarily paying out gold as has boon done' by
two 02 the largest reserve ber..1m, the committee believes that tho reearve
supply of gold certificates in the smaller denominations is wholly inadequate.




1.

C-OLD 1-13:Z1

:IND 2.3

OP

-

AS OP

.L

if:LIM:LT: 7,1 g 1924 (AC 2.711.1A

(On babIls-bf Circulation Statement

)

ficares)

....

Gold holdincs of Federal Reserve Banl:s:

U. 3. :ant aad Assay Office bars
U. d. cold cola . 400.000

Foreicn cold coin .....

OVO4OO000

Gold at .A.ssay office awaitinc sottlemmt

Gold certificates'

-

4m.,

Gold Jett1emont.2Urla - Federal neserve 3oard
Gold Redem2tion Pnnd - U. 2. r2reas-=er . . .

.

39299C;;1/
1500C42,230

170120141
206,509,030
51'17,226,494
5C091109M7

:1190139437,899

*00*.....000940000
.......c000.00.
000 0*

Gold Holdincs of Federal aoserve Acents:
U. S. 'Milt and 2.scc.: Office bars .

U. S. cold cola

Forei-n 3.old coin

Gold certificates

.

.
60,5319106
45,6C5,000

2219=2000

:oard.. ..............19670,C4C,760

Gold Fund -- F.
Gold rodelvtion fund -- U. 3. 2rea3larer

1239506,Z00

,';120129,139,756

February 140 1924.




,

:7:219

.

co.,
2-(7 c';

373

C4.7

'23

-

iil &v.,...' Bills

..ro.)0
L.ustria

,,; 'i)70500
-

4 16,0'....,

,:anzf,43

16,250
-

..

...-.1,.lan,..

thcraia
2ranoo

.

5,000
13,576
7,000
5,000

0:3rm::ny

nellvnd
Latvia

...)
'2 ,..:;:..:cri-,E7;

45,000
275,620
125,500

'

-

,

1,700
1,000

Poland

':otal

...

-

543,625

65,526

Caribbean Countries

40,000
28,000
40,000
108,000-

emba

Derto ?Aso
Esmte Domin6o

Total

..:',17.59526

J..-_:

,:."..

0-t-

,-itz.i.r,

-

,- ..
,':14 000
07,500

-

i' ;

58,075

-

1,000,000

0,125

40,000
69,500
3,000,000
61,630

,3,000

25,500
36,000.

-

484,125

-

-

4,220,025

,.,..;

80000
50,8'25

.

.81,850
-

185,625

.a.

1,0

14,500

,

,

..

24 COO
,

K...

.

3,0
1:

5,4L,_

40,

-

5,000

309000
610000

-

..,, 000

..,

..,

70,
192,

-.

-

-

z...x..2.c..,:;.::,)3

Lurope

10,000
.:';::99,15

V,

-

-:

,...5 69,&

k:41,226,023

,.:,-.

3 3 ,1

1,053

Belgium

Bulsaria

700

4,276
61,000
3,000

Dansii3

Ensland
Finland
France

606

Cerzany

66,60

.Greece

.1E9500

Italy

25,V00

Portual

26,000
35,000
42,000
1,000

Lithuania
cotland

Cweden

8C,,z00

Caribbean Countries
710300

Bornmda

British Vest Indies
Haiti
Porto Rico'
Santo Daninco

596,000
80,000
127,000
30,000

China

108,07C

Asia

21,000

Palestine

40,000

Cano.da

3,66e

iiouth America

3,886

Brazil

.j..1,374,3E0

Total aecei-.9ts




:_;,-,__. 7' :--,:::-...

51,000

'

5,000

' otal ShiptlontL

....0

2ota1 Transactions

vt ,VW8,506

hirents over aecoipts
14 questionnaires sent out
10 ban:t.s had transactions
4 banks had no transactions
fs\.'

CC"TOBER

4
1

A MO I) NT

5's

2's

1'5
SHE E75

Amoy NT

Amows,

.sliEET5

10's
AMOt,

5,tEF_15

,,

SHEETs

20'5

60.5

CUNT-

E

T.S

AmOoN'T

TO T A L.
5H,ETS

Amo uNT

AMOUNT

-L,RRE.Ncy
3,c oco 0 CO

-Recte,ptkov,,

72 000 000

5ta,derd

90 000 000
000 000

(475-0 000

5 '1437 600 /20 OCO 000

6000 000 260 coo coo

-ts

I/O ?so coo
'/33/3 00o

Gold.

,

0 000 000 2 Soo 000
48 000 000 /2, 000 COO

C,:ulat,o-n

',serve

7500 000

937 500

13 SOO 000

<er,:y Gold Reserve

oo /22500000 75000 Ooo
7 000 coo
/ 76o coo
coo °cc

£110000
7C.Serve R/30

4E3 oe 0

000 120 750 000

71 000 000
8,i 560 coo 21 P10 coo /if 080 COO

to,une 30
AO(aSt

46 436 000 ,'( 607 000 6 0/6 Coo
613 996 oco /53 ,7477 Goo 71 074 000

Septalabtr
5 'Year.

7 375 000 133 soo 000
500 Coo. 20 000000
3 876 000 1/3 Soo oco
/ 7,o c i 32 720 000
752 000 7 520 000

// 357 coo is, No 000

675 000 17 Coo occ
105 000 000

S 75t, coo
.2

/4',5-oco. Coo

18/2500 3400ceoo

7713 7s0 /i/.2 6sc occ

783 1.25

Lc 7/S coo

/8o 000

Jo occ 000

Zs 000 788., oo 000 /12 2.50-000
7.z 060 660 /S, cob occ
77.250 3/7 Goo Oco
7741 (-25

8:2/ 47,5"

/

07.5-3.2-

1

1 7,5- cc'

<:

4,5"coc coo
oCo 000
07) 533 365 600

cc,

675 000 5.36 763 GCso 13 ,11
000 000 33 coo coo
`75c cc,
67.5000 475 743 GOO 1.2
,
436 000 -5-7 740 000 / Arcii?,

y5/.20 000 / 425 co
7 687 000 6c'
000 1,5 094
376 000

(FC occ er.Tri

53 31.8 coo
42 .290 0o0
'17360 CCc
5/.2

48 coo

3/ 7o0 coo

5.250O 14 00o 000
48730.0

6 667/Co /67 70o 006
/ 000 Coo
G

COO 000

7 /00 87 loC occ

/5650-c 3/ 7,0c) °co

53/ 660 / 7/6 800
/o 000 r
.2 500 000
57,
/ coo Oco
/6-c, coo 30 coo 068

538500 /el 700 coo
/00 060 ..25 000000
4t38 .560

76 700 000

coo

57.2 coo 3.2 coo coo
4, '//2/ //7 700 ccc

/(cts COG

.578500 76 7rr re

Curre,Gy

.2.5-00o /if/ 000 000 is' J42,5- coo

7s ooe 306 Coo Coo #.537.500
.2,51/ -25-0 /, 97803/ COO 1.57 /7(.28 7.2.5-G. 2,5-0o

/7/./ 000 coo 534-2 -500.

/9/ 7-5-0 /, 75v/ 03/ 000/.5-q 044,

.201 S40 000 .24/38 coo
/61/953000 pie 617 COG
coo
/9/ 7s-0.2,17002/30ov /971 82/1-733-'
/75 000 Coo

NI.,e a u.

.30 coo coo

?agNer

CuStooty

6 7575-1/6-.33.

Is 73 009

<, Yee,

,

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.24.2 36,7887

/57 Sco coo
/py 8(' 5'87

,FICATE.S

/30 Coo 0C/O

3.25o coo Pi-5-000 coo

// 0 U0C cre

Rede-mptiO,S

.2 773 7sc 19.2 4 s5-0 coo.

,soy.able Gold.

113 8/ 3 Coo

07533

6.6' 7/8 oco

c'eorvc

33- coo coo

373- cc:

10--- coo coo

:y Cold Reoe,ve

.2c5-9t7::4c3( occoo

Ra,erVG V30

4/IC 763 coo

to ,troe 30

37 630 000
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0 9),7

7..' 1/53 ics r co.

/86 coo 30 00o Coo

75- coo 3171 ooe coo

3/ 7.5-00

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.3/7 600 000

if 77Y ( .25-

8.2/ ,175

56.2 500 /0 Cee Oc%
/ 457560 3O Oco Deo
1.61.7 / 00 /07 700 000
/ 000000 .20 o co O Co.

5467/60 g7 710. 00o

677 ce, 1.2 .2Y0 coo
73-2CCC 117340 000

57.2000 302 oCo 00o

if 568 07:S1.2 748 0(4

Au.suo,

5LL.VC

.2 625000 1.35 000 coo

/o 6/7 0753-33C5 coo
20c 003 80000 Coo
8 Coo coo

/ 642 .5:00 36 °cc 000
/ 783/35 3/ 700 Cor.,

'//.2 /00 //? 700 coo

50 OCC /0 000 006
/56 o co 3C Goa Coo
536 .500 101 7/:( Cro

/00 600 .2.5:000 000
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7(6 766000

000

/6.0

cc
67,; Coo :76 76(;-"

/075:5/ cc( / 7/6 860
35000 /co 000 COO / 51.2500
75:000 300000 cce 510-37,5-cc
,2,--5-11.2SO/,/4,7 53/ coo

/8 07') ci.',"s
6,2 s-od /33 0 oc Coo / 34.2 sco
/7/ 7.5-040.3, 13/ o o /6 7/61P-51/01.20 000
850 000
/6? IP/O Coo

/ 5-04 CC 0

/7/ 750/, /81/ CY/ Coo /7 0 7(

CERTiFtCATES

.360 000 000r ?0 000 000

1,5d-t-rnr-to-nd

1/0500 COO

Circu.latio-n

'Cci Coo coo 12 000 coo

'Reseeve

1 .5-0e Coo

'i70 000 000 /22 500 000 45000 000
7 000 coo / 7.5-0 coo 2 000 000
ticserve ,/30
'1E3 coo cCo /20 750 000 '1.3 000 000
67 068 000 /6 767 Coo 3 92.y 000
3 008 occ
37 665 Oc.c, 7 7/7 000
-559 736 coo 1,-17 43if 000 I/7 ,/32

Ycar

27000 OCC

300o Coo
.30 COO 000

2 coo 000
25 000 000

RtfArYe 1(30
to Jltoe.1O

Ouv5,

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VOCSOC CO 0 qs
7.2 00o Coo / 8

/7 1172 OCC

29

260000

'/373 000 10 GsG Coo
003 000
/ 672 coo
6 04.5 COO

000000

/0 000000 .2 560 ((c,

,-txt1
,

S

72 000 000 /8 coo ooe
10 000 000 2 500 000

hi1 66 'f 000

SCO Oco 1.2 SG-2,5-60

;

S 62.50,2
250 000 */3 COG 000

(0
135:606
006 000 /ZS' (So oc o
7 coo coo 2 coo oco
5.26 000 000/24 /25 Co0
/..3

650 000

5375000.

-. '128 0c,C- 32 72.0 000

/ 636 000

7 520
2q0 coo

37r. 000

076 000.,

6/

120 cco COO
3.375376-000 /3 .500 000
3 750 000 /3.3 500 000
000 000
2.5-0 000

ar,

7 G r;C, 000

.3 So o coo 112 500 coo

z 0/2 occ

6 77 4,68 occ

6.25: or(

COO 000 /co cco 000 .2 -Soo co c

.24/7 000 000

000

'360 Cr' r-

6.6,75000 /11 040 000
4,50 000

.2 800 000

,roa, rrr

075-000
3.5C Cr()
67T COO

/ 33 z ccc
.37/ 000

5208 000 /1.; soo 060

tCo,.,,plOt

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0

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U 5 *:-..

/03.21.2 060 le 83/ coo
.50 /70 060 10 407 606

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39 00. oco

11 875 coo
/ 350 o.c,c
/3_225000
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.2- 6150 cc
75.2 eC,

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/

37.728 coo

376 .(.

211 E/c 660

1.27 13-c, Coo

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6 '157 000
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304 ShN 000 .2-0 1.24 6,00

rese,c,

O5

CASH AND CUSTODY FUNCTION
CASH DEPARTMENT

-FEDERAL RESERVE BANK
OF NEW YORK

(

DAILY CURRENCY ANA YSIS

-7.
,

DIVISION

GOLD

__

SILVER
FIT

NEW

PAYING

1.10NEy

.000

.

FIT

NEW

FIT

NEW

lc

PAYING
C.A.SH CUSTODY
RECEIVING

=

.

CASH CUSTODY

7,2 ..., a

1,000 RECEIVING
MONEY

-(-4 a 0

/ -7 a 0

CASH CUSTODY

/ 1./...../
._.1 ,f-',-,

500 RECEIVING
MONEY

PAYING

-t-C.

/ .,-,Z0 0

/-

100 RECEIVING

/0
LI.--c

(2

0

7

7

/7
C,

.3 6 .c,-,- af,,,-

PAYING

..3

,.,

/..,....;--o

/f'

3,,,z.

J._,;-..

CASH CUSTODY

/.."_. 7,.s.-7,2,

....

I

700

77

2 3o/0

C.' r

',7 0/

7

7

700

,--

/ .L.7 3

TOTAL

7

2.

7

7,3

cD.

7 00

2.00'

RECEIVING

s!

MONEY

-/f
4/4s...r2

TOTAL

44/7

../...,=6Q

/11.6-7

/

1

/0 ..--477-

/ f.z._

.2-

,D

'

t..1

0.% 7

2- 72_,767.L.., cD

TOTAL...2_ fit: 0
,...c.---C,r= 0

CASH CUSTODY

/0 c--

RECEIVING

PAYING

/07

&-

7

MONEY

MONEY

0 C'
s7z. o 0

C-

2_

/ 7 0 C.'
/

CASH CUSTODY

7

6,0

/ ...07....*6-

,...; / 2_ 0

63. 2- o 0

3/f9

6'7

o

/ / cf''' 0

..

1/4!--,C-7 ,:,(=,

CASH CUSTODY

7 °,.°
/ ,s-, 0

2-c, 0

7

0

c! 0

2. 0=7- 0

0

,

RECEIVING
MONEY

TOTAL

iz. 2 7 ..2,

/ (.,, c-,2.7---

0 74,,

,

CASH CUSTODY

cr6(-,c,7

/ / c.,
CI 7 .'="7-

RECEIVING

3

_Zoo

,

PAYING

,./..:

....,..,-7....,

PAYING

CASH CUSTODY
RECEIVING

6,6.
47 2-

- 2 ......

2-- (-7
'

(.. -,

6

2-.;

/ -7

o

7

/ - 3 0-e.

-,,.'-v7

.2

..':. 7 ,3

/

/ ...2-

/ 1A0r.,,.7
2 i..

TOTAL

2-

,f-, 7 0 ,.._
r

/

',..,

MONEY

/ ,-(;-:i.

/ OZ

2.__(-;

.

z_ 2_

Q

2_.

'74 0

/

7

7

d'

/

MONEY

7...; f

TOTAL

PAYING

....4--7

hZ 7-c. 6-

CASH CUSTODYCUSTODY
%

o 00

3-.1
TOTAL

2

0

Q.....-...,

6cyTOTAL

s

c9 o

.2

f, o

PAYING

10

70

2

7

PAYING

,

6

PAYING

NEW et FIT

C

//

TOTAL

20

//

COMBINED

FIT

NEW

MUTILATED

/ /

.Z.

MONEY

50

FIT

FIT

MISCELLANEOUS

RECEIVING
MONEY

.O0/3

TOTAL

3: c--)
45' v`;-,z-AX

.

7

/
1!

3 if

33 /

0/

/7z 2..,L-:

/7/

2_2_2O 6

PAYING

CASH CUSTODY
RECEIVING
MONEY
TOTAL

COIN PAY.
COIN REC.
COIN COUNTER

s,13-0

TOTAL

0

en4

-


TOTALS


/

/

r-

e- /of.

ec,

/

o?

2.

'

TOTAL
UNCOUNTED
FIT

TOTAL CCU NT ED

'EDERA_ RESERVE NOTES

F. R. B. NOTES

2.7 cc ,

CD

/ 000

TOTAL

NEW

NAT'L AND

LEGALS

2 i,z10

/

CASH CUSTODY

.000 RECEIVING

JU L 3 U 1925

(000 OMITTED)

X74'

11,70M.

-A 27. 7
192

S.

oo

-o

July 2, 1924.

My deer Harrison:

Of course, it is tough as can be that you must have another siege in
the hospital. I cannot tell you how much we all regret it and sympathize with
you.
The news we all get of your progress i immensely encouraging, and of
course that helps very much. I cannot restrain myself from repeating the warning,
however, that I think heretcfore you have been in too much of a hurry to leave
the hospital and in too much of a hurry to get back to the bank. It is a fault
of which I have been guilty myself often enough to feel warranted in cautioning
you not

to cc anything like it again.

Everything at the bank i6 fine but very ouiet.
We were promised a
visit yesterday from Senator Heflin, who wanted to see our new building; but I
did not wait around with any refreshments to meet him. In fact I went up town
to hear what was going on at the Convention over the radio. Don't even know
whether he came or not.
It is just ee well that I should not be here when be
does come, for I would rather refuse to see him than start up a row if I did
bee him. We had a nice letter from Mr. Case who seems to be having a splendid
time, especially at Oxford. As you know, he will be beck the middle of this

month, and Jay plans to sail On

the 12th.

You need feel no uneasiness whatever on account of your absence.
you know, I had planned to be here this summer, anyway, and I find that the
sumFer agrees with me better in New York than any other season.
first-rate,

and over this week-end I

You may have observed that

may try my hand at a

As

Also I am feeling

little golf.

Mr. Mellon has announced

that he

calling the 4e of 1925 and paying tnem off February first of next

contemplates

year.

With

hi E usual direct way of (wing things, he just says he is going to do it, although
of course the Treasury will not be pledged until the formal call is made. This
I have about made up my mind to have the
is a step in the right direction.
next meeting of the open market committee in Chicago on the 25th of July, eo 88
to meet with their directors. I think the whole bank will get a better understanding of whet it is all about if the committee meets there and discusses the

policy of operation with the directors

present.

Please make it your first business to
This seems to be all the news.
get well and you will please us all very much, especially your friend, the writer.
I am proposing dne my next trip to Washington to stop off and see you.
With all sorts of good wishes,
Mr. George L. Harrison,
Union Memorial Hospital,
Baltimore, Md.
BS .MM




Affectionately yours,

July 10, 1924.

Dear Mr. Harrison:

We are all delighted at the good reports of your progress, and I am
especially delighted that you seem to be free of pain and discomfort which
would be so trying during the hot weather.
Everything at the bank is serene
and your absence need occasion you no anxiety whatever that it is causing anyone
inconvenience.
I have been a regular and consistent truant myself, going so
far yesterday as to spend about an hour at the Convention, there I watched the
animals perform with a good deal of amusement, sitting indeed with the alternates
where I assumed the air and manner of a ward politician and was so successful in
doing so that at least a dozen perfectly stranee delegates greeted me with
smiles and nods, behind which I could discern possible invitations to vote for
favorite sons or daughters.
But the heat drove we away, and I slipped into a
friend's apartment where there is a good radio and heard the whole business very
much better that way than on the floor.
The landslide for Davis at the end
was immense. My personal feeling about the whole affair is that McAdoo has
earned the contempt of his party and the country, and I hope he gets all the
pleasure from the prize
to have.
Smith I think is regarded
as a good sportsman having played the gaAe suecescfully.
Some of
his backers
told me that leng ago they knew he could not be nominated, but no power on earth
could turn them from their determination that McAdoo should not be nomineted.
Then at the
minute it seems as though some dispensation of Providence
visited a lot of our misguided people at the Convention and turned them to the
only man on the list who could overcome the prejudices and bitterneesee that

that he is entitled

last

have developed in the campaign.

None of my Sepublican friends agreeewith me, but at the moment and
with things as they appear to be now,I believe Davis will give Coolidge a very
hard run for his money and may indeed he elected.
The reasons for my feeling
that way I will elaborate when I see you.
But I do not hesitate to say so very

strongly because there is considerable doubt in my own mind
,nould not vote for him.
The principal reasons being:

as to

whether I

My high regard for him.
My contempt for the record of the Republican Party in Congress

and in some other respects

before

Mr. Coolidge's

took effiee.

(a)

My lack of sympathy with their course as to European affairs.

(4)

My hearty disapproval of the

I an not going




Republican

Party's

tariff policy.

to decide until I know more than any of us know now.

2

Mr. Harrison

July 10, 1924.

The new building is coming along famously barring delays with the
progress on the first floor.
We are moved in wholly or partly on the 9th, lth, 5th and 3rd floors, and further
moves are taking place with fair regularity.

glaziers who are on strike and the apparently slow

have dealt with Curtis in regard to the notarial matter
toward a solution on a plan which we can all approve
which will leave Curtis with a part of the business but eliminate the objectionable features of the present arrangement.
Jay and Mason

and

are making progress

Our investment account is up
have another meeting in Chicago on the

to $395,000,000,

25th of July.

so we are proposing to

Money is easy, but we have done nothing further about our rate, although
current discussion on the street seems to anticipate that ee may go even lower.

Mr. Jay

sails on Saturday and Mr. Case returns on Tuesday.

that he aas had a grand holiday.

He writes

Owen Young has been suddenly summoned to London in some unofficial

capacity in connection with the meeting of the Prime iiinietere tor the arrangement of adjustments in connection with the Dewee program.
This seems to be

the budget of news, so you may imagine that things
My vim plans for the summer are indefinite. We have another wedding
in the family in September, and after that I may get away for a while. Meantime,
should a trip to Washington be necessary I will arrange to stop off and have a
visit with you. Be good - don't get restless - and beyond everything stay in
the hospital as long as the doctors tell you to - and even longer. I am so
afraid of your being foolish in your urgency to get back to the office.
are quiet.

With my very beet to you, and much affection,
Faithfully yours,

Mr. George L. Harrison,
Union Memorial Hospital,
Baltimore, Md.
BS.MM




July 22, 1924.
Dear Mr. Harrison:

Mr. Rounds and I are planning to be in Washington the early part
of next week to work out a program for Mr. James' comnittee on efficiency,
economy and salaries.
There are quite a number of other matiere that will
come up to keep me there probably for about three days. I am rather plann-

ing to stop off either going over or returning, to have a virit with you, if
it is all right for me to do so. On receipt of thi o letter, could you drop

me a line or telegraph me advising jueL, how long you expect to be in the
hospital, and whether it would be convenient for me to stop off Sunday afternoon, or whether you would prefer to have me do so on my return from gashington. Probably it will be more convenient for me to make it Sunday afternoon.

Mr. Case is tack looking fit as can be, althogh he had a touch
of tonsillitis on the way home on the oat that made him rather miserable
for a few days and kept him home until yesterday. It is all cleared up nova
There is not much doing in the bank just now - things are very quiet, and you
need feel no uneasiness about being away. I shall make the necessary arrangements about your absence so as to conform to the usual red tape, but it has
all been explained in Washington and they thoroughly understand and sympathize
with your mishap.

We now have about 1000 people at work in the new building, and it

looks fine.
The program for the final moving., including the valuables, has
been worked out to the last detail and will be approved at our meeting this week.
am asking Mr. Gilbart to send you some papers on the subject of
direct sendings, which I think will relieve your mind of any uneasiness which
was caused by my comments on that new development in handling checks.

This is about all the news. Let me know if you want any reading
matter and what eort you enjoy and I will see that you are kept well supplied.
With beet regards, and looking forward to seeing you, I am,
Youre sincerely,
Mr. George L. Harrison,
Union Memorial hospital,
Baltimore, Md.
13S.=




July 24, 1924.

._;ear Mr. Harrison:

just a line to advise you that / have your letter thiw morning
and hive decided to take the train leavin Ner; York by Standard Time at
10)10 Sunday morning, due in Baltimore at 2:20 Standard Time, and if butte

convenient to you will go direct to the hospital for a little visit, and
then take a later train to Mashington that afternoon. Probably if I take
either the 4:16 or 5:23 train, it will not involve my being with you eo

long as to tire you out.

It might be as well for you to wire me if this

is all right, as I can change the train.
Yours sincerely,

Mr. George L. Harrison,
Union Memorial Hospital
Baltimore, Md.
ES.MM







wk.

July 29,

'224.

Dear Mr. Harrison:
I wes delightp to ee you o wel; and shal' take
most encouraging wort back to th,: office about your
progress.

You awl Miss Stpvart both havim; agreed that a little
work woul be helnful, I hav- founi a job that will just
The new Aor,istant Srcr'tary of th Tr-apur,' in
suit you.
bur-aue Mr. C. S, Dewey, wi,h,s to
charge of the fic
has a task with You aout the- curency arri coin ,roirram.
-o
h
Th whole matter ha e b n tarne oy-r to him an
him that -ou
I hey,
to take a real wallop at it.
in
that wh-1 I return to N-w
wil b le1ihte.1 to aPF him an!
tho.,e matt r6
York I wil' get out the filer relatimr to al
sew: them ovPr to You .o tha you can r, fr,,sh your memory
about eh t aubject, an' th n he -;-n li ov r to
Imo encro a couple of hours with vol. :i:oussin wars an spans
of gett ng a comorPh-nAvP roKram under way to cover ooth
If the doctor or nurse
currency and coin
tPln raph me at New York, as I am rcturning thie et,rnoon.
I will aleo.3fry %rol moo booke wb,n I get back hem' .

toll

v-toes this, plrul,p

Gi)od luck to you,

Ancerely yours,

Mr. ,17.-,,or6- L. Harrison,

Union Memorial Hoenital.
Baltimore, M..

August 8, 1924.

Dear Mr. Harrison;

You may be interested in reading the enclosed letter from Mr. Jay.
You saw that our rate went down yesterday with
Please destroy it after reading.
It will be helpful to everyone concerned with the exception, of course,
a bang.
there is any kick about the
of banks which have money that they cannot use.
rate, it will certainly be coming from some of the chronic ones of that category.

If

Confidentially, I have dome rather gloomy cable reports from the other
progress of the negotiations over the Dawes plan, but the press
dispatches to-day are much more encouraging.

side about the

But I would like to have your
There is little here In the way of newe.
The last time I was in
advice about one matter.. It is most confidential.
Washington, Mr. Rounds: and I were told quite in confidence that information had
reached the Federal Reserve Board that there is e very considerable development
Of course, they did not refer to us.
of nepotism in one of the Reserve Banks.
put on the program for the next
as asked whether it would be
I
Governors' Conference a lot of topics relating specifically to those matters of
ethics whioh unfortunately are not always as clearly understood as they might be.
I answered that so far tLe our bank was concerned we would be delighted to have
ell those subjects discussed, but that we would not think of euggesting those
that the Board must take that responsibility. I was
topics for the erogrem;
then asked to prepare some simple topice which I have done and Mr. Mason is now
They relate specifically to such matters as the apeointlocking them over.
Bent of relatives of officers or directors to positions in the bank, their
employment as brokers or otherwise outstde of the bank, whether any one associated
with.: theebank_or related to its officers or directors gets orders for supplies or
that do you think
transactions with the bank,
about it? I can well understand that some of the men at the meeting and
possibly the directors ofsome of the Reserve banks would resent what they would
On the other hand,
regard as an inquisitorial attitude by the Reserve Board.
there have been hints of other matters of this sort which should in fact be dealt
I would like your general opinion about.it.
with.

feasible to

etc. etc.

has any other like

The only other matter of any interest that I can think of has to do
with par collections.
Mr. Angell came in yesterday to advise us that steps had
teen taken by arrangement between a little State bank in Mississippi and Mr.Claiborne
the aim being to force the Reserve Banks
to ley the foundation for another
to give immediate credit for items payable within its own district,
I shall not
burden you with a desoription of the teeNmtica1 details, but it seems that Mr. Angell
has had e couple of meetings with the Federal Reserve Board in the matter, and the
hoard seems to be taking a pretty active direction of the litigation, having gone
so far, I understand, as to make some suggestions to the Atlanta Reserve Bank as
to Mr. Randolph's relation with the litigation. There isn't anything we can do
about the matter because as I understand it Ir. Angell's call and advice to us




suit,

August 8, 19E4.

was simply a matter of courtesy and not by request of the Federal Reserve Board.
Mr. Angell thought that the actual trial of the issue could be postponed until
sometime in December, by which time Mr. Davis' fate will be known, aind he still
might be able to represent us. I hope he can, although you need not yet

Interpret this as being any desire on my part that he be not elected.

?lease take good care of yourself and don't take any chances by doing
foolish things. I hope you will convey my kindest regards to Mr.and Mrs. Glover.
All the boys join in sending you good wishes.
Sincerely,

Mr. George L. Harrison

ego Mr. G. C. Glover, Jr.
Roaquit, Mass.
DS.Mak

sac.




August 12, 1924.

Dear Harrison:

Here is a matter on which I would like to have your judgment.

It can be expressed in a word in pencil on the back of this letter if
you don't feel like pore than a very limited correspondence.

Very confidentially: When I was last in Naehington, Mr. James
told me that a director in one of the Reserve Benks had recently infonted
him that in that bank there were no lees than thirty-five employees Who
were in some way related to the officers or directors of the bank, .failly
Mr. Jemes intimated that the
of them sitting around doing nothing.
infornetion had come to him in such a way that he could not use it.
Personally, I an inclined to believe that it is an exaggeration anyway.
But it did raise the queetien of the care with which this and other ethical
points are regarded by the management of the different Reserve Banks, end
I think Mr. James himself proposed that something be put on the program
for the next Governors Conference which would bring out this whole subject
in open diecuesion.
I said that I could easily prepare a munorandum of topics which
would accomplish that, but loul.d not care to suggest them myee.lef for the

It would be bound to raise hard feeling, and, in fact, I am not
certain whether it ie a wise thing to have such a diecuesion at a Governors
But, in order to font a preliminary metimate of what would
Conference.
be involved, I halve prepared a list of queries which has been reviewed by
Mason and one or two other officers, and the result of it all is enclosed
program.

with this letter.

My last thought is that the safest procedure would be for the
Federal Reserve Board to take this matter up with the iniividual Reserve
Banke, either by direct communication with the directors, or through the
regular examinations.

How does it strike you?

There is prectically no news to send you from the bank, and,
a personal may I have nothing perticularly pleasant to send, because my.'
mother has just had a rather dangerous attack of pneumonia, but is now out
of danger, and Phil came home from the south last Saturday with a mild case
of diphtheria and is in quarantine at the apartment. The doctor thought .
beat for me not to be there while he voF.s in quarentine, so I am at the 'Plaza
Hotel.




Mr. Harrison

E

8.12.24.

hope you continue to improve. Please don't let any foolishness
interfere with the process, and, beyond ell things, don't be fussing about
the bank with ambitious ideas of returning before the doctor wants you to
do so:
You will find something of this sort in every letter that / write
you.

With much affection,

Sincerely yours,

George L. Harrison, Eeq.,

c/o Mr. G. G. Glover, Jr.,
Nonquitt, Mass.

118.1138

Enc.




'Emql iiitAA-64m0datktfrri--,
(August 9, 1924)Z0,127' 1.1-4:77r-I,-

ifv/4xt;....z...../.0-71

,/4
...,,,:
Memorandum
'

/rt t

.v./.."4":....ez,-;

el I

?

i

qggj_k_theF8estionsforSubmissioederveBojLrd
to the Governors Conference.

In connection with the following topios,

a request should be made when

the program is sent out in advance of the meeting for each

Governor to come to

the meeting with all details fully prepared on the following topics, so that he
lay be able to answer any questions as to the 2raotioe of the bank.
- (1) Does the bank have any policy in regard to the employment of rela.
tives of the officers

or directorS of the bank?

(2)

Does the bank have any rule on this subject?

(5)

Does the bank have any rule or policy on the subject of the em-

ployment of persons having any
Are

other kind of relation

to the officers or directors?

there any persons employed by the bank connected

If so, what positions do

with the of..

other sort of close association?

ricers or directors by kinship or by any

these

persons

occupy, what salaries do

they draw, and what are their relations to the officers or

directors?

Note: A good principle to be adopted by the management of the
banks would be that those occupying positions of greater responsibility than that of clerical workers should not in general be kin of the-offioers or directors and should not have
such relationt of any other kind with officers or directors as
would make the bank fairly liable to a charge of favoritism.

Who are the brokers appointed by

the bank to act for it in

or selling securities for its own account and for member banks in any case

buying
whore

orders are executed on behalf of member banks?

By whose authority

was the

Does the bank have

any policy or rule in regard to the selection

selection and appointment of the

brokers

effected?

and appointment of such brokers?



i°14

t I9

(

Are the brokers kin of officers or directors of the bank or assoeited with them or related to them in any

?

ar

manner?

.

1.644°14-711-444"-bernk-1

Do the brokers submit regular financial etatements of their condition?
t11)

Do the brokern carry speculative or margin accounts?
If: the financial responsibility and general

reputation of the

firm such as practically to insure against financial loss or assooletion of the
reserve bank in the possible failure of the brokers?
Note:

A good rule to be adopted by the mnnagement of the banks
is that these brokers should not sustain any relationship of any
kind to officers or directors, unless there are circumstances
jumtifying the seleotion of these brokers independently of the
.fact of such relationship.

Has the bank any rule or nolioy in regard to the selection of
other brokers, that is, brokers for insurance or

real

eetate or

Note:

what not?

The same questions and principles apply to these
as to those just mentioned above.

brokers

Federal Reserve Banks as Fisoal Agents of the United States.

Does the bank make purchases from or sales to the Treasury or

any other branoh of the Government of

securities in which the bank itself is in-

terested financially without knowledge of the Treasury?

(18) Does it in oases where the Treasury is informed of the facts get
an acknowledgment from the Treasury in writing of the receipt of such information?

(18)
other branch

Does the bank, when in receipt

of

orders from

the Treasnry or

of the Government for the purchase or sale of securities of the Gov-

ernment of the United States

refrain from Wing or selling any of those securi-

ties for its own account until completion of the order of-the Treasury?




Does the bank have any polioy or rule in regard to the selection
of oouneel?
Notes A good rule to be adopted by the mansgement of Vac) banks in

this matter is that kin of officers or direotors or those beving
other associations with them should not bc designated se counsel,
unless there are ciroumstances inde2endent of the fact of such relationship justifying designation as counsel.
Are any officers, directors or employees In any way, shape or manner connected with any concernewith which the bank does business either in the pur-

chace of its supplies, etc., or in the conduct or any of its transactione, upon which comliseions Aro paid, so that any officer or director or employee of the bank
in any way profits from the business?




Moto; It ir at times very difficult to escape situatiooe where indirectly such profite would arise. For Instance, in connection eith
the ereoti n of bank builgings, it nometimes hmpens that dir,l-ctore

are stockholders or in some way conected rith
concerns ho get
.contracts for some :.art of the construction lark or material for the

new building. In every instance such connection should be disclosed

to the direotors of the bank and the individual having the connection
Should refrain from taking any part in the bank's motion in awarding

contracts, etc.

August 19, 1924.
My dear Mr. Harrison:

Yours of the 17th has just come. I am glad to say that both my Mother
and Phil are about well again. Of course, Mother will be weak for a long time,

but all danger from her illness is happily past.

About the Tleetions of ethics concerning which we were corresponding.

have written to Mr. James will be sent to you in a
I am not willing to be responsible for putting anything on the prodrain,and personally would not encourage the Board to do so. I have decided,
therefore, to put the whole matter in the shape of a report of the situation in
this tank. IC the Board wiehes to take the responsibility of discussing these
matters at a meeting of all of the Governors, they must do so themselves. It
would be much better to take it up with the different banks individually.
A copy of A

letter which I

day or two.

As delighted to hear of your fine progrese, and especially pleased
it easy and not come back too soon. That is the
wieeet thing to do.
that you have determined to take

Phil's illness and some other matters have made it very difficult for
me to get away and I have not gone tc tooce Pole because it was inadvisable that
otter sheuld have any visitors at all which might have F. tendency to excite her.
o I 4M afraic. ,Jmy elan is not a feasible one. Please remember me most kindly
to the Glovers. I shall hope ea see them in Washington even if I cinnot at

Noaquitt.

There is really no newt here of any consequence. Things are quieter
than I have ever seen them in the bank.
We all send you much affection.
Yours sincerely,

Mr. George L. Harrison
c/o Mr. 0 C. Glover, Jr.
Nonquitt, Mass.

BS.Mk




August 25, 1924.

Dear Mr. Harrison:

Enclosed is a printed copy of the bill in equity filed by the
Pascagoula National Bank. The status of the matter is as follows:
The board is filing affidavits, after consulting with Mr. beck, by
which they hope to be dismissed as party to the suit on jurisdictional
grounds, kr. beet< having advised that it would oe a serious mistake for them
to volunteer to appear in this or any other like proceeding, and that he
doubted whether the suit could be brought against them, anyway, as they are

They should not appear ae volunteers in the Courts all
over the country whenever litigation is attempted.
a Government body.

Notwithstanding that Ye. Lerenn advised the board that he was
couneel for the Whitney-Central National Bank, and might therefore be disqualified from representing the System in this litigation, a telegram was
sent him urging that that would be no obstacle and still asking him to accept
a retainer.
ia replied tt,t he would he in Nee Yorl to-merro* (Tuesday) and
would be prepared to discuss it. I have pointed out to the Board that there
In the first ylece, before
were clearly strong objections to retaining hie.
he could agree to represent us he would have to know something about the case,
eno after we had eiticloted the eeriousneee or the ceee he woald undoubtedly
feel required to consult with his client, The Whitney-Central National Bank.
The reedit would be a complete disoloeure of our position to the plaintiff.
I feel that this pane
This, I said, was too serious for us to contemplate,
is the principal bane to the litigation and we would pay the largest share of
the bills, and in case the cult was lost we never would be able to eeplain

how it happened that Ar. Lemenn had been retaineu.
Tomorrow Governor Criesinger and the members of the law committee,

Messrs. Hamlin and Platt, will be here at the bank to meet Mr. 'Amelia. I
ex,ect Mr. Angell tnd possibly Mr. Wyatt will be present end we will have a
frank diecuesion.
I have some feeling of uneasiness in regard to what will
be said.

Now I think you will agree with me that the serious elements in
this case have to do with sections 13 and 16 as to what we can and cannot
collect) enc how the collection shall be handled. This is an effort toward
literal enforcement of the provisions of section 16 requiring all Federal
If they can establish
reserve banks to receive on deposit at par, etc.
that this requires us to buy the checks, take ownership of them, and make
immediate payment for them, our par collection system must go overboard or



eb must inflict the country with a tremendous inflation. Then if they succeed
in getting a temporary injunction the consequences would be most serious, and of
course we cannot forecast whether the temporary injunction would apply only to
the Atlanta bank or whether it :Hight be so broad in its terms as to require compliance by all the Reserve banks.
My general feeling is that the trial court must be made aware of the
seriousness of this issue and convinced that the Federal Reserve Act contemplates
no such absurd procedure de of buying the float. In general, I em inclined to
see if we cannot get some Tan like Persons who has made a great study of 4.14.4

inflation end of bank figures, and have a nonlegal development of the subject
worked up for use by the lawyers. If such an argument cannot be directly brought
Into the case, it might be brought in by the SolicitorGeneral in case he could
be eereuaded ea appear in the interest of the country as e whole, and it even
might be possible to interest the Merchante Association , or better still, the
Aksocietion of Credit Men. but the main thing is to get some vigorous able
uouneel who will Lake command, where we will not rise the poevibilitice of
inadequate preparation because of the very deliberate procedure by each a body
as the Federal Reserve Board.

believe the return day when an answer must be filed is September 2,
and the prayer for an injunction must be argued on October 2. That is the
best that Wyatt can figure out. The situation discourages me a little bit
because here we are without counsel and really with but little time for prepere..
tion of a eubject which is so complicated and abstruse that the best lawyer in
the world should take weeks and even months in preparation. I em only hoping
that *e cen have the case put over.
Sincerely,

Mr. George L. Harrison
c/o Admiral Cary T. Graysou
Easthampton, L. I.
BS.MM

on c.




FEDERAL RESERVE BANK

OF NEW YORK

Palm Beach, Fla.
uary 24 1925/9;,_

OFFICE CORRESPONDENCE
To

Mr._Harrison

SUBJECT

Miss Bleecker

FROM

5.1.14)N.

Here is a friend of yours.
see anyone.

I understand hea1dot

It leads me to suggest that under the present

scheme, where there is

much corridor space and few folks

visible, we have not yet satisfactory solved the problem of having
sane responsible person who is available during meetings, etc.,
to talk with folks like this.

It's a purely personal view, and

I pass this on only because you know the "man" and the "need".

"

fulA 4"ueuitt"




vAA))

FEDERAL RESERVE BANK

441"F

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mt. Case

iiitek
192

pVTr_ O.F
SUBJECT.

*741

enj. Strong

FROM

I gather from the word I got from the office that

when Congressman Ungo recently called no one ear him.

Can

you let me know just rhat happened.

Mt. Harrison I was a little too
the official request for the
tains another.
-If you will
sent you yesterday taken out
stituted, I shall appreciate
sorry..-Aca,




forehanded yesterday. Here is
same thing; and your letter conbe good enough to have the copies
of the files and this one subit.
Thank you.
And I am

FEDERAL RESERVE BANK
OF NEVV YORK
Palm Beach, Fla.,
January 25, 1925.
Dear Harrison:

I have just finished reading your letter of January 21,
and Judge Sibley's opinion in the case of the Capital Grain and
Feed Company against the Federal Reserve Bank of Atlanta.
As
you say, the opinion reads exactly as we would have it, and I am
wondering now whetherthis case, after presumably going before a
jury for decision as to the facts, will ever reach the Supreme
Court and give Judge Brandeis a chance to reconsider what he has
said on the subject of paying one check by using another check, and
so on indefinitely.
As I recall, what he wrote was not a
judicial decision at all, but merely an expression of pdicial
opinion, and, if the Supreme Court should sustain Judge Sibley on
the law in this case, would it not, in fact, mean that all of those
statutes in the Southern States which were designed to prevent our
collecting at the counter would be unconstitutional?
And, in the
light of this decision, coupled with the decision in the other
Atlanta case, would we not really be obligated, in the case of
doubtful banks, to actually make collection by presentation at the
counter?
If this is the case, is not the Atlanta bank taking a
very serious responsibility in holding any check sent to it by
another Federal Reserve Bank in the usual course pending the receipt
of telegraphic instructions?
I can understand the difficulty they face -- the alternative
being, really, a non-par list, which might seem to affect the credit
of some of their own member banks.
This whole collection business, it seems to me, involves
responsibilities far beyond what most of the officers of the Federal
Reserve Banks, and even the Members of the Federal Reserve Board,
Some day, of course, we are going to get
begin to apprehend.
Would there be any ground for
What is the way out?
hit badly.
asking Congress to give us some legislation which would develop some
better uniformity, as well as some better understanding of the
I am not enough of a lawyer to know whether this
liabilities?
would be an encroachment upon the powers of the States or not?

Under the circumstances I have some doubt of the wisdom
If the Atlanta circular is wrong,
of the course you propose.
even though it has been approved by the Federal Reserve Board, we
should at least protect ourselves to the extent of giving notice to
It
Atlanta and to the Board that we will not be bound by it.
upon which to get an
occurs to me that this is a good subject
expression of opinion from the Standing Committee on Collections.




FEDERAL RESERVE BANK OF NEW YORK

Mr. Harrison

2

1.25.25.

In regard to the Stone Mountain coins, after we discussed
it the other day, it occurred to me that inasmuch as they are United
States coins, are legal tender just as any other 50cent piece is,
and count with us as a part of our subsidiary coin, that we might
have gone a little far in our first position with V:ellborn and
McCord. And if it has been fixed up to their satisfaction, I am
rather relieved.
The only question then would be whether the plan
for paying out the coins was one which we could approve and conduct.
Your statement as to illegality is convincing to me on that point,
but, nevertheless, I am glad you found a way to accommodate them.
My friend Swinny, of Kansas City, who is a membe r of the
Federal Advisory Council, has the room next to me, and we had quite
a talk the other afternoon about the McFadden Bill.
He is well
along in years, and very conservative, but I gathered that in
general he agreed with the four points which we had raise d, namely,
The objectionable features of the
Hull Amendment
The lack of protection as to real
estate loans
The need for a rewriting of Section
5200

and finally

The need for some protection under the
Statute of savings deposits.

As to the latter, he holds the view that national banks
I do not agree with him there, because
should not receive them.
they are, in many country places, the only facilities of that kind
open to poor people in the community.
We are just winding up a three elay storm, - one of the
worst I have ever seen, - which has put the railroads out of busiBut
ness, and, I fear, has flooded the golf course where we play.
by tomorrow we hope to start again.

So far I have had a very quiet time, barring a few dinner
parties, and you would be surprised to know that every morning has
been spent loafing, with the exception of a little office work,
and every afternoon before Oinner I have had a nap, sometimes over
So you can report me as behaving myself in case you see
an hour.
Dr. Miller.

I am very cross with you about one thing, however, and
that is your failure to let me hear a word about your throat. Have
I was on the point of
and what does he say?
you seen Dr. Miller;
telegraphing you about it, but your letter came last night and it
was long enough to convince me that at least your voice is all
I didn't neglect mine, bePlease don't neglect it.
right.
cause I saw no less than four throat specialists before it was
The trouble was that I didn't see
discovered what was the matter.
And Miller and Coakley are the ones to look at it.
the right ones!




FEDKRAL RESERVE BANK OF NEW YORK

3

Mr. Harrison

1.25.25.

I have just written Yr. Case about the call which
Congressman Tingo made at the Bank.
The last word I had in Washington was that he had displayed a rather friendly attitude toward our
affairs recently, and, if no one saw him, there must be mmething
wrong about having officers on tap when such callers come. Would
you mind bringing this up at the Council meeting and see if the
officers, attl well as the boys outside, are properly instructed.
Sincerely yours,

APE15141-1V7

George L. Harrison, Esq.,
Deputy Governor, Federal Reserve Bank of New York,
Federal Reserve P. 0. Station, New York, N. Y.




TELEGRAM
COMMERCIAL WiRE-INCOMING

X

ATTENTION

TRANSLATION COPY

40WU MQ 20 COLLECT PALMBEACH FLO 1028A FEB 10
GEORGE L HARRISON.
ESQ, DEPUTY GOVR

GREATLY DISAPPOINTED YOU HAVE NOT
CONSULTED MILLER
ABOUT THROAT PLEASE DO NOT FAIL TO DO
'SO AND TELEGRAPH
ME

BENJ STRONG




1116A




(Ft-1)17/177,±1
0M5, 2 25M 5-25
FEDERAL RESERVE DANK
OF NEW YORK

INTEROFFICE

ROUTE SLI7
DATE

TO LAA' Atint;
M -

6

,

SERVICE DIVISION
MESSENGER SECTION

M.

(14 A-AD-,

FROM U
j.

DEPARTMENT
DIVISION
SECTION

N. B. USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE.
TO INSURE PROMPT AND ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED

'

0

-

MISC. 4. I-40014-I-LA

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
lb Mr, Harrison

DATE

June PO, 1925.

SUBJECT

Renj- Strong

FROM

I have suggested to Miss Bleecker that if it should ever become
necessary to make any disposition of my private files, I would like to have
you and my son Benj. Strong Jr., go over them with her to decide which are
purely Federal Reserve System matters but of an entirely personal nature,
which might well be. retained in the bank under appropriate confidential
cover;

which might be worth while saving in the family, and which might as

well be destroyed.

I hope to get a lot of this done some time after my

return from abroad, but would like to feel that there is some understanding if
the need should arise.




July 6, 1925.

iiFederal Reserve

Bank,

New York.

o.

76

CONFIDETLJAL FOR DEPUTY GOVERNOR

Leave for Berlin Wednesday. Afterwards plea
holiday with Norman at Spa Belgium.
All well.
Strong

A
11111




,

oc),,r7e

wdwil

FEDERAL RESERVE BANK

MISC. 4. 1-200W7-24

OF NEW YORK

OFFICE CORRESPONDENCE
garrison

np

Lir

ROM

DATE

July 10, 1925

IQ?

W. A. Scott

SUBJECT:

We have today received two telegraws from the Argentine Embassy,

'requesting us to release 41,200,000. and 475,000. of their gold deposit with u
and transfer 41,200,000 to Louis Dreyfus & Company, New York, and )75,000. to

National sank of Comerce, new York. This leaves a balance of 4450,000 in

their gold account.
(Copy to La.. Sailer)




Y,

Hotel Majestic,
Paris, France,
August 15, 1925.
Dear Mr. Harrizon:

Yours of July 31 is just received, having been delayed by our
travels.

It is very good of you to await some word from me before sending
the letter to the Board about its letter X-4377.

In general my views are that this is a rather sell thing upon
should not accept this
order of the Poard without e protest.
The Board's attitude in this and
other similar mateers impresses me, first, as exhibiting a desire to exercise
authority, rather than to get at results, and, second, to do so by applying
rules to all twelve of the Reserve Banks as the result of BO= trifling evidence
of lack of good judgment on the part cf possibly only one bank.
"there difficulties are caused in this way, the Beard should deal with the individual
bank, and not assume to exercise authority in this general way.

which to lay emphasis. But, on the other hand, that we

That T do think must be done, - and done vigorously at the
appropriate time - is to protest to the Board against the various evidences
which we have from
to time of suspicions of our motives, our good faith,

tir3

our good judgment, etc. etc.

In other words, I would prefer to sea an

issue railed with the Board on some important and funiamental matter like
that, rather than on some less importaat matter like this one.
These sus-

picions which are harbore4', by some of the Members of the Board are really the
fundamental cause of almost all of the difficulties which arise.

should be brought to the view (although I am not hopeful of the possibility
of it) of regarding the organization as one whole, instead of regarding the
Reserve Banks as being on. on side, and the Board on the other; the Board
administering discipline, exercising authority, and dispensing rebukes and
admonitions which cause irritation and hard reclines.
My suggestion would be that we prepare for use at the appropriate

time a complete list of all matters of that sort which have arisen in the
course of the last few years. And if at some time really formidible action is
warranted, that it be taken by the directors of our bank, or, possibly, by a
Itiwill be
committee of the directors of a number of the Reserve Banks.

preferable to have it done by directors than by officers.

I will reply separately about Merle after I have had a chance to
go over Burgess's memorandum.
Sincerely yours,

George L. Harrison, Esq.,
Deputy Governor, Federal Reserve Bank,
33 Liberty Street, New Yerk.



fa"

/

el Majestic,
Paris, France,
August 18, 1925.

Dear Mr. Harrison:
T. shall not answer it at
Yours of August 6 just reaches me.
but the following comments are justified:

I think the redection in the size of the bills will cause
)re corelaint and irritation than will be justified by the emeunt to be saved.
Any effort to push two dollar hills into circulation is,
am, going against the current of public feeling, as was the case with silver
liars, and I doubt if the results will justify the effort.
All of the arrangements you refer to for saving expense in
the mechanical handling of the currency and of paid Government obligations
seem to me to be fully justified, and, if the law permits, we should do it.
I doubt very much if he asks for any more gold
About Schacht:
shipments, and havewrittem a brief explanation cf what he is after in a letter
FlaboratinE a bit, it developed when we were in Berlin that
to Mr. Case.
achacht's reserve, - three-quarters being in gold and one-euarter being in
foreign bank balances - had constantly increased since the reorganizat'on of
the Reichsbank, and the proportions had been almost exactly maintained at three
The fluctuations caused by demands for foreign payments took place
to one.
entirely in the foreign balances which he does net show; in other words in
Norman and I both
that it was a mictlke for
invested funds held abroad.
him to carry GO inflexibJe a reserve; that he should accustom people to the
idea that it would fluctuate.
So, even at some expense to the Bank, he proposes to convert some of his invested balances into gold, and, at times, to

felt

reverse that process and even to let his disclose( reserve run down by investing
portions of it and putting At in the undisclosed accounts,
But I did not
gather that he had any intention of actually having gold shipped Lc Germany

from America or elsewhere.
have sent you.

Much of this is explained by the statement which

I will be writing you at greater

length when I gat to London,

but there is not much to report from here.

Sincerely yours,
C. L. Harrison, Esq.,

:

Deputy Governor,

!IL
.

'

.

Federal Reserve Bank of New York,
33 Liberty Street, New York.

.







Spa, Belgium,

July 21, 1925.
Pear Hr. Harrison:

I WES delighted to have your fine letter of Italy
10, with enclosures, which I have just read with great interest.
It gives a bully picture of whet has been going on. You will,
I know, understand my not answering it in detail. None ofths
matters you dral with requires any comment from me, and I am

just now sending a deluge of letters, all of which I hope you
will rend. And from them you will get about all that T would
have to write about anyway.

We all keep well, except that Governor Norman is

ly worn out, and yesterday I was a little troubled about him.
I think possibly it's the reection from a long stre2m. Pe see=
disinclined to take any exercise, but I am going to make him take a
good wrlk this afternoon and try to send him to bed thoroughly
tired out to see what that does.

Please give my best to all at the bank, and include

youreeli generously.

Very sincerely yours,

eeerge L. 'Harrison,
n-puty Governor, Federal Reserve Bank,
33 Liberty Street, New York.

Hotel Majestic,
Paris, France,
August 20, 1925.

Dear -kfir. Harrison:

1111111
'

You have doubtless been thinking about the next Governors
Conference.

T shall sail on the Olympic on September 9, and suggest
that we endeavor to arrange for the conference this year about the
middle of October.
That will give me a month after returning home
and time to go over a program with you and make my own suggestions
so that they may reach the other Governors for preliminary study.

ir
,

I am a little sorry now and then to get evidences that
ters are held up during my absence, which it seems to me might be
disposed of.
One was the discussion with th e Comptroller about the
cost of examination reports. Don't you think Governor Harding could
fix that up while T am away!
You will recall he is a member of the
Committee with me.
Another matter, almost too trifling to mention,
I notice1 in the minutes.
It was the decision to await my return
before informing the tenants in our building whether they should use
33 Liberty Street, or Federal Reserve Bank Building, as an address on
their letterheads.
Surely I am not needed to decidc a matter like
that.
I can tell you now, however, that I think it should be
33 Liberty Street.

Tonight Dr. Stewart and I are going to Bale to meet the
officers of the Suisse National Bank. We return right away.
An
I will spend another week in Paris, reaching London on the 28, where
I expect to find the Vice President of the Bank Polski, and probably
the President, to meet me.
We are also arranging to have Br.
Vissering come to London.
And it may be that Dr. Schacht will c
for a last talk before I go home.
I don't want to delay sailing
beyond the Olympic, and this will give me a very busy two weeks in
London, but I think we can make it.
We have enjoyed the trip greatly; have learned a lot; and
keep very well. But I must say the vacation part of it was too short
to suit me.
My best to all of you at the office.
Sincerely,
G. L. Harrison, Esq.,
Deputy Governor, Federal Reserve Bank,
33 Liberty Street, New York,



(i)

Hotel Mejestic,
Paris, France,
August 25, 1925.
Dear Mr. Harrison:

saw in the

While I think of it, I want to advise you of sowetning which I
Bank of France, which may prove of interest to us.
They have constructed a large series of vaults for coin and

bullion which impressed me as being a great improvement over our bullion
vaults. The rooms are somewhat larger than our rooms, and each room is
lined throughout with heavy metal shelving and light doors with wire fronts,
so that the contenes of these compartments or shelves are ezpoeed to view.

The gold bars are stacked in individual piles on these shelves , with pas-

stacks so that the number of bars can be counted and the
contents of each vault audited and checked without even opening the doors.
In front of each pile of bars they have cards on which are given tha numbers
of the various bard, by whom the bars are made, and the particulars of weight
and fineness.

sages in between the

The whole thing struck me as a very efficient and satisfactory
method of stacking gold bars to avoid ccnstant rehandling.
ment, but

It seems to me that if we have room in our vault for some such
could not only carry a very large amount of gold in each compartwe could do it in such a way as to avoid a great deal of labor.

equipment

Of course the shelving must be very heavy, and therefore the
may be very expensive.

system we

Sincerely yours,

George L. Harrison, Zsq.,
Deputy Governor, Yederal Reserve Bank of New York,
33 Liberty Street, New York.




Hotel Majestic,'
Paris, France,
August 25, 1925.

Dear Ir. Harrison:

I have just finished reading yours of the fourteenth and the enIt does seem a hopeless jot:
closures with a sinking heart.
Unfortunately Dr. Stewart left just before the mail arrived, or
I would have had op,ortunity to post him about the situation respecting the
I cannot understand, after cur discussions with Crissiager,
weekly statement.
and after reaching an agreement with Crissinger, Stewart and Smead, as well as
after cabling our assent, to which Norman had agreed,why there shculd be any
fuss about it.
Possibly I should
As to the salary matter, I am simply dumbfounded.
repeat in this letter, for the benefit of our directors, what you and the other
officers, and probably the directors, have heard me say repeatedly.
This is a year of reorganization and adjustment in the bank, when
salary policy cannot be developed until we know the _outcome of our building.

I shall be unable to tell until the end of the year just what is feasible in

It has been my hope and expectation to make
the way of salary adjustments.
salary adjustments in connection with a plan by which the entire staff of the
All ef these questions of salary
bank can be given a good lunch every day.
adjustments, therefore, have been dealt with, so far as I am aware, rather
This was all explained to the Federal Reserve Board verbally
tentatively.
and by letter. Even Mr. James has stated to me that he was quite content to

let our situation develop- throughout this year, and have a permanent policy

adopted after a yearic experience.

As to the specific salaries involved, the Board entirely overlooks
the fact that we have hundreds of people in the bank handling cash; that the
tellers eft make heavy payments to the banks, while they have always been
uneer paid, have been changed euite frequently lately and the new and younger
men who have been promoted to thee positions have had their salaries gradually
the chances of defalcation
But the Board does
increase('

not realize that
in a large teller's cage are really loos than those which arise where cash is

The audit control is closer, and the
handled in saaller quantities in the bank.
If the principles which the Board seems to apopportunity is therefore less.
ply to the "tellers", simply because they are called tellers, should be generally applied throughout to bank, I suppose it would be necessary to increase
salaries by poesibly e200,000 a year.

The fact is that cur whole salary scale in certain of the departments
This is partly due to the deliberate
is, and has been, too low for a long time.
because of our building, is partly due to the
delay in effecting readjustments
insistence of the Federal Reserve Board that they will not tolerate
by the Federal Reserve Board which
ary increases, and is partly due to an
has been so hostile to the New York Bank, its management, and its organization,



attitude

further sal-

0.411MAINNEIV

Paris, France
8.25.25

Mr. Harrison

(2)

aat we are all naturally reluctant to face these recurrent disputes.
This episode leads me to believe that the time has now arrived
for us to carry out the program mentioned in my last letter which related to
the approval of the Board of the employment of experts for special investigaT think we must make a search of our memories and our records in
tions.
order to produce a list and digest of all cases of this sort which have arisen,
and then, instead of having the officers deal with it, have a committee of our
directors, - possibly with similar committees from ether Reserve Eanks - go to
Washington and thee the matter up with Mr. Mellon and with the Board.
You may say to our directors that my visit abroad has convinced me
that we have ahead of us a period of very great responsibility, where we can
perform a useful service in facilitating monetary readjustment over here, or
where re can devote cur tire to these ridiculous little squabbles which simply
annoy and distract us from more important things, and leave the Federal Reserve
System a rather impotent, bureaucratic affair with nothing accompliehed.

latter, I don't feel dispoied to be a party to it.

Now, as to the
I would rather have the raw once and for all, and either definitely get away
fror these annoyances or also quit attempting to accomplish anything.
won't do to take the matter up in the usual -way. 7e have got to ao right to Mr.
I would be very glad to talk to
Mellon and insist upon something being done.
the President about it, but it might even be better to have some of our directors

It

do so.

1 have been in a state of mind recently to welcome this investigaMelon that among other things we will bring
tion by Congress, and to notify
Of course I
up the constitution of the Board and its general inefficiency.
hate to add to Mr. Me3lon's burden just now, for he has some very difficult things
on hand, but we have a conference coming on in October and that might be the
appropriate opportunity for doing something while the other Governors are in
Washington.
At any rate, you might be talking it over pending my return.

rr.

sincerely yours,

George L. Harrison, Fog.,
Deputy Governor, Federal Reserve Panic,
33 Liberty Street, New York,




RECEVEO
FEDERAL RESERVE BANK

1,4

SEP 14 1925

O. L. /-4.

OF NEW YORK

Hctel Majestic,
Paris, France,
August 25, 1925.
Dear Mr. Harrison:

It seems a shame, after all the study you put into the preparation of the schedule accompanying your letter of July 28r-that I have been
unable to answer it before, but it has been very difficult to get time for
the consideration it neeCs.

As to your letter:
First, I have a pretty good general idea of
the practices of other central bank in open market operations, which Dr.
Stewart will be able to supplement. But it is not a phase of the subject that
we would care to develop very fully.
Much of our informa
fidential, and the inquiry would be so advertized that we would be likely to
get into hot water with our friends abroad if we attempted an exposition of
their policies.
So the conclusion you and Jay arrived at is satisfactory.
Second, as to the gold policy. Generally I do think that .a considered, written report and recommendations is the best way to approach the
matter.
Why don't you start Crane to work on it.

Third, I agree, as indicated in your letter of July 24, that
argumentative matter shculd not yet be attempted.
What we need first is
the information taken from our files and from reccrds and reference books.
Later, when the material is arranged, it may be desirable to rearrange it
with a view to apportioning it among different people who might be expected
to appear before the commission.
And now as to the topics themselves:
Reserve Re uirements of Member Banks: While it will probably best go
under some other heading, probably "Competition with Member Banks", I think
it would be desirable to prepare something to show how the earnings of member banks were affected by the passage of the Federal Reserve Act, and how
they may have been affected by our actual operations.
Case's letter to
Mitchell is a good illustration, and, of course, the enormous savings in the
reduced reserve requirements is the principal item.

Then, under A, I think something shouldbe brought out to show the
enormous growth in the proportion of time deposits to demand deposits, and the
consequent lowering of gross reserves to gross deposit liabilities because of
the requirement of 3% only.
Federal Reserve Note Issues:
Cannot figures be prepared to answer the
chronicle article, showine that no change in the currency would take place if
we paid out's. tillion dollars gold,, and retired that amount of Federal Reserve Notes, or, even more strikingly, if we actually liquidated the Federal
Reserve Banks and wound them up.



Also, as Willis is quite likely to turn up at any hearings, might

eI

-

Paris, France
FEDERAL RESERVE BANK OF NEW YORK

8,25,6.25.

Mr. Harrison

(2)

it not be a good plan to get out all of his articles in the Journal of Commerce and show what an inconsistent medly of misstatements and incorrect information they contain.
I just notice one in which it refers to the London
acceptance as being principally drawn to finance British export trade. That
is exactly what they are not drawn to finance. Almost all of the bills representing foreign trade in London are drawn to finance imports of goods into
England.
Snyder's article in the weekly report to the directors on the
Recharter:
First and Second Banks of the United States is excellent, but could be recast
so as to be more applicable to the present controversy.
D.

Willis has reiterated over and over again that we should buy
bills. The point should be made that if the Bank of England, or the Reichsbank,
or any other of them undertook resumption of gold payment, and relied upon our
willingness from time to time to buy bills maturing in 90 days, with no understanding as to how long the account would run, they would be basing their policy,
and a very important one, practically on call money; literally delivering
themselves into the hands of the managers of a foreign bank who might at any
time again force a suspension in case the credit was used. Sensible men don't
do such things..

In dealing with open market operations, we
Open Market Operations:
should throw light upon the curious difference between the discount rates of
the banks of issue of Europe and of the Federal Reserve Banks. How our
discount rate is really the Lombard rate, and our bill rate is really the
equivalent of the discount rates abroad.
Under B. 4, the question of the effectiveness of our rate brought
into play by open market operations should be very carefully studied andpreIn this connection, I think we should be careful not to attribute too
pared.
much to open market transactions and notsufficient to the influence of gold
movements.
Something shouldbe done to explain the development of the gold exchange standard, and the danger of involuntary inflation as the result.
Under the heading "Open Market Operations" and in connection with
Our atthe McFadden Bills, the attempt may be made to curtail our powers.
Our member banks can
titude should be to seek an enlargement of our powers.
get credit at any time, and renew it almost indefinitely if they are entitled
to the renewal. We would be asking no more for foreign correspondents if we
requested the power to make loans on eligible paper, as distinguished from
I, personally, would advocate the power which all foreign
discounting it.
central banks have, to extend credit in some form upon the security of shortlimit it principally to Lombard loans
time obligations of foreign governments;
Possibly the statute should be cleared up so as to
to the banks of issue.
make it perfectly clear that we can lend gold, as well as buy and sell it.
Competition with Members:
Under C. 2, I takethe point of view that the
C.
granting of powers to Reserve Banks to perform services for member banks
may not mean that we can require member banks to use those services, but the
implication is that we cannot, as a matter of policy, deprive them of the
enjoyment of those facilities if the Act gives us the right to extend them.




Varis, France
8;25.25

FEDERAL RESERVE BANK OF NEW YORK

Mr. Harrison

(3)

I wish we could get some figures from some of the big
Free Services:
banks as to what was their per item cost for making various types of collections, and contrast them with our costs,
we should
for shipments of currency to us by members was almost an essential basis for
our par collection system, and that the absorption of the costs on outgoing
currency was the result of the transfer of the sub-treasury functions; hence
we got stuck both ways;
we should especially emphasize the value of this
service to the public generally.
F.

A. Cost of Operating Federal Reserve System:
The emphasis should be laid
upon the ne.,d for protection of the member banks and the public against loss,
etc.
This would apply especially to the buildings.
I have not attempted to arrange these few suggestions in their
suitable places in the memorandum, as probably it is being worked over and
rearranged anyway.
It strikes me as being very complete.
Further suggestions are
more likely to develop as the data is being studied, and that is one of the
first things 1 want to get at on my return.

if you consider that the suggestions are rather meagre, please
also consider that the memorandum of topics is wonderfully complete, and
leaves little for addition except argument.
Very sincerely yours,

yk0,
George L. Harrison, Esq.,
Deputy Governor, Federal Reserve Bank of New York,
33 Liberty Street, New York.







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FEDERAL RESERVE BANK
OF NEW YORK

,-"1iay,21, 1921.

My dear Lr. Jay:

I am enclosing herewith as we agreed last night, a copy of my
memorandum of procedure and proposed telegram to be forw ded by the Federal
letter from Governor
Reserve Board to all Federal Reserve Banks and 'a draft
Harding to the President.

Inasmuch as I have made the memorandum of procedure so detailed
and inasruch as the time available is so limited, I have not attempted to
prepare the form of statement to be issued by the President upon the conclusion
of all these preliminaries.
I have felt that my time this
better spent on the papers that I have enclosed.
The for
be issued by the President is one which will form very easily and naturally
after these other matters have been disposed of and I feel that the best that
I can do in the short time this morning is to outline what the procedure
statement should contain.
I shall, however, work on the form of statement over the week end
and will have something ready Tuesday in Washington for either you or Ir.
I hope there is no hitch
Strong, whichever it is that goes to Washington.
in the program to get these papers to you.
Mr. Rink of the Service Department will take one set by rail and the other I am mailing to you as you
requested at your Crescent Beach address.

Very truly

GEORGE L. HARRISON,

Th5:51:11:3;u7/4"6

Pierre Jay, Esq.,
Crescent Beach, Connecticut.




FEDERAL RESERVE BANK
OF NEW YORK
4.

May 28, 1921.

Dear Governor Strong:
I am enclosing herewith a form of meMorandum of procedure,salme
proposed form of telegram to be forwarded by the'Federal Reserve Board
to all Federal Reserve Banks and a draft of letter to be forwarded by
Governor Harding to the President.
I have sent copies of these papers to Li'. Jay at Black Point,
Connecticut so that he will have had an opportunity to go over them before he :wets you Monday.
I am sorry that in the very limited time which
I have had to work On this matter it has been impossible for me to prepare
the form of statement to be issued by the President, but as I explained
in my letter transmitted to Mr. Jay, I feel that the very brief opportunity
that I have had to Work on this subject this morning was better spent on
the enclosed papers.

You will notice, however, that the memorandum of procedure is
so detailed that the outline of the statement to be issued by the President will need only to be elaborated in order to provide a suitable statement to be issued by him.
As I told Er. Jay,..idesseerg I shall work on
such a statement to-morrow and Monday and will have some sort of a preliminary draft ready for you or Yr. Jay in Washington on Tuesday morning.
I am afraid, however, that all of my efforts are a little elementary and
that these may not be just what you want.
I y only excuse is the briefness
of the picture that I got from you and the even briefer tine in which I
had to Work on it.

.G?GE L. HAPRISON,
-Bemstp=0.qmpripmem

Governor Strong,
Hotel Plaza, New York, N.Y.







Dear sir:

I have just spent a fortnight traveling
through Western and Southern agricultural and in-

dustrial districts to study the conditions prevailing
there, and as requested by you at our conference early
in May I am writing you briefly my observations and
views.

(Agricultural and Industrial Conciitions

better but farmer having but small capital in many

cases will take two or three years toreadjust himself
to the new condition.)
I found that in many sections misunderstand-

ing still prevails as to the pruaimumniatiax general
credit policy of the Federal Reserve Banks as well as to

2

their precise

relation to producers and

distributors.

It seems difficult to make it understood that the
Federal Reserve Board has no funds whatever to loan

do not lend to

and that the Federal Reserve Banks
individuals but lend only to banks.
seems to persist

that the Reserve

The idea al

Board and the Re-

serve Banks can direct what particular loans a member shall or shall

not

make, whereas these are of

course matters solely within the jurisdiction of

the member bank.

7




serve

The credit policy of the Re-

Board and the Reserve BakkaVare expressed and

made effective through the discount rates,

which

are a reflection of existing credit conditions and
act

impersonally without

reference

to any particular

loans of the member banks.
A year

ago several of the reserve banks

raised their rates in order to conserve credit for




3

the Autumn agricultural requirements, and in October
the Reserve banks inagricultural sections were borrowing from other reserve banks $267,000,000.00.

Now

the demands for credit have declined, bank reserves
have risen, and reserve bank rates have been reduced.
An unprecedented volume of last year's agricultural
products us being carried over, largely on bank credit,
and the credit requirements for this yearts crops are
being felt.

The reserve bank at Minneapolis and Rich-

mond have already had to borrow from other reserve
banks to secure additional credit for their districts.
The Federal Reserve Board and all of the Reserve Banks, I am sure, are fully alive to the importance of continuing the policy of extexy_ing credit most

liberally to member banks which require it for the
financing of their customers.

pressure on

I am not aware that

member banks to reduce loans is being

4

exerted anywhere in

But in view of the

the country.

continued misunderstanding of federal

to which I have

Federal

Reserve Board,

to-day

alluded, the

after hearing my report, has

Reserve policies,

telegraphed each

Reserve Bank, reiterating the necessity of

liberal credit policiee,has

continuing

again called their attention

to the fact that the Board has never revoked the permission, granted to member banks under authority of
law in the early days of the war, to re-discount the

eligible paper of

non-member banks, and has asked each

Reserve Bank to advise

each

of its

member banks accord-

ingly and to give fall publicity to the message.

trust that this message and
it may remove finally
to

the

the publicity

both the

attendant upon

misunderstandings as

credit policies of the system and the use si

which some banks, both

member and non-member,

times made of the alleged restrictive




I

have at

policies of the




justify

Reserve banks to
credit

their refusal to extend

to their customers.
The Board believes that the

tension

of credit involved

should remove

through

carry

gradually

to

in the foregoing policy

any apprehension which farmers and

have felt

cattle raisers may

to

liberal ex-

as to their ability

their seasonts operations and

market

their

legislation which has

products.

Further

been suggested making eligible

for discount agricultural paper with more than six

mtonhs to run does

the present
for its

not seem necessary, for although

situation requires time

solution,

policies of the

re-discount of

there is nothing in the law or the

Federal
renewal

where member banks

and patience

feel

Reserve banks to prevent

the

paper to a reasonable extent
justified in making such re-

to ad-

newals.

Nor is it necessary at present further

just the

rates of the Reserve banks as in all agricultural




6

and nearly all industrial disotrict these rates are
at or beloe the level of the rates at which member
banks are loaning, and therefore are not exerting

either penalty or pressure.

For the facilitation of the credits required by our foreign trade, the regulations of the
Board regarding bankers' acceptances are being re-

studied with the view to meeting more liberally the
present abnormal credit demands.

The first change

determined upon and announced several weeks ago was

the permission to the Reserve banks to buy acceptances arising out of imports or exports with a malwrf
up to six months where such maturities were required

by the usages of trade. As a permanent policy the
Board eould be glad to see our foreign trade banks
which come under its supervision under seotion 25 of
the Federal Reserve Act, whether chartered under




7

federal or state

laws, empowered to become members
system;

of the Federal Reserve

legislation,

federal or

guards would accord

and

state, as

to have such

under proper safe-

to the banks of

other countries

facilities and opportunities in

the same

States as

are extended

to

our banks abroad.

In conclusion may I assure you

Federal
from day

the United

that the

Reserve Board is keeping closely informed

to day of

the progress of the re-adjustment

which is taking place not only in

the United

States

but throughout the world; and that the policies of
the

Federal

the view

to

Reserve System

are

being developed

facilitating production

difficulties under which

and easing

with
the

industry, commerce and ag-

riculture labor at present.

The

level of

was a year ago.

reservoir is nearly 40%

higher

Its condition justifies

a liberal policy

than it

the credit

not only

in




8

the extension of credit to our own producers and distributors but also to foreigners who
produce.

wish to buy our

For the primary extension of credit either

at home or abroad the Federal Reserve banks are not
responsible, but as banks of re-discount they are
ready now as they have been in the past to support
their members in extending such credits as our producers, distributors and exporters may require.

_




1,442

tit it r riaa-ftwo Anita lo-it-ei4,141a
40.9o-r-44-$414
The laseiEs4econference 41.41,44 last week was called for
A

the

purpose of

inquiring into international credit cone-4

ditions and the practicability, by

extensions of credit, of

stimulating our exports, particularly of

prodtcts

of which

a larger surplus than

carried over from the

those

usual has been

preceding year.

05---4/64wv-A, 114-4

Pale

agricultural

other exporting countries are also

feeling a

/IS

decline in

the demand for their products, purchasers of

goods from the United
culty in paying for
in

order

States are finding especial diffi-

the, because

at present every nation

to purchase goods in the United States must give

a premium to secure the dollars with
account.

which

to settle the

The improvement in our domestic credit con-




la
.401.

ditions now justifies us in encouraging the extension of

credit to other countries in order that they may more
freely purchase our goods and more easily pay for them.
The adoption of a more liberal policy in the exten-

sion of private credit to foreign countries and their

nationals naturally requires a continuance for the present
of the liberal policy this government has pursued towards
the beginning of interest payments on the war debts of
foreign governments.

For, obviously, when foreign countries

are foregoing purchases of our goods because they cannot

give the dollars with which tOpay for them, to insist that
they begin interest payments aggregaring nearly $500,00,000
a year on their war debts to us would require them still




-2-

further to curtail their purchases and would neutralize
the assistance they might receive from new loans negotiated here.

Our purpose at the moment is to facilitate the export of American goods, particularly our surplus agricultural products.

The bankers who attended the conference

gave assurances that every proper effort would be made in
negotiating loans to foreign countries to see that irks 41,

4 fair share of the proceeds would be applied to the purchase of American agricultural products.

But they made

it clear that under present conditions no restrictions are

necessary to make it certain that the proceeds of such
loans will be applied either to fresh purchases of goods
in the United States or to the payment of debts contracted
for goods previously purchased here.

Whether the pur,..

chasing power created by such loans is expended by the

trte-ivr.ce terr-r-troth..
-o-owat-ry-negotiating the -lean or by some other country to




-3-

which the borrower is indebted, is immaterial, for it is
only by the export of gold equivalent to the proceeds of
the loan that this country can be deprived of the advantage of having the proceeds of the loan expended here;

and at present gold is not being exported but on the contrary is flowing

i4 o us from every part of the world.

Before making a statement regarding this conference
the return to Washington of Governor Harding of the Federal
Reserve Board has been awaited.

has been in the West and
tion regarding
ditions.

South

For the past fortnight he
securing first hand informa-

domestic industrial

and agricultural con*4

His letter of yesterday which is appended makes

it clear that the credit policies of

the

Federal Reserve

System are being shaped and executed with an

eye

not

only to carrying forward of agricultural and industrial

production and facilitating its distribution both at home
and abroad,

but also to

relieving apprehensions with res-

pect to the supply of credit which the farmers and live




-Fr

-4-

stock men have been feeling as their season progressed.
These assurances that our bankers, whether their
field of credit extension is at home or abroad, will work
together for the stimulation and revival of our trade, both
foreign and domestic, taken together with the steady improvement in our credit supply may well bring encouragement to

purchasers and distributers who are depressed by the trials
and difficulties of the readjustment through which the

ate,
United States and all other nations0 now passing.

EXHIBIT "B"

PROPOSED FORM OF LETTER FROM GOVERNOR HARDING TO THE PRESIDENT

My dear Mr. President:
I have just returned from a two weeks trip through the middle West, a trip
for the purpose of making

which I have made, as I advised you on

a study of the conditions prevailing throughout the agricultural districts.
Because of the very great importance of this subject to the country at
large, I am taking the liberty of reviewing in brief my 'observations upon that trip,

and of outlining to you the present, and proposed, policy of the Federal Reserve
System, to aid in the readjustment of those conditions.
(Review of conditions by Governor Harding)

In order that there may be no misunderstanding of the position of the
Federal Reserve System, I wish briefly to explain the precise relation of the Federal
reserve bank to the farmer,. manufacturer, merchant, and the exporter.

As you are

undoubtedly aware, the Federal reserve banks do not, and cannot, deal directly with
the individual, whether he be the producer, manufacturer, or exporter.

The only

authority that the Federal reserve banks have to make loans, or to advance credit,
is that authority conferred by section 13 of the Federal Reserve Act, to make loans
or advances to their own member banks.

They cannot make loans to the individual

borrower, nor can they require 'a member bank, or any other bank, to make a loan to
a borrower.

So also it should be made clear that whether or not 4 particular

borrower may be called upon to li]uidate an outstanding loan to a member bank

is a

matter which comes Solely within the jurisdiction of that particular bank, and is
not in any way subject to the jurisdiction of the Federal reserve bank.
The Federal reserve banks have never been instructed, or requested, by the Federal
Reserve Board to urge their member banks to liquidate the loans of their customers,
Gn the contrary
both the Fqderal Reserve Board and the Federal reserve banks have generally
pursued the policy

that the aggregate amount of borrowings by member banks from

their Federal reserve banks is a matter controllable by the rate of discount, and not



-2-

by any arbitrary shuttingoff of credit, at any rate.
In view of the fact, however, that, as I found on my recent trip, there has
been a vary general misunderstanding of the relations between the Federal reserve banks
and the borrowing public, and in view of the further fact, that certain commercial
attempted to justify
their refusal to make advances to their
banks have from time to time
customers by the alleged excuse that the Federal reserve banks would not permit this,
that, or the other kind of a loan, the Federal Reserve Board, in an effort to emphasize
the necessity of a proper public understanding of the functions of the Federal reserve
banks, has sent the following telegram to each of the Federal reserve banks, calling
attention to the necessity of continuing a most liberal policy in the extension of
credit in the agricultural sections:
(Telegram)

It is believed that this telegram will make it apparent that the Federal
reserve banks stand ready now, as in the past, to advance credit to their member banks
whenever those advances may be needed, in order to permit of a proper and normal
liquidation of their loans to their customers.

It is now the policy of the Federal

Reserve Board, just as it has always been, that no pressure should be made upon
member banks to liquidate loans, which might cause undue hardship and loss to
borrowers, who are suffering because of the drastic liquidation of the past year,
and whose insolvency would only result in loss both to them and to the lending banks.
The Federal Reserve Boa'rd is clearly of the opinion that for the present

there should be no further change in existing rates of discount, but that the credit
facilities of the Federal reserve banks should liberally be extended to their member
banks at existing rates.

There cannot be and, in the opinion of the Federal Reserve

Board, there is not, any just complaint that the existing rates of discount tend,
merely because of the rate, unduly to restrict credit, since in most districts the
prevailing rates of discount are below the market rate for money.
A reduction in the present level of discount rates, it is believed, would

only encourage unsound speculation in both

the

securities and commodities markets,

and would tend to maintain the present costs of production above competitive levels,




-3-

without providing any greater freedom of credit where it is legitimately expected
and needed.

The Board believes, therefore, that the present discount rates, with

a fuller public realization of the willingness of the Federal reserve banks to extend
credit, wherever required, at those rates, will best Accomplish a natural and normal
readjustment of the credit situation, and will best promote the welfare of the
agricultural interests, and the country as a whole.
Section 19 of the Federal Reserve Act provides in part that "no member
bank shall act as the medium, or agent, of a nonmember bank in applying for, or
receiving, discount from a Federal reserve bank ***** except by permission of the
Federal Reserve Board.

In order further to facilitate the flow of credit to those

borrowers and sections where most needed, the Federal Reserve Board, as stated in the
enclosed telegram, has exercised the power conferred upon it, to permit member banks
to act as the medium, or agent, of nonmember banks in applying for discounts from the
Federal reserve bank.

This action should have a marked effect, particularly in those

areas where much of the agricultural borrowings

is of necessity made through state

banks, which are not members of the Federal Reserve System.
Before concluding, I wish to state that the Federal Reserve Board, in order
to encourage the sale and export of American goods, has recently amended its
regulations so as to permit Federal reserve banks to purchase acceptances, growing

out of transactions involving the importation or exportation of goods, even though
they have a maturity at the time of discount in excess of three months, the previous
limit, but not in excess of six months.

It was realized that one of the effects of

the war and present worldwide conditions, was to slow up the process of international
trade transactions, and, in extending its regulations so as to permit Federal reserve
banks to purchase six months acceptances, the Federal Reserve Board, it is believed,
has taken an important step towards simplifying the problem of financing the export
of our goods abroad.

The Board is also considering at the present time the possibility of further
liberalizing its acceptance regulations, but is not yet prepared to make any definite
announcements in this regard.




I beg to remain, my dear Mr. President,
Respectfully yours,

MEMORANDUM OF PROCEDURE CONCERNING THE CREDIT SITUATION
IN ITS RELATION TO INDUSTRY AND AGRICULTURE.

In order more definitely to carry out the suggestions and policies

-

discussed at the conference of bankers with the President and the Secretary
of the Treasury and the Secretary of Commerce at the White House on May 25,
the

following is
I.

.

proposed as a tentative form of procedure:

The Secretary

of

the Treasury should, at his earliest convenience,

confer with the Federal Reserve Board in order to advise them of the discussions

Which took place at the White House on the evening of May 25, and to suggest that
the Federal Reserve Board take the

following

steps:

Prepare and issue to all Federal Reserve Banks a letter, or

preferably a telegram, emphasizing the necessity of the liberal extension of credit in the agricultural districts and calling to the
attention of the Federal Reserve Banks the importance of making public
their past and present policy in this regard.

This action by the

Federal Reserve Board is proposed in order to make it impossible for

member banks in these areas to deny credit to their customers upon
the false excuse that the Federal Reserve Banks have shut off their
credit. (See form of telegraph hereto attached and marked "EXhibit A.")
Prepare and forWard to the President a letter reviewing in
some detail the conditions in the agricultural areas as viewed by

Governor Harding on his recent trip through the Middle West, and defining the Board's policies insofar as they affect the restoration
of normal conditions in both the industry and agriculture of the
country. (See form of letter hereto attached marked "EXhibit B.")
II.

Subsequent to the action by the Federal Reserve Board proposed

in paragraph I above, it is suggested that it would be advisable for the President




to make a public statement referring to the Board's telegram to the Federal
Reserve Banks and quoting in whole Governor Harding's letter to the President.
This public statement should also refer to the following matters in the order named:
The conference held at the White House on May 25.

The advisability of encouraging foreign borrowing in this market

without any unnecessary restrictions as to how the proceeds should be applied.

The fact that it is impossible for the proceeds of a foreign
loan made in this country to be exported except

la

the shipment of gold,

and that gold exports are not now likely, since existing exchange rates

would make it too unprofitable to borrow dollars in this market at a premium to be exported in gold at pax.

It should be noted that even though

the proceeds of a loan made to Belgium, for instance, are used by Belgium
in the first instance to purchase goods from the Argentine, that purchase
is made by a transfer of credit on the books of the United States and the

proceeds of the loan still remain in the United States, but to the credit
of Argentine instead of to the credit of Belgium.

Inasmuch as dollars are

at a premium in the Argentine just as they are in Belgium, it is unlikely
that the proceeds of the loan will be exported from this country in gold
at pax.

They will, therefore, be utilized by the Argentine either for the

payment of existing debts in this country or for the purchase of goods from
this country.

The assurances given to the President by the bankers with whom

he has conferred that they will gladly cooperate with the Government to
facilitate the foreign commerce of the country by making every proper effort
to scrutinize foreign loans made in this country in order to'see that their
proceeds are as far as possible applied direct1N to the payment of existing
debts or to tne purchase of goods in this country and also to see that a



3

proper proportion of the proceeds of such loans are applied by the
foreign borrowers to the purchase of agricultural products in this
country.

The intention of the administration to urge the immediate
enactment of legislation permitting foreign banks to operate branches
in the United States without prohibitive restrictions either by State
or federal law, this legislation being necessary in order that foreign
countries will not be retaliatory legislation prohibit or impede the
operations of American banks and bankers in those foreign countries.
The intention of the administration to consider the propriety

of our permitting foreign governments to postpone the payment of interest on our foreign government debts for a period of two years.

Since

the payment of interest on those loans must be in dollars to request
foreign governments now to borrow the full amount of the accumulated
interest in dollars will only tend further to distort the exchange market
and to run dollars up to a premium even greater than they are at present.
24rthermore, it will be necessary in the next few years for Germany to
make extensive loans in this country in order to fulfill the obligations
imposed upon it by the Reparations Commission.

With this relatively neces-

sary demand upon our market for dollars it would be only an additional
burden upon our export trade for this Government to abandon its liberal
policy in reference to the payment of interest by our debtor governments.
To require all of those various borrowing governments to scramble to get
American dollars merely for the purpose of making their interest payments

will have the inevitable effect of creating an even higher exchange barrier
against our exports by making it more and more unprofitable for foreign
buyers to purchase goods in this country. (Tentative form of statement to
be issued by the President is attached hereto and marked "Exhibit C.")




EXHIBIT "A"

PROPOSED FORM OF TELEGRAM TO BE FORWARDED BY FEDERAL RESERVE
BOARD TO ALL FEDERAL RESERVE BANKS

"In view of conditions of export market and excess supplies of agricultural
products, for which there is not yet a normal or adequate demand, the Federal Reserve

Board urges upon all Federal reserve banks the necessity of continuing a most liberal

policy in

the extension of credit to their member

banks, so

that those member

banks

shall have no basis, so far as the credit facilities of the Federal Reserve System
are concerned, for calling loans already made, or for denying new loans required by
their customers, either for the purpose of carrying staple agricultural products

pending

their further liquidation

in

the normal process of distribution, or for the

purpose of financing the new crop.)

6iew of continued misunderstanding of past and present policy of the
Federal Reserve System in this matter, you are requested to forward this telegram to
all member banks in your district, and to give it to the press, In order eurther to
facilitate the marketing of the old crop, and the production of the new,

the

Federal Reserve Board has exercised the authority conferred upon it by section 19,
to permit member banks to act as a medium, or agent, in applying for discounts from

the Federal reserve bank."




EXHIBIT "B"
PROPOSED FORM OF LETTER FROM GOVERNOR HARDING TO THE FRESIDENT

My dear Mr. President:

1 have just returned from

trip through the middle West, a trip

ft

175

which belleompeenweelemme I advised you on

ta""k41113:2213"12=taitlag.

ea study et the conditions prevailing t enegleast the agricultural districts.
Because of the very great importance of this subject to the country at
large, I am taking the liberty of reviewing in

brief my obeervations upon that trip,

and of outlining to you the present, and propoeed, policy of the Federal Reserve

System, to aid in the readjustment of those

coaditions.

(Review of conditions by Governor Harding)
In order that there may be no misunderstanding of the poeition of the

Federal Reserve System, I wish briefly to explain the
reserve

precise relation of the Federal

As you are

bank to the farmer, manufacturer, merchant, and the exporter.

undoubtedly aeare, the Federal reserve banks do

not, and cannot, deal directly

the individual, whether he be the producer, manufacturer, or

with

The only

exporter.

authority that the Federal reserve banks have to make loans, or to advance credit,

is that

authority conferred by section I! of the Federal Reserve Act, to take loans

or advances be their

own member banks.

They cannot make loans to the individual

borrower, nor can they require a member bank, or any other bank, to make a loan to
a-borrower.

So also it should be made clear that whether or not a particular

borrower may be called upon to liquidate an

outstanding loan to a member bank, is a

matter which comes solely within the juriedietion of that particular bank, and is
not in any way subject to the jurisdiction of the Federal reserve bank.

The Federal reserve banks have never been instructed, or requested, by the Federal
Reserve Board to urge
On the contrary

their member banks to liquidate the loans of their customers.

both the Federul Reserve Board and

pursued the policy

Federal

reserve beaks have

that the aggregate amount of borrowings

their Federal reserve



the

banks is ft matter

controllable by

generally

Dy member banks from

the rate of discount, and not

Eby any arbitrary shutting off of credit, at any rate.
In view of the fRot, however, that, as

I found on my recent trip, there hes

been a very general misunderstanding of the relations between the Federal reserve banks
and the borrowing public, and in view of the further fact,
attempted to justify

banks have from time to time

that certain commercial

their refusal to make advances to their

customers by the alleged excuse that the Federal reserve banks would not permit thie,
that, or the other kind of a loan, the Federal Reserve Board, in an effort to emphaeize

the necessity of a proper public underetanding of the functions of the Federal reeerve
benks, has sent the following- telegram to each of the Federal reserve beaks, calling

attention to the neceeeity of continuing a most liberal policy in the extension of

credit in the egriculturel sections:
(Telegrem)

It is believed that this telegram will make it apparent thet the Federal
reserve banks stand ready now, as in the past, to advance credit to their eember banks
whenever those advances may be needed

in order to

liquidation of their loans to their customers.
Reserve Board, just

as

termit of a proper and norwal

It is now the policy of the Federal

it has always been, that no prearure should be made upon

member banks to liquidate loans, which might cause undue hardship and loss to

borrowers, who are suffering because of the drastic liquidation of the past year,
and whose insolvency would only, result in loss both to them and to the lending banks.

The Federal Reserve Board is clearly of the opinion that for the ;.)resent

there should be no further change in existing retes of discount, but thet the credit
facilities of the Federal reserve banks ehould liberally be extended to their member

banks at existing rates.

There cannot be end, in the opinion of the Federal Reserve

Board, there is not, any just cowplaint that the existing rates of discount
merely becuuse of the rate, unduly to

prevailing rates

restrict credit, since in moet

tend,

districts the

of discount are below the market rate for money.

A reduction in the present level of discount rates, it is believed, would
only encourage unsound speculation in both the securities and commoditiee markets,

and would tend to maintain the present costs of :.roduction above com:etitive levels,




-5--

without providing any greater freedom of credit when
it is legitimately
-lid needed.

expected

The Board believes, therefore, that the
resent diecount rates, with
e fuller public realization of the willingness of the Fed-al
reserve banks to

extend

credit, wherever required, at those rates, will best accom
4eh a natural and normal
readjustment of the creit eituation, and will best promote
of
agricultural

interests, and the country as a whole.

Section lir of the Federal Reserve Act provides in

I*.

that ',no

bank shall act as the medium, or agent, of a nonmember bank in

member

lying for, or
receiving, discount from a Federal reeerve bank ***** except by i.lesion
the
Federal Reserve Board. In order further to facilitate the flow oi *dit to those
borrowers and ceot

a

qk

4favtoned telegramA

/where most needed, the Federal Reserve Board,
permisttated

14.1W/0)

has exercised the power conferred upon it, to

to act as the medium, or agent, of nonmember banks in applying for
Federal reserve bunt..

.

in the

em

discou::::e

This action. should have a marked effect, partioulary in

areas where much of the agricultural borrowings is of necessity made through eta'
banks, which are not members of

the Federal Reserve System.

Before concluding, I wish to state that the Federal Reserve Board, in order
to encourage the sale and export of kmerican goods, has recently amended its
regulations so as to permit Federal reserve banks to purchase acceptances growing

out of transactions ievolving to importation or exportation of goods, even though.
they have a maturity at the time

of discount in excess of three months, the previous

limit, but not in excess of six months.

the war and

It was realized that

present worldwide conditions, was to slow up the

one c,-2. the effects of

process of international

trade transactions, and, in extending its regulations so as to permit Federal reserve

banks to purchase six.. months acceptances, the Federal

Reserve Board, it is believed,

has taken an important step torards simplifying thoaproblem of financing the export
of our goods abroad.

The Board is also considering at the present time the possibility of further
liberalizing its acceptance regulations, but is not yet prepared to make any definite
announcements in this regard.




I beg to remain, my dear Mr. President,
Respectfully yours,

4

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The conference with the bankers which you attended last week
was as you know called for the purpose of inquiring into international

credit conditions and the

credit, of stimulating

practicability,by extensions of

our exports, particularly of

those agri-

cultural products of which a larger surplus than usual has been

carried over from the preceding year.

It appears that there has been a general slackening abroad
in

the demand

for

goods, and purchasers of our products have

found especial difficulty in paying for them, because at present
every nation, in order to purchase goods in the United States must
pay a premium for

the dollars which it needs to settle the account.

The steady improvement in our

fies us in
in order

encouraging

domestic

credit conditions now justi-

the extension of credit to other

that they may more freely

purchase

our goods

countries

and more

easily pay for them.

But the adoption of a more liberal policy in the extension

of

private credit to foreign countries necessarily requires a




Ia
continuance for the present of the liberal policy this Government
has already pursued towardo the inaugusrtion of interest payments to

it on the war debts of foreign govenuants. Obviously, when foreign
countries are foregoing purchaeee of our goods because they cannot

get the dollars with which to pay for them, for

us

to nevertheless

insist that they begin interest payments aggregating nearly 000,000,000
voto42-4

a year on their war obligations which we holdNrequire than still further
to curtail their purchases and would neutralise the tower to pure.
chase which they might secure from now loans negotiated hero.

Our purpose at the moment is to facilitate the export or

American goods, particularour surplus agricultural products.
Tho bankers who attonded the confersnce gave us assurances that every

effort would.be made in negotiating loans to foreign countries

to see that a fair share of the proceeds would be applied to the
purchase of Anerichn agricultural products.

But they made it

clear that under present conditions no restrictions are neeepaary

to make it certain that the proceeds of suoh loans will be apflied
Ather to fresh purchases of goods in the United States or to the




pavmemt of debts contracted Zor goods previously purcn:

j here.

Whether the purchasing power created by such loans is expended

hare by the borrowing country or by some other country to which

the borrower is indebted, is inmateriel, for it is only by the
export of the proceeds of the loan in gold that this country
can be deprived of the advantage of having the purchasing per
expended here;

thus created and at present gold is not being exported but on
the contrary is flowing in to 12.0 from every part of the world.

Before writing you of the result of this conference I have
awaited the return to Waihington of Governor Harding of the Feder,-

al Reserve Board, who for the past fortnight has been securing
first hand information in the South and West regarding domestic

industrial and agricultural conditions.

Hie letter of yesterday

which I attach makes it clear that the credit policiee of the
deral Reserve System are being shaped and executed with a view

not only to carrying forward agricultural and industrial activity
and facilitating the distribution of their products at home and
abroad, but also to relieving apprehensions with respect to the

supply of credit which the farmers and live stock men have been

feeling as their season progresses.

These

assurances that our bankers, whether their field of

credit extensionfAis at home or abroad, will work together for the

stimulation and revival of our trade, both foreign and domestic,

taken together with the steady improvewent in our credit supply

and in business conditions may well hearten those of our farmers

and manufacturers, merchants and exporters who are somewhat dis-

couraged by the trials and difficulties of the readjustment through

which we are now passing.







trust it will also serve to put an end to the attitude which
not a few banks,vember and now member alike, have at times adopted

of declining loans to their =stovers on the wholly false pretolt
that the Federal Reserve System is opposed to banks' making a

particular loan or Class of loans.

see

Dear

s

dust s

have

ern

pent a fortnight

Agricultural and is

there, and as

adustrial districts to study the

requeste

. and Industrial conditions

Well capital ins

the general
credit

precise
e

sea

,ucers and distributors.

the'

ederal Reserve eoard has

eeeers1
3serve eanks

oe

tedeeel

fee

no funds whatever to loan

do not lend to individuals but lend only

e eanks can direct what particular loans a member shall

eet meee

zees these are of course matters solely within the

of tee

earisdectiou

difficult to make

so seems to persisit that the Federal Reserve Board

eesere

or eeell

It seems

idea

to eseee.

and

readjust

of the Federal Reserve anee as well as to their

teat
'Eno

but farmer having

-some sections misunderstanding still prevails as to

palCy

W
tlee

writing

ition, etc.)

I.

relation to pew

understood that

better;

many cases will take-te or three years to

hieself to the
new cond
that in

I am

stions and views.

(Agriculture]

I found

South-

conditionsprevailing

gi by you at our conference early in euy

you briefiy my
observc

only

traveling through Western and

merber bank.

WOO'

The credit policy of the Reserve Board and

ge Banes is expressed and made effective through the dis-

eederal

which are a reflection of existing credit conditions and act

COUL

impersonal..., without

reference

to any

particular loans of the member banks.

A year ago several of the reserve banks raised their rates in order
to conserve credit for the Autumn Agricultural requirements, and in October
the Reserve banks
banks as much
clined,

In agriculeural sections were borrowing from

as 467,000,000.00.

other

reserve

Now the demandsfor credit have de-

bank reserves have risen, and

the

reserve bank

rates

which were

than raiaed have been reduced. An unprecedented volume of last year's



Dear Sir $

I have just s pent a fortnight traveling through Western and Southern agricultural and I) adustrial districts to study the conditionsprevailing
there, and as requests el by you at our conference early In key I am writing
you briefly my observs

itions and views.

(Agriculturai

and

Only small capital in
hiOself to

Industrial conditions betters but farmer having

/luny cases will take tve or three years to readjust

the new oond

it t, etc.)

I found that in

some sections misunderstanding still prevails as to

the general credit policy

of the Federal Reserve Banks as well as to their

precise relation to pro( olmers end distributors. It seems difficult to make
t 'Understood that the'

Ural Reserve Board has no funds ghat:ever to loan

and. that the federal zu 'serve Banks do not lend to individuals but lend only
to 'oalks. The ides ill so seems to persisit that the Federal Reserve Board

and the kederel Reserv

e Banks) can direct what particular loans

a member than

Or shall nok maxi, 4.sh meat these are of course matters solely within the
luriedictio0of the menber bank. The credit policy of the Reserve Board and




the

Yederellieserva

Banke is expressed and made effective

ehich are a reflection

OOUL

impersonal.w without reference

of existing credit conditions and

to any particular loans of

A yerer ago several of the reserve banks
to conserve

credit

for the

through the die-

Autumn Agricultural

act

the member banks.

raised their rates in order

requirements, and in October

the Eeservel bans in agriculeural sections were borrowing from other reserve
banks as muoh as t267,000,000.00.

Now the demandtfor credit have de-

alined,

bank reserves have risen, and the reserve bank rates which were

than raised

have been reduced.

An unprecedented volume of last year's

-2-

agricultural

products is being carried over, largely on bank credit, ard the

er,dit requirements for this year's crops are already being felt. The reserve bank at Minneapolis and Richmond have begun to barrow from other re-

serve banks to secure additional credit for their districts.
The inederal Reserve Board and all of the Reserve Banks,

I am sures

are fully alive to the importance of continuing the policy of extending
credit most liberally to member banks which require it for the financing
of their customers. I am not aware that pressure on member banks to reduce

loans is being exerted anywhere in ths country. But in view of the continued misunderstanding of Federal

neserve policies, to Which I have alluded,

the Federal Reserve Board, after hearing my report, has today

telegraphed

all the Reserve Banks reiterating the necessity of continuing liberal credit
policies; and has

authorized member banks to act as agents for nonmember

banks in applying for the rediscount of

their

eligible paeer. The Board

asked each .aserve bank to advise its meaner banks

accordingly and give full

publicity to the message. I trust that this message
tendant upon

and the publicity at-

it may remove finally the misunderstandings as to the credit

policies of the system.
attitude which

not

I trust it will also serve to put an end to the

a few banks, member and nonmember alike, have at times

adopted of declining loans to their
that the

has

customers on

the wholly false pretext

Federal Reserve System is opposed to banks making a particular

loan or class of loans.

The Board believes that the liberal extension of credit involved

in tne

foreeoing policy should remove any

aperehension which farmers and

cattle raisers may have felt as to their ability to carry




through their

-3-

season's operations and gradually to market their products. Further legislation which has been suggested making eligible for discount agricultural

paper with 'ore than six months to ran does not seem necessary, for although the present

situation

requires

time and

patience for its solUtion,

there is nothing in the law or the policies of the Federal Reserve banks

to prevent the

rediscount of

the renewal of

a note in a

case where under

extraordinary circumstancesailo those at present prevailing, it has not
been possible to market the goods or produce financed by the original note.
Nor is it necessary at present

further to

adjust the rates of the Reserve

banks as in all agricultural and nearly all industrial

are at or below the level of the
and therefore are not exerting

at which member banks are loaning,

rates

either

districts these rates

penalty or

pressure.

To facilitate the credits required by our foreign trade, the regulawith

tions of the Board regarding bankers' acceptances are being re-stud4ed

the view to meeting more liberally the present abnormal
first change, announced several weeks ago, was to

buy oankers' acceptances arising out of
up to six months.

permit the Reserve banks

imports or exports with a

Ai a permanent policy the

our foreign trade banks which come under Its
of the AMA, whether

credit demands. The

maturity

Board would be glad to see
supervision under

Section 25

chartered under Federal or State laws, become mambers

such
of the Federal Reserve System; and would welcome legislation,

Federal

or

State, as under proper safeguards would accord to the banks of other countries the sane facilities and opportunities in the United
extended to our banks abroad.




States as are

to

In conclusion may I assure you that the Federal Reserve board is
keeping closely inforred from day to day of the progress of the readjustment which is 'taking place not only in the United States but

throughout

the

world; and that the policies of the Federal Reserve System are being developed
with the view to facilitating production and easing tho difficulties under

weich industry,

commerce and agriculture labor at present

credit reservoir is nearly

The

40% higher than it was a year ago.

3evel of the
Its con-

dition justifies a liberal policy not only in the extension of credit to

our own producers and distributors
our goods. For the primary

but also to

extension of

credit either at home or

the Federal 4serve banks are not responsible,
they are ready now as

in extending such
require.




foreigners who wish to buy
abroad

but as banks of rediscount

they have been in the past to support their members

credits as our producers, distributors and exporters may

ALicflt CVO' Ord

at

cL) 61c4A( mmf

ArwEn,

e4ecA.a.rx:g4

661iinik

1.9
)

'

ftthAK

clted*%-

(1) No reduction of discount rates
which will encourage speculation and inflation
and tend to maintain costs of production above
competitive levels.

Discontinuance of pressure upon
burrowing member banks to liouidate loans which
would cause losses and hardships to borrowers
and possibly insolvencies.
o(76- 7cri.

EPee extension of credit by reserve
tanks in theI\ agricultural sections to enable
the new crop to be made.
Encouragement of foreign borrowing

.in this market without restrictions as to how

41Pa- the
---,

i

fig

.

proceeds should be applied.
-

Liberalize the regulations of the
Federal Reserve System governing acceptance
credits for financing imports and exports,
particularly the latter.
Fund the debt of the allied nations
to our government upon such liberal terms as
will defer payments of interest during the
present period of pressure upon the exchanges.
Secure legislation which will enable
foreign banks to open branches in the United
States without too burdensome restrictions.
Permit some sort of Federal reserve
membership for foreign trade banking corporations, so that their bills will enjoy as
favorable rates as those of member banks.
(

q)

bccitzo




97wrn4v-7

Pe.di TAM

ji(vv\,

-

-




4-6-75

=7--




CLASS OF SERVICE

CLASS OF SERVICE

SYMBOL

SYMBOL

Telegram

7,1M

etter
Light Message

Day Letter

N
Night Letter
If none of these three symbols

TEL

Appears after the check (number of

wards) this is a telegram.

Other.character is indicated by the
syniJol appearing after the check.
'.1..

NEWCOMB CARLTON, PRESIDENT

Blue

Night Message

Blue
Nite

Nite

NL
Night Lotter
If none of these three symbols i

GEORGE w, e.. ATKINS. Elem. wce-FieEsTeerrp.

,RECEIVED AT COMMERCIAL NAT'L BANK BLDG., 14th & 6 STS., N. W. WASHINGTON, 0. G.

appears after the check (number of
words) this is a telegram. Other- i
wiseits character is indicated by the I
symbol appearing after the check. I

ALWAYS
OPEN

31

PM 8

50 18
NEWBEDFORD MASS 707} 31

J STRONG

3118
FF,DERkL RESERVE BOARD WASHINGTON DC

HAVE BEZi LAID UP DOCTOR ADVISES CAN NOT LEAVE TONIGHT VERY
RRY BUT EXPECT TO ARRIVE TUESDAY MORNING
GEORGE HARRISON.
Ilt

-

c
\- lt\V




11111111111111111111111
August 29, 1921.
.

Case:

Mr. Harrison regreLF that he will be
- unable to attend the dinner to-morrow evening,
fts he is peaving to-night for Washington.




thl)t

(eUfklieJLII

44eWM,

ed.

0,4,2 150M-9-20

FEDERAL RESERVE BANK
OF NEW YORK

-

TIMF

TO

INTER0111MIICE

ROUTE SLIP
A. M.

P.M.

OFFICE
MESSENGE

DATE.

DEPARTMEI
DIVIS100
SECTIO,

REMARKS

FROM

DEPARTMENT
Ir

SECTION

N. B. USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE.
TO INSUREPROMPTAND ACCURATE DELIVERYALL COMMUNICATION9 SHOULD BE DISTINCTLY LA BELEI




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COPY OF LONGHAND LETTER
Jamestown, R. I.
UNDATED [seemingly end-summer 1923]
ear

August 28, 1923

Dear Mr. Strong:

I have been a complete fizzle as a correspondent all summer and am
in disgrace with all my friends.
But the one thing that usually most annoys
my neck is the writing posture, so I have just let it go entirely.
I hope
you will excuse me. It has been a joy to hear such good news of you as all
the recent reports have conveyed and I'm beginning already to look forward to
the time when we shall both be back on deck. You certainly have had a long
hard siege of it -- one of much patience and courage and to get back in action
will be only the more fun for you on that account.

As for myself, my kne* progresses splendidly.
It is not yet completely
solid, in fact, the doctors think it won't be for 3 or 4 months more, but it is
so much better, and I can do so much more with it that I'm going back to the
office Saturday morning--the first.
I would feel most cheerful abou
were it not for the arthritis in the back of my neck and top of the spine. It
has been pretty bad all summer but again the doctors hold out every favorable
promise. They think now that it has been caused by a slight but not unusual low
grade infection in my right kidney which was operated on about 10 years ago for
a mechanical difficulty--displacement. I am having it treated, irrigated every
4 weeks, and it already shows much improvement.
The neck condition
sarily be slower in bettering, but I am sure they now have located the source
of the trouble.
So here goes! I cannot tell you how glad I shall be to get back to the
Bank -- or how restless I have been all summer because of my inactivity.
Lately, I have kept pretty much in touch with things through Mr. Jay who has
been telephoning me the high spots in the par clearance developments.
It is
most unsatisfactory, however, for I never know how much I miss or what may be
the background. As far as I can see, the whole Washington program has been
rudderless and I have had little sympathy with what has been done so far.
They
miss is good broad banking mind on the Board and unless they listen attentively to
the Reserve Banks I'm afraid they will make a mess of this par clearance matter.
Mr. Jay is in Washington now, but I do not know how popular New York is in the
Capitol just now.

I really have no news. I'll try to find some for you when I get back
the office the end of the week. In the meantime, I just wanted to let you
my plans -- and that I have been thinking of you a lot all summer. Except
monthly trips to Baltimore for my treatment, my vacation has been entirely
eventful!

With all sorts of good wishes and the best of luck to you always.
Affectionately yours,
G. L. H.

August 28th




to
know
for
un-

FEDERAL RESERVE BANK
OF NEW YoRK

September 6, 1925.

IN REPLY PLEASE REFER
TO

Dear Mr. Strong:

Here I am at last, and mighty glad I am to be back.

My only regret

is that you are not here too, but according to the reports I get it won't be
long now before you are back tearing things up again!
I wrote you last week of how I feel.
say in that connection.

There is nothing more

I just want to drop you a line to tell you that I am

finally back on the job, quite lost in my ignorance, but sublimely happy to be
on deck again.

Mr. Case has returned from his vacation this morning, although I
have not yet seen him.

I have spent most of my

Mr. Jay discussing par collection matters, the approaching hearings of
McFadden's committee, and the general situation in Washington.

I think you

are familiar with the greater part of it, but the present plan, as I understand
it, is to have me go to Washington, primarily to inspire the Board with some
fixed policy in the matter of par collections.

Certainly, so far as I can

see, there is no leadership and little possibility of it unless someone from
the outside will take a hand.

I have felt ever since the matter was first

mentioned to me that there is a real handicap in having anyone from New York
do the job.

You know well enough the ever present prejudice against the

efforts, no matter how sincere, of anyone from this bank.

Men such as

;lingo would never admit that our motives were inspired by anything other than

a purely local selfish point of view, and I am afraid in consequence that were
I to appear before the committee, even as a representative of the Reserve Board,



Mr. Strong

JE BANK OF NEW YORK

9.6.23

a large part of the benefit of a full and careful exposition of the subject
would be lost just because of my residence in New York.

It is a pity that that

should be the case, but it really is so.
While I have not yet been back long enough to become oriented, my

present feeling is that even should I go to Washington it should be officially
in a purely advisory capacity to Wyatt, the Board's couneel.

As such, I could

do all that would be necessary so far as the Board itself is concerned.

And so

far as McFadden's committee goes, I am not so sure but that the logical solution
would be to have, perhaps, Mr. Davis appear for the Board.

While it is true that

he, too, is from New York, nevertheless his selection would be far more logical
than mina since he is the System's Counsel on collection matters and since also
he is a prominent democrat with presidential possibilities whom Wingo, Steagall,
et al could not ignore.
emphasized

I think this aspect of the situation cannot be over-

.

At any rate this is a phase of the matter that might well be considered.
Tha present status as I understand it is this:

Mr. Jay has suggested

to the Board as a consultant with the Board's counsel on matters relating to par

collections and we have this morning received a letter from Mr. Crissinger
saying that the Board has voted to ask me to go to Washington in that capacity.
I have not seen Mr. Jay since the letter's receipt, but I rather suspect that
I shall go down early next week, talk the whole matter over with the Board,
size up the situation as far as may be possible, and then try to formulate some
sort of procedure.

As you know, the Board has already asked the Federal Advisory Council
to give it the benefit of its views on this matter at its meeting on the 17th.

Mr. Warburg returns to town tomorrow and I shall probably have an opportunity
of talking the whole situation over with him.
Regulation J should never be made effective.

My own present feeling is that
The arguments against it are

clear and to my mind convincing so far as the present time is concerned.




Mr.

RESERVE BANK OF NEW YORK

-

Mr. Strong

3

9.6.25.

Wills and Mr. Martin were in town yesterday and while they are in favor of

/'

J as a matter of theory and principle, they were rather inclined to
agree with Mr. Jay and myself that perhaps it could be held off for the time

being pending further efforts in other directions, such as amendment to clearing
house regulations throughout the country and especially in the Atlanta district.
We also had in mind taking up with the Credit Men's Association the suggestion
that they have their members agree to change the present caption on their bill
Ohicago funds to a caption somewhat as

heads requiring payment in New York o
follows:

111Plirec

"Payment may be made. y

Reserve System."

cap on checks

payable

at

This would have a two-fold effect;

par throught the Federal
it would put a real handi-

drawn on non-remitting banks and it would also tend to reduce

present clearing house charges for collecting out-of-town items.

There are only

twenty-five clearing houses where such charges are now made and if business con-

cerns agree to accept in payment any check collectible at par they will naturally
enough endeavor to establish banking accounts in those cities where the banks do
not make an interest or discount charge for the collection of out-of-town items.
Mr. Jay discussed this suggestion with Mr. Wills and Mr. Martin at length
yesterday and they were most favorable to it.

It m

need to be considerably refined, but it is just another one of those things
that must be considered as antidote to Regulation J.

Mr. Jay has made some

other suggestions designed to speed up collections throughout the country, hoping that this may be an additional argument against the absorption of float.
And so the matter goes.

As you see, there is yet no definite plan

and no definite policy, but I shall keep you advised of what develops, especially
if it is finally determined that I am to go to Washington.

Half the fun of being back is lost in your absence and I am looking
forward more than you know to your return.
when you are away.

We miss you dreadfully, particularly when there are so many

matters of System policy on hand.



The bank somehow is not th

we will work them out somehow, so don't come

sRAL RESERVE BANK OF NEW YORK

flying back before

your

Mr. Strong

4

time.

9.6.23

I know myself how much better off I am for having

waited an extra two months, and Miss Bleecker and I shall both keep your door
locked until your two months are up!
I have not yet touched the

Governors

Conference matters, but shall

keep you informed of whatever comes up and forward the programs as soon as they
are on paper.

If you have any suggestions of topics that you want put on the

program please let me have them.

This is long and rambling, but that's the way my mind is just now.
With all sorts of good wishes,
Always affect

Benj. Strong, Esq.,
Cragmor Sanitarium,
Colorado Springs, Colo.




nataly yours,

FEDERAL RESERVE BANK
OF NEW YORK

September 10, 1923.

IN REPLY PLEASE REFER
TO

Dear Mr. Strong:

I am, as you see, still in New York and not definitely certain when I
shall go to Washington.

I am trying now to gather as much data as we may have

available at the bank on the whole subject of collections,

especially in its re-

lation to the problem that Claiborne has put before the Board on the subject of
float.

From what I can gather from Mr. Wyatt, the Board's Counsel, there is

little chance of the Board adopting Claiborne's proposed regulation.

There is,

however, still some interest on the part of some of the members of the Board in
the question of our buying intra-district float.

I presume, therefore, that in

the end there will be three real definite questions: (1) Shall we, or shall we not,

put into effect the proposed Regulation J relating to the charges to be placed on
the collection of all checks bearing any indorsement of a non-remitting bank;
Shall we, or shall we not, buy intra-district float;

(2)

(3) ghat shall be done in the

event that Regulation J is not put into effect.
As I understand, the Federal Advisory Council has been requested to give
its opinion on these questions.

They meet in Washington next Monday.

I was to

have spent the past week-end with Mr. Warburg at White Plains but, unfortunately,
when he arrived Saturday morning he was suffering from an attack of ptomaine poisoning and couldn't seame.

I am planning, however, to go to White Plains tomorrow

afternoon to spend the night with him, and I shall take all my data in the hope
that we may draft some sort of program or recommendation that the Advisory Council
might adopt.

There is no point in my going to Washington this week to talk things

over with the Board if the Advisory Council is to go next week whol]y unprepared to



Mr. Strong

ERAL RESERVE BANK OF NEW YORK

/

9.10.23

Ace any recommendation consistent with what we believe to be the right policy.

If

I can accomplish anything by working here with Mr. Warburg, I shall stay until after
the Advisory Council meeting if that is necessary.

But even supposing that we get the proper recommendation from the Advisory
Council, as I have no doubt we will, there remains the other serious problem of
McFadden's Committee.

I am enclosing copy of a letter that Mr. McFadden has just

written to the Reserve Board concerning the first meeting.

It speaks for itself

and indicates what a vast field his committee hopes to cover.

Wyatt told me this

morning on the telephone that the Board is all the more anxious to have me come to
Washington since having received this letter, and from what I can gather from Wyatt
it looks as though they might draft me for work on a number of the topics that the
Board is to be called upon to discuss.

I am only too glad to do what I can, but

feel more strongly than ever that it would be a mistake for me to appear as the
Board's representative before the committee itself.
Reserve Banks, well and good;

If McFadden calls upon the

but otherwise I frankly think we should keep out of

it so far as direct testimony is concerned.

The situa

from what it was when you appeared before the Agricultural Commission-

At that

time the New York bank was directly under fire and the New York Money Market in
its relation to the rest of the country was directly involved.

There was no one

but you who could give the Commission the information that they desired.

Realizing

the antagonism of the average Congressman against Wall Street, I think the better
part of any testimony that might come from a New Yorker would be lost unless en a
matter directly concerning the New York bank.
So far as par collections are concerned, I still think, as I wrote you
last week, that it is very likely that Mr. Davis is the best man to appear for the
Board.

So far as the other topics which McFadden refers to are concerned,

frankly do not knew what member of the Board would be best qualified to discuss
them.

Wyatt asked me that on the telephone today and I was at a loss, as was he.

In any event, I suppose the first move is for me to get to Washington and go over



itAl_ RESERVE BANK OF NEW YORK

a

Mr. Strong

9.10.23

_a whole situation as thoroughly as I can with the Board and see how things develop.

It may be that after I have been there some days there will be some

iatural excuse for me or Mr. Jay to appear before the committee, but I do not believe
that we should seek such an appearance.
I shall write you again Wednesday or Thursday, after I have seen Mr.
Warburg and after 1 have learned just when I am to go to Washington.

If you have

any thoughts that you want me to have please send them to me at the bank as my stay
in Washington is at best indefinite and, if necessary, Miss Bleecker can forward
them to me.

I am not at all worried about the preparation of the data to be given to
the committee.

That we can work up all right.

The only question is who is the

best person to appear for the Board in a hearing the better part of which will
necessarily be cross examination.

If it were only a matter of direct testimony it

would be simple but yclu can't get very far with direct testimony before a committee

of which Mr. Wingo is a member.

I know

him of old!

Before closing I may say that we discussed with Mr. Orr of the Credit
Men's Association the thought which I mentioned in my last letter to you, about
having the members of the Credit Association place on their bill heads some
caption to the effect that their bills are payable "in blank city exchange or in
any check payable at par through the Federal Reserve System."

Mr. Orr was delighted

with the suggestion and seemed quite sure that it would be favorably received by a
good percentage of their members.

At any rate it is something to work on.

iiith all sorts of good wishes from all of us,

Faithfully yours,

Benj. Strong, Esq.,
Cragmor Sanitorium,
Colorado Springs, Colo.

(Dictated by Mr. Harrison
but signed after he had left)



FEDERAL RESERVE BANK
OF NEW YORK

September 13, 1923.

IN REPLY PLEASE REFER
TO

Dear Mr. Strong:

I made a flying trip to Washington Tuesday morning, returning late
yesterday.

Certain members of the Board felt that I had better go to Washington

at once rather than to wait even to see Mr. Warburg concerning the approaching
meeting of the Advisory Council;

consequently I had to postpone my conference

with Mr. Warburg until tomorrow, and in its place have had what has been in
some ways an unsatisfactory visit to Washington.

As I intimated to you in some of my previous letters, I was not at
all certain of just what was to be my function and when I reached
it was with some misgivings that I reported to Mr. Criesinger.

Washington

He was lying

on his sofa apparently not feeling very well and evidently feeling less disposed to talk with me about collections or anything else.

He said that Mr.

James was the one who had taken collection matters in hand and suggested my
going to see him to discuss the whole situation.

While the Governor was not

abrupt, he wasn't particularly cordial and reflected what I imagined all along
a

was the sentiment of/certain faction of the Board that it was no use calling
in anyone from the outside.

Mr. Wyatt later verified this assumption, saying

that Mr. Crissinger was not particularly favorable to having me, or anyone
else, come tc Washington to advise the Board about the matters to be discussed
before McFadden's committee, but that both Mr. James and Mr. Dawes insisted on
having me come if only for their personal assistance.

vacation at the time the invitation to me was being discussed before the Board
and I am sure had no part in the deliberations one way or another.



Mr

Mr. Strong

FEDERAL RESERVE BANK OF NEW YORK

9.13.23

Mr. James was most cordial and very anxious to let me have a free hand
so far as he was concerned in developing some sort of a policy which the Board
might follow.

Certainly he seemed most anxious to get everything that I could give

him for his information in case he should be called before the Congressional Committee.

So far as my visit with him was concerned, I was really much pleased.

I

think that he is perfectly susceptible to the suggestion we have made to postpone
the issue of the new regulation J and to abandon any project for the purchase of
intra-district float by the Reserve Banks.

He was also very favorable to our sug-

gestion that the System as a whole might well give attention to the question of
speeding up collections in some such manner as our county clearing arrangements.

When I described these arrangements in some detail he inquired in substance

what

in hell was the matter with the other Reserve Banks that they had not done some
similar work in other districts.

He apparently is quite determined to take up

that feature of the matter with the other Reserve Banks as soon as may be feasible.

He also favors taking some sort of action, informal if possible, directed towards
a reduction in the clearing house charges of those districts where the rates are
now obviously exorbitant.

With the exception of one or two iso

those clearing house are located in the Atlanta district.

So I say again, as

far as Mr. James is concerned I think we are on the right road.

My only fear is

that the Board as a whole not only does not understand the collection game or its
present problems, but will be completely at a loss in a cross examination before
McFadden's committee;

and the circumstances of my invitation to go to Washington

indicate quite clearly to me that there is no danger of my being invited to appear
before the committee in behalf of the Board.

For the- reasons I have already said

to you, I think that that would be a mistake in any event, but it signifies a certain
self-assurance on the part of some members of the Board that I believe to be
entirely unjustified.

I understand that the Board has sent a letter to all Reserve Banks, the

members of the Advisory Council, and others asking for their opinions on the several



RESERVE SANK OF NEW YORK

Mr. Strong

3

9.13.23

_afters which McFadden has said he was going to ask the Board to elucidate.

The

result of this circular letter will undoubtedly be a conglomeration of replies

which it will be impossible for the Board to digest before the committee's hearings
in October and I know no one person on the Board whose general knowledge is suf-

ficient to justify his appearing before the committee for an extemporaneous exposition
of the several topics proposed.

I am undertaking now to prepare for Mr. James

and Mr. Dawes a memorandum on each subject and shall try to make it as concise and
convincing as possible.

But I am afraid that when the time comes it will probably

be Mr. Crissinger who will appear before the committee.

If so, I wonder as to the

outcome.

It may well be that the committee, after hearing the Board's own representatives, will itself ask some of the Reserve Banks to appear before it.

If so we may

then get our chance and I am hopeful that that's what will really eventualize.

I

have to go back to Washington Sunday or Monday and shall probably be there a week
or ten days more with Mr. James.

During that time I shall manage to see McFadden

some way or another and am sure that he, himself, will bring up the question of the
Reserve Banks.

Possibly that will be the best way out.

As a result of my flying trip, I rather feel that there is not so much
danger of the Board's adopting any regrettable policy relating to collections.

I

think that the Claiborne-Adams pl,an has no supporters in the Board and believe that
even Mr. James is now willing to let the question of the purchase of float slide.

So also I believe that the Board will be glad to let the
tion J slide along quite indefinitely.

adoption of

the new regula-

My only present fear is that if Claiborne

and his crowd get before McFadden's committee they may get supporters there whc will

have to be argued into a saner position by a very carefully thought out

discussion.

As I view it, our real problem is to provide now for that contingency,realizing

that there is little or no chance of the Board's appointing anyone from this or
any other Reserve Bank to accept the job in its behalf.

I still believe, however,

that they may be willing to have Mr. Davis appear for them on the one subject of



ESERVE BANK OF NEW YORK

Alections,

Mr. Strong

4

9.13.23

and that may be the best way out, particularly if the committee

decides not to call on the

eserve Ranks individually.

I have my meeting with Mr. Warburg tomoirow and we may work out a plan then.
If not, I shall write you as soon as I get to Nashington next week what happens.

My knee is doing splendidly and I am really surprised how little this
relatively strenuous existence wearies me.
It certainly will be good to have you back next month:
Affectionately yours,

r-v

Benj. Strong, Esq.,
Cragmor Sanitorium,
Colorado Springs,
Colorado.

P. S.

The Board's speed is pretty well exemplified by their latest appointment --

Hoxton, Federal Reserve Agent at Richmond!

I was so shocked when Hoxton told me

of it in Washington that I am afraid my congratulations did not impress him.

(Dictated by Mr. Harrison,
but signed after he had left.)




Washington, D. C.
September 22, 1923.

Dear kr. Case:

I am sorry not to have returned to you before now the enclosed letter prom Governor Norris.
Unfortunately, however, my opportunities of studying it have been very limited since I have been here, and
I have had to put it off from day to day.
Even now I have given it only
the most superficial examination, but presume that as long as it is submitted to you merely for the "most radical alterations" you did not intend
that I should give it the most minute study.
It strikes me on the whole as being most satisfactory.
have
always felt that the Government's participation in our earnings under the
guise of a franchise tax has been upon the wrong theory, and, as you know,
it has resulted from time to time in misunderstandings of our relations
with the Government.
If our payment to the Treasury is based upon a tax
on the uncovered notes outstanding, our relations become, as I think they
should be, purely businesslike, in which payment is made upon the service
the Government renders, that is, the uee of its credit in Federal Reserve
Notes.

I think Governor Norris' arguments and his comparisons with
other banks of issue are all pertinent, but I cannot help feeling that he
weakens his entire case by the compromise which he has reached on page 8,
where he suggests an amendment to the Act authorizing, first, a rate of
interest on uncovered circulation, and, second, a further contribution to
In other words, he does not
the Government in the form of a franchise tax.
avoid what I now consider to be the real objection, that is, the principle
It has been
on which the Government shares a part of our excess earnings.
that principle that has from time to time enabled the Treasury and others,
more or less rightfully, to delve into the methods by which we are doing
business and to question the amount of our expenses in conducting that
Furthermore, the suggestion of Governor Norris not only places
business.
the Government's claim for interest on notes ahead of our member banks'
claim for dividends, but also gives it a supplementary claim greater than
If,
that of our member banks to a contribution from the excess earnings.
as the figures show, the tax on circulation might be made to approximate
what the Government now more or less reasonably expects by way of a
franchise tax, why further complicate the thing by giving not only interest
on circulation but a 60% interest in the excess profits to be called a
franchise tax?

Governor Norris, on the last page of his memorandum, evidently
That being so, why is it
appreciates the difficulties of this compromise.
I, personally,
advisable for your committee to propose the compromise?
would prefer not to attempt any sort of amendment to the Act, especially
when you never can tell where it will end, if the only purpose is to reach




2

Mr. Case

9.22.23.

The real question is whether it would be worth while to
this compromise.
risk an amendment even if the franchise tax were to be eliminated entirely in
1 rather think that it would,
favor of interest on uncovered circulation.
In any event, it is an
perhaps not this year but a little later on.
interesting topic and one that might well be pursued now with a view to
procuring an amendment at some future time, even though it is not advisable
this year.
Very truly yours,
(Signed) George L. Harrison.

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank of New York,
New York, N. Y.

Enc.




,

FEDERAL RESERVE BANK
OF NEW YORK

Washington, D. C.
September 22, 1923.
Dear Mr. Strong:

Miss BleeCker brought me your letter of Septenber 17 when she
came to Washington yesterday.
I am delighted to know that you are
at last away from the sanitorium and that you are really started on the
road back to us.
It is splendid, and while I hope you don't make the
break too soon, we shall certainly be glad to have you back on the job.
We miss you dreadfully.
I came to Washington last Monday and sat in on the Advisory
Council hearing of Claiborne and Adams concerning their check collection
plan.
It was most interesting to see the way Aiken, Wade and others
showed up Claiborne and his proposal.
The Council voted unanimously
against it, and I think there is really no one on the Board who is
favorable to it.
The real difficulty, however, is in getting the
Board to take any definite action one may or another concerning the
collection plan or the matters to which McFadden has referred in his
letter of September 8, a copy of which I sent you a While ago.

Other than revising Regulation J so as to conform to the
recommendation of the Advisory Council, I have been able to accomplish
little or nothing, except to ,get together a lot of data which may be
useful in presenting the Board's problems to McFadden's committee.
Frankly, I have been very much discouraged in my efforts here because
of the lack of leadership and appreciation of what really lies ahead
for the Board. and the System.
I poured out all my troubles to Mr.
Miller two or three cloys ago, just before he left for California, and
he professed to be as much discouraged as I.
He suggested that so
far as he could see, the only thing for me to do was to go ahead,
irrespective of the Board, and get together whatever reports and
statistics and data I could on the matters covered by McFadden's
inquiry and tarn then over to the Board next meek for whatever action
they may care to take.
As illustrative of the apathy of the Board,
I may say that I was told confidentially that the Governor, in discussing
the situation, merely remarked that there was a lot of fuss about nothing;
that he could amply prepare himself for the hearing by half an hour's
study the day before!
So far as par collections are concerned, I think that things
are progressing satisfactorily. While the Board has not yet acted upon
the recommemdations of the Advisory Council, I am inclined to bblieve
that they will approve those recommendations and issue the new regulation
in the revised form.
That regulation merely maintains the status quo,
with the exception of a paragraph which provides that me shall not collect checks on any nonmenber bank Which refuses to remit at par and whose
checks cannot be collected except through an agent
over the counter.



RESERVE BANK OF NEW YORK

2

mr. Strong

9.22.23.

That leaves us free to continue collections through other banks
even in
cases where the member bank is unwilling to ramit at par.
I also
understand from Er. Jay that the Credit Men's Association is
taking
favorable action on the suggestion to have their members put
some sort of
caption on their invoices to the effect that their bills are payable in
checks Which are payable at par through the Federal Reserve System.
That,
combined with some sort of a tactful effort to have the
clearinghouses
reduce their collection charges, will about complete all that
I think we
should do at the present time so far as our practices are
concerned.
So far as McFadden's committee is involved, I believe it will
be necessary
to give a very clear, powerful exposition of the whole subject.
I am
afraid that neither Mr. Crissinger nor Mr. Platt will be able to do
that,
and there seems to be no one else on Whom the Board can
agree to represent
them at the hearing.
It is difficult to present the Whole matter in a
letter, and yet I believe the Board will attempt that method,
supplementing
it by oral testimony of the Governor Where necessary.

It has been beastly hot and the humiditi dreadful for the last
two or throe days. I have felt the weather more
since coming to Washington
than all summer.
In fact, one of the natives told me this morning that
he believed the last three days had been worse than
any days this summer.
I wouldn't dispute it.
Miss Bleecker's report about the program for the Governors Conference is also a bit discouraging.
In spite of our letter, followed by
a telegram, we have heard from only four, I believe, of the
eleven Reserve
Banks. Three of those four say that they have no topics to
suggest and
Calkins, who is the fourth, advises that he is mailing
some suggestions.
Even in our own bank there appear to be few ideas for the
program.
I
presume, however, that everything will came in at the last minute, although
the Board is anxious, as we are, to have the program issued
by October 1.
Please don't forget to let me know as soon as possible if you have anything
which you are particularly anxious to have on the
progran, for I um afraid
it will be difficult to get it on the program itself unless
we hear in time
for the original issue.
Always

cti. Ptely yours,

affe/.:-i

Benj. Strong, Esq.,
Broadmoor,
Colorado Springs, Colorado.




v

FEDERAL RESERVE BANK
OF NEW YORK

.e.shington, D. C.,

September 29, 1923.

Dear Mr. Strong:

I wrote you about a weeh ago, and vhile I have been pretty busy
in the meantime, it- is difficult now to say Whether or not I have really
accomplished, anything.

Certainly, so far as some of the individual members of the Board
are concerned, I believe my vcrk has been well worth while. James, Dawes,
Cunningham, and also Hamlin and .?latt, have been most interested in all
the Matters that are to cane up before the Committee, and the better part
of my work ha.s'been in personal contact with these five. The first three
have had' so little of the background of the System's work that it has been

difficult to crystallize their opinions in such a short time, but I believe
'that, if only through discussion, I have been able to give them a little
bit of the point of view of the System.. Dawes, particularly, has impressed
me, and for -James I have the utmost resect. He is a man of very definite
opinions end a hard, conscientious student. The only difficulty is that
he is such an enthusiast that each new point that appeal s to him is apt to
carry him too far in relation to .other topics. For instance, in the par
clearance discussions, the value of reducing the exorbitant collection
charges in some of the Southern clearing houses has appealed to him so
vigorously that he wants to go out with an axe and chop off all clearing

house charges either by a threat to remove Federal Reserve Branch Banks from
those towns which have exorbitant clearing, house charges, or by an amendment
to law preventing any sort of collection charge for items presented throutp.

the eedert.

hilt: I believe that we may ultimately

come to ti AtlitOm irr/S-TO-63.1=erd job to make -7.r1 see what a bal effect it
I believe, now,
of any form in accomplishing it.
would be to a'se fo

however, that he sees the relative importance of a temperate discussion
with the clearing houses rather than governmental threats. 1.'y only worry is
that he may not stay put when he meets these clearing house fellows, as I
think he wants to do, and. when, in the heat of discussion, his enthusiasm 'might revive his- old point of view.
It is now Saturday. McFadden's Committee begins its hearings on
Tuesday afternoon, Alen some representative of the Board IS to appear. The
Board. itself has never had any thorough understanding of just how it is to
pre.sent its case, or through whom. It is taken for ,granted that Oris singer
will appear, but he has been least interested of any of the members in
preparing a program for the hearing; indeed the work that I have' done has
been for the other five members, and. Crissinger, h5rneelf, has stated to
some of those ',scribers that he laiows perfectly well what he wants to say now
and. that he is not in sympathy with any sort of presentation of the Board's
views through a memorandum.



His idea, apparently, is that he is to appear

.AL RESERVE BANK OF NEW YORK

.

strong

0.29.23.

well
/7-AC) and give his own personal opinions for what they are worth. It That's very sense
is easy to
if it is understood that they are his personal opinions.

0 the fact that both Hamlin and Platt are very much worried about the situation,
especially as they disagree on so many important points -.dth the Governor,
notably Branch Banking, and even Par Collections.

The Governor has blocked every attempt to strike the suspended Regulation J off the records or to substitute another regulation embodying the Advisory

These recommendation in substance amount to that I
Council's recommendations.
have already expressed to be my own personal views, so that I won't go into

detail, other than to say that they really preserve the status quo, - no charge

for non-par indorsements, but a continuance of the policy not to handle checks
drawn on a bank that is unwilling to remit at par unless those cheeks can be
collected through another bank. A majority of the individual members of the
-Board appear to be in favor of the Advisory Council's recommendations, but
Crissinger seems adamant, and, as a result, no action has been taken. I believe
that the whole thing will drag along now certainly until the Governors Conference,
If we can at that time get the Joint Conference to give its unqualifiedesueport
to the views expressed by the Advisory Council it may be that the Board will
James himself is all for our position in the
then determine its policy.
matter, but he rather favors postponing an announcement until he may have had a
chance to work on these clearing house charges.
You perhaps know that the directors of the Credit Len's Association
are strongly in favor, and have voted to recommend to their members the adoption
of some caption along the line Which I have already discussed with you, - making
their invoices payable in checks which are "payable at par through the Federal
Reserve System."

just one thing mere. Aside from what I may loosely term any educational
propaganda with individual members of the Board, I have, at the request of the
Law Committee, composed of Hamlin and Platt, prepared a memorandum concerning

all of the points raised-in McPaddon's letter. While it is some 30 pages, it
is intended only to strike the high spots, and embodies compromises of opinion
between 2latt, James and.Hamlin. I am not wholly satisfied with it myself, but
in the liaited time available and with the restrictions that they have themselves
placed upon me, I think it is the best we can do. Just what will be done with
it I am net yet certain, but'Hamlin and Platt seem to think that if they cannot
get the memorandam into the reoord in any other way they will present it as
embodying their own personal views. Its biggest value will, I believe, be in
the supporting data Which accompany it; including Yr. Jay's discussion of par
collections, also maps and Charts on nonmembership, and various other matters
relating to the topics McFadden mentions. I won't send you a copy merely
because its use is SID doubtful and also because it is subject to material change

in the next two or three days.

I had lunch with McFadden last week and had a most satisfactory tare
with him of the problems of his committee. I spent some three hours giving him
my views of the whole situation and he seemed so interested that he asked me.
if I would be willing to appear before his committee, saying that,the dope I
had given him was just what he wanted his committee to have. I told him frankly
that it would be a. great mistake to call me in advance as one of the principal
witnesses and asked him not to do so. I did say, however, that if, later on,
anything in particular came up concerning which he wished to have my opinion
I would, of emirs°, be glad to appear. 1 think, however, that if I can avoid



,ERVE BANK OF NEW YORK

9.29.23.

Mr. Strong

things seem to be going badly.
it will be much better so; certainly unless
last week, and he was mast
I saw Senator Glass for a few minutes seems in f ins health and high
He
reassuring concerning the ultimate outcome.
spirits and. has his war paint ready:
ion at
Mr. Jay has just returned to Washington from the conventon per
revamp of his article
Atlantic City and is at present working on abest form for presentation to the
collections with a view to having it in the
it.

committee in case the Board decides to use
1:7ith all sorts of good. wishes,

Always affect

Benj. Strong,
Broadmoor,

,Jolerado Springs, .3olo.




tely yours,

FEDERAL RESERVE BANK
OF NEW YORK

Tuesday
Jan. 15, 1924

My dear Governor:
I have only-11Q1L4 122111ingxtceived your note from The Links,

dated Sunday, concerning the lettfr to Governor Crissinger.
Yesterday I re-read the letter in the light of your comment
when signing it; redrafted it in an effort to make it very much less
and forwarded it to Governor
"brittle;" had your name signed to it;
I am sorry your note was not received in
Crissinger in Washington.
time to permit of my holding up the letter. This morning I showed a
copy to Mr. Jay, Aho says he does not see how anyone could possibly
I hope you, too, will feel that it is sufficiently
take offense at it.
A copy is enclosed herewith.
soft to avoid any possibility of friction.
I am sorry I did not see you before you left, as I wanted to
say good-bye and wish you all the good times you so well deserve. Take
We miss you dreadfully,
it easy and get all the good you can out of it.
and yesterday, with all the out-of-town guests, was not quite complete
They all asked for you and sent their best to you. And
without you.
we send ours too:
Affectionately yours,

Benj. Strong, Esq.,
The Breakers,
Palm Beach, Florida.

Enc.

P.S.




Tile dinner last night was a hellish bore!

:447

FEDERAL RESERVE BANK

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Copy of Handwritten Note

Wednesday, July

23, [19124

Dear Mr. Strong:

I was delighted this morning to get your letter and shall
be ever so glad to see you any time you may be able to stop off here.
So, if, as you suggest, that would be
Sunday would suit me to a T.
convenient for you, would you mind having Mr. Beyer wire me the approximate hour of your arrival so that I can arrange my "sittings-up"
accordingly? I am most anxious to see you, but hope you won't have
me on your mind or make the stop here unless you feel you can do so
I should understand perfectly!
without any inconvenience at all.

It is boiling hot, but I have a comfortable room, fairly
cool considering the outside temperature, and manage to get along
quite well. If I lived in Baltimore in a comfortable well appointed
But
house, I think the doctors would let me leave here in a few days.
having no anchor, no special place to go, and a railroad trip whatever
I do, they are urging me to spend another few days here. In the circumstances, I have no alternative, but as to all that I shall talk with you
when I see you. In the meantime, I do want to thank you, however, for
all your letters and messages which Miss B. has been good enough to send
along. My only real regret, my only worry, is in this enforced absence
from the office, particularly now when you are short-handed and in the
midst of all this moving. But I only lose my temper with myself when I
I simply can't conceive of anything left in me that is
think about it.
get-at-able with a surgeon's knife, so I hope to stay on deck a while,
once I get back there. Anyhow, I do miss it all!
Thanks again, Mr. Strong, for all you have done for me, and
please don't stop off here unless it is easy and convenient, as much as
I would like to see you.




Affectionately yours,

(Signed)

GEORGE HARRISON




FEDERAL RESERVE BANK

MISC. 4. I-200M-I-24

OF NEW YORK

OiTICE CORRESPONDENCE
Mr. Strong

To
OM

DATE

August 13, 192A._192__

SUBJECT:

Miss Bleecker

Mr. Harrison telephoned this morning to say that he had replied to
He
your letter of August 12, but it had inadvertently not been mailed.
asked me, therefore, to give you the following comments in the meantime:

Mr. Harrison believes that the New York bank should not
put the topics on the program; if they are placed on the
but he
program at all, he feels the Board should do it;
questions the wisdom of their appearing at all on a program
which has pretty wide circulation.
He believes misun
and criticism would result, no matter how carefully the topics
might be worded.
Mr. Harrison feels that it would be much better to have the
Board discuss it informally, though fully and frankly, at the
Joint Conference, saying nothing whatever about it in advance,
unless the Board feels justified in taking it up with whichever
He feels that this would avoid the mieunderetandbank it is.
ing bound to result from putting the topics on the program without

FEDERAL RESERVE BANK

41..4.1200M-1-24

OF NEW YORK

OFFICE CORRESPONDENCE

DATE
SUBJECT

To

9ROM

the needed local

color.

Also Yr. Harrison asked me to say that he is getting on splendidly,
though slowly. He is taking things very easily, and finds his strength
He is glad to have office matters
is returning slowly but surely.
referred to him, and was particularly glad to hear from you.




192__




0,1

44







/14-/




-

Copy of Longhand Letter
Nonquit, Massachusetts
August 17th, [19]24

My dear Mr. Strong:

I have been most interested by your letters, though very distressed to hear that your Mother has been so ill. It must be a great
comfort to you, though, to feel that she is now past the worst of it.
And with Phil ill too, you have had a poor time of it. I only hope that
all goes well by now.
I wrote you a letter some days ago about that "packed" Reserve
Bank and then finding later that it had not been mailed.
Miss Bleecker a resume of my views as to procedure by the Board. I find
by your subsequent letter that we nearly agree.
As for myself: I continue to progress in good shape, though I do
not get my strength back as quickly as I had hoped -- particularly in those
back muscles which had to be severed and re-tied during the operation.
But
everyone else feels that I am doing even better than I should reasonably
expect. In any event, I shall be careful and prudent about my :return.
I
really think I could go back on the first but with all the persuasion I
have had from you and others I shall very likely stretch it out to some time
nearer to the fifteenth. Even if I am right about the first, that will give
me a little leeway in which to relax and forget the oppressing job of "trying to get well." I am planning to leave here Tuesday to go to Jamestown,
R. I. (Hotel Thorndyke) and then to East Hampton the next day in my car via
New London and Sag Harbor -- a motor ride of only 4o miles. But I shall let
Miss Bleecker know my address as I go. I may possibly take the boat from
here to N. Y. and then out to East Hampton by rail.

I still fret at my continued absence from the Bank, but you have
all been so generous and considerate that it is made as easy as possible for
me.

We have been hoping to hear that you are at Woods Hole and that
you would be carrying out your "threat" to spend a day with us.
Mrs. Glover
asks particularly that I send you her best together with her regrets that
you haven't turned up. You had better plan to db it if ever you do come up
this way.
I must close this for the mail. Thanks again for your letters and
their instructions.
I am a most obedient soul these days!
I miss you all.




Affectionately yours,
(Signed)

GEORGE HARRISON

I telep

orm 1204
CLASS OF SERVICE
am

SYMBOL

Telegram
Blue

Day Letter

Blue

Nite

Night Message

Nite

NL
Night L
If none of these three symbols
appears after the chbrk (number of
wor ' this is a teiegi am.
character is ind ated by the
sy
appearing after the check.

Night Letter

NL
If none of these three symbols
Other-

NEWCOMB CARLTON, PRESIDEN

GEORGE W. E. AT/C1NEL .F1

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

RECEIVED AT

70CH VC 47
NEWYORK NY 500P FEB 5 1925
BENJ STRONG

THE BREAKERS PALMBEACH PLO

ARRIVED WASHINGTON SUNDAY SPENDING MONDAY AND PART 'OF TUESDAY AT

TREASURY RETURNED BANK YESTERDAY MORNING HAVE MUCH TO WRITE ABOUT BUT

OWING TO RUSH UNABLE TO DO SO UNTIL TOMORROW FEELING MUCH RESTED AND

BENEFITTED BY WEEKS ABSENCE THROAT IN FINE SHAPE HOPE ALL\WELL WITH YOU




HARRISON

534P

January 21, 1925.
Dear Governor Strong:

The enclosed opinion of Judge Sibley of the United States Supreme Court
in Atlanta, handed down on January 8 of this year, will, I know, delight your heart.
From time to time you and
rather the unconstitutionality - of
have in effect made a check payable
In fact, I
or another bank draft.
another to have Mr. Baker work this
pending Pascagoula case.
I myself
was inclined to believe that it was
litigation.

I have talked over the constitutionality - or
the statutes of those States in the South which
at the option of the drawee bank either in cash
know it has been your ambition some way or
fe.,ture of these earlier statutes into the
hesitated about that action only becauee I
a little irrelevant too the issues in that

Fortunately, the case of Capital Grain & Feed Company vs. Federal
Reserve Bank of Atlanta (why is it always Atlanta that is the defendant?) has
provoked an unqualified decidion by Judge Sibley that the statute in Alabama, to
which I have just referred, is unconstitutional - but almost better than the
aotual decision itself is the discussion of the Judge throughout the opinion.
It is really excellent - although the result does make the Atlanta bank liable
in the particular case.

In brief,

A check drawn by the plaintiff on a
the case is this:
member bank in the Atlanta district was forwarded to the Fifth National Bank of
The Fifth National handed the check to the Federal Reserve
New York for deposit.
Bank of New York-f* collection. We transmitted it to the Federal Reserve Bank
of Atlanta, and they in usual course - after delay of some 24 hours - forwarded
it to the drawee bank direct. The drawee bank made a remittance by a draft on
Before that draft
its reserve account with theFederal Reserve Bank of Atlanta.
was charged to the reserve account, the drawee bank, or remitting bank, was closed.
,

The plaintiff contends that the Federal Reserve Bank of Atlanta knew
that the drawee bank was in a failing condition and that because of that peculiar
knowledge it should have prenented the cheek for payment in cash over the counter
The Atlanta bank
rather than through the mail for remittance in another draft.
pled the law of Alabama, 'which purported to give to the drawee bank the right to
pay either in cash or a bank draft, and that, therefore, it would have been futile
The Judge
to have presented the check for payment in cash over the counter.
has ruled that inasmuch as this aspect of the Alabama law is unconstitutional, it
was no excuse for the Federal Reserve Bank of Atlanta in not having presented
the check for payment in cash over the counter.
-

The Judge, however, leaves for the
or not the Federal heserve Bank of Atlanta
did have knowledge that the drawee bank was in a failing condition and as to
That gives the ruling of law.
jury the questions of fact as to whether




2

Governor Strong

January 21, 1925

whether or not in fact it was tardy in handling the transaction in other respects.
It is good
You may be interested in some leisure hour in going over the opinion.
reading.

The next chapter in this particular case ie represented by the enclosed
copy of a circular issued by the Federal Peserve Bank of Atlanta, to the effect
that in any case where any member bank or Federal reserve bank forwards to it for
collection a check on e per bank in its district which happens to be slow in
making its remittance$, the Atlanta bank will hold up the check, telegraph the
endorser the circumstances, and ask whether the endorser wants the item handled
The circular makes no distinction
as a collection item at the endorser's expense.
whatsoever between a member bank and nonmember bank, but putporte to relate to
banks in its district - member and nonmember - which are on the par list.
The Federal Reserve Bank of Minneapolis has handled a similar situation by removing slow remitting banks from the list if they happen to be nonmember banks
and by taking peculiar precaution in any case where they are member banks. That
seems to be the clear cut way to handle it, but Atlanta - while leaving such
banks on the par list, and thus holding itself out as reedy to handle the items
as each items - arbitrarily holds them up when received and telegraphs for
So far as member banks are coneuthority to handle them as collection items.
cerned, I think their action i8 probably illegal, but in any event, whether legal
or illegal, it seems to me to be an inexcusable procedure and one that might
very likely involve the Atlanta bank in more litigation with resulting discredit
to the collection system as a whole.

all

As soon as I received the circular, I called up Mr. Eddy to ask whether
_the,Boerd_hadereceived a copy, and if so whether they had taken any action with
To my surprise, and eomewhat to his chagrin, he told me that not
regard to it.
only had the Board received a copy of the circular, but had approved its issue
in advance. Under the circumstances, I have decided not to pursue the matter
any further at the present moment, but to make a real iesue of it as soon as we
may have an item held up in accordance with the terms of the circular.
On top of all this, who should appear at the bank the day before yesterday but Bandolph, counsel for the Federal heserve Bank of Atlanta, and McCord, exchairman,aLd now treasurer of the Stone Mountain Memorial Association, and some
They were much perthird and very silent gentleman, whose name I did not get.
turbed that the Federal Eeserve Bank of Net York was the only one of the eleven
reserve banks which had declined to cooperate with the Federal eserve Bank of
You may
Atlanta in distributing the Stone Mountain Memorial fifty cent pieces.
remember that McCord and Wellborn wrote us a letter a few weeks ago asking that
we purchase some of these coins and hold them in our cash subject only to the
We wrote back - as I think
order of the Stone Mountain Memorial Association.
would prefer net to handle the
Mr. Jay advised you at the time - saying that we
coins in this manner, and suggested that they be distributed through the medium
of some member bank in New York - that being the usual procedure in this district
in similar cases in the past.'
At the meeting in Mr. Jay's office on Monday, Mr. Randolph explained
the general purpose of the Stone Mountain Memorial Association and memorial coin
and made a somewhat elaborate patriotic appeal to us to cooperate in
trict in their distribution, and then asked me quite frankly to explain why
I told him that wordeand disguise
it was that we had turned down their request.
all aside the transaction which they asked was as follows:




this dis-

Governor

3

Strong

Jenuary 21, 1025

(1) The Federal Recerve Bnnk of New York should make a loan without
them to carry the

interest to the Stone Mountain Memorial Aeeociation to enable
coine pending distribution at a

profit.

eCe

That we should be aeked to carry the come in our each in the
(2)
nature of a special or unmarked depoeit payable only to the order of the Stone
Mountain Memorial Aesociation.
I told Mr. Pandolph that, as he probably realized, no Federal reserve
bank was euthorized to make an advance to the Stone Mountain Memorial Ansociation
or any cimiler nesociation with or without interest, and that furthermore, even
aseuming that the loon wen not involved, r.e were not authorized to accept L depoeit from the Stone Mountain Memorial Aecociation to be dispenced aubject to
order.
Pendolph could not deny either of these statements but argued
that all the other reserve banke were doing it end that the thing wee a greet
patriotic movement and should be furthered ac much as wee poesible to do so

their

without crieticiem.

Macon and Case are both
We have had a further diecuenion eabout it.
to egree with my poeition and not to yield from it, but Mr. Jay and
inclined
Sailer - and even I myself - would like, if poseiblo, to handle e few of the coins
if only because of the fact that we might be oubjected to unnecessary criticism
for our lack of cooperation in a matter which no other reserve bank had questioned.
In the oircumetences, I am trying now to prepare,for Mr. Jay to sign,
a letter which will not recede from our eerlier poeition, but which OM euggeet
My
our handling the matter in e way not co blatantly unauthorized by the Act.
ineemuch as the reeueet ceme
thought uould be to write the Atlanta bank
from them - completely ignoring the Stone Mountain Memorial Aeeoeietion - and
advice them that in accordance with their request, from time to time just a few
days preceding the distribution of the coins, we would be glad to buy limited
amounts of the coins from the Treeeurer of the United States,ae we are clearly
authorized to do, and that we will pay them out at face value upon instructions
from the Federal Reserve Bel* of Atlanta.
This will not be quite all that Dendolph vent°, .but it will evidence
our desire to cooperate and at the same time ereserve our legal position.
/ have
This lee. long ctery which ehould be read only in ft hammock.
gone into detail only because I think you may be interested in the
I lose all patience with them
difficulties that Atlanta is getting us into.
and more particularly with the Federal Reserve Board for allowing the situation
to continue as it does. I only wish that it had been 7andolph Mason of Virginia
who had turned don) Randolph of Georgia on the Stone Mountain Memorial Association

latest

project than pi;orge

Harrison a

citizen, at best, "At Le".

But *lough of this.

You must be wearied already, and as it is late
here, I am pltnning to go home through the sleet and ice of New York and forget
Georgia and
Atlanta.
We all miss you, but things oeem to be going aleng
smoothly eno he I have had an all day session to-day with Mr. Warburg and the
executive comwittee of the Advisory Council, which has just agreed upon a damning
report on th Hull amendment to the McFadden bill.
Miller of nichmond wan
pretty diffi ult, and the report in its other feeturee la a harmless compromise.
I am leaving Friday for South Carolina for a week and plan to be baok here on
February 2. IMy beet to both you and Miss Bleeoker.

ia

Mr. Benj. Stfrong,




Remitlatz,Itla.

Sincerely,

01,...

4.1n 61.6.77.1

February 8, 1W25.

Dear Mr. Strong:

As I wired you yesterday, I returned to the bank early Wedneeday
morning, after having stopped off in Washington over Monday Send Tueeday.
I found
on my return, your
of January 25, together with three separate memoranda
dated January 24.
Before discussing these, I might better refer to my doings

letter

104ashington.

Early Monday morning, Mr. Case asked me over the telephone to have a
chat with Governor Crissinger about the open merket operations, with a view to
informing him that the open market account had reached the M.10,000,000 limit,
and that it might become advisable in the near future to go below that limit.
I had a very satisfactory talk with the Governor, told him what little I knew
of the open market operations of the psrt week or ten days, And that Mr. Case
felt that the Open Market Investment Committee might soon have a recommendation
to make with respect to lowering the tn0,000,000 limit. The Governor wanted
at once to take it up with the Board more or less informally, but after another
talk with Mr. Caee, I suggested to him (Crissinger) that it might be embarrassing to Mr. Case if he did so prior to some recommendation from the Open Market
Investment Committee itself.
Criseinger agreed and stated that he would discuss it with no one except Stewart until such time as he might receive further
word from Mr. Case. It was then that Crieninger advised me of the fact that
the Board was pretty much split on the matter of open market operations and
that while he, himself, was in entire sympathy with the Banning of the account
by the committee, he felt that a certain group of the Board, headed by Miller,
Miller has exwere antagonistic to the influence of this bank in the matter.
ploded on aeveral occasions and stated that we were running the account with a
view solely to accommodating the New York market rather than With the purpose
of meeting credit conditions throughout the country as a whole.
Crissinger stated that he had no doubt that the Board would unanimously approve
of lowering the present *500,010,000 limit, but he said he was afraid that
Miller would want to restrict our right to make repurchases if money should
Miller apparently feels that we should not have power
later become tighter.
to sell and buy to meet temporary changes one way or another in the market,
but rather that we should be selling now with a view later to raising the
discount rate.
Later on that day, Wyatt collared me to tell that there was a
definite momement on foot to have the 4




In

Governor

2

Strong

February 15, 1925

lay amended so as to make all expenditures of the Federal Reserve Board and the
Federal reserve banks subject to appropriation by Congress and the budget oomtittee control.
Apparently the whole thing wap initiated by the fact that Judge
Lobdell went to Congrees to have the Farm Loen Banks placed upon the same basis
as the Federal reserve banks in the matter of expenses.
It ppeers that the
Intermediate Credit Benk expenses are controlled somewhat the same way that the
Federal reserve bunk expenses are.
His argument was that the Farm Loan Banks
should be as independent as the Federal reserve banks and the Intermediate Credit
The Senate committee, I believe, approved of Lobde/l's recommendation,
Banks.
but at this point General Lord heard of the efforts of the Farm Loan Board,
the ceiling, and called upon the members of the Farm Loan Board to explain.
Lobtial outlined his reasons to General Lord, whoa e only comment was that if
.uniformity was necessary it should be accomplished by having the Federal Peserve
Board and the Federal reserve banks on the came basis as the :Farm Loan Banks, that
is, subject to budgetary control in Washington.
Ae a result, General Lord went
to the President, and, as the story goes, received assurance from the President
that he was in entire sympathy with General Lord's proposal.'
I understand from
Wyatt that James and Cunningham expressed their delight at the turn of affairs
on the theory that General Lord would then have to effect economise in the
Federal heserve System and that the Board's committee would thus be relieved
of that burdensome responsibility.
understand that Hamlin, too, felt that
it might be just as well to have both the Board and the Reserve banks subject
to General Lord's control in the matter of expenses.

hit

/

Upon talking the matter over with Case and Jay over the telephone that
afternoon, we decided that I might advisably talk the %hole question over with

Winston on Tuesday morning.

Accordingly, I arranged to see Winton and have

lunch

When I told him of what I had heard and what we
with him on Tuesday.
believed to be a very serious fundamental objection to General Lord's plan, he
told me that he had heard of the movement, that he had gone to Secretary Mellon
with the story, and his objections to it, and that 'Mellon had gone straight to
the President, who, Winnton advised me, turned completely ebout upon hearing
Secretary Melloate reesons why the Federal tieserve Syetem should be free from
In conclusion, Winston
the control to which General Lord wanted to vubject it.
told me that he thought that there Was nothing further to worry about on this
score.
I mention it now only because I understand from Mr. Jay that he wrote
you something of what was in the wind, and I want to relieve your mind, at leatt
moment.
The most disconcerting feature of all is the fact that Memlin,
James and Cunningham openly took the position Which Wyatt tells me they did take.

for the

All this brings

Strater's
up a most unpleasant aspect of the situation.
After the
committee on collections had a meeting in Richmond on January 12.
meeting adjourned, the committee decided to stop off in Taehington and talk
over with Mr. James and Mr. Platt certain questions relative'to the non-caeh
46 a reeult, Strater, Attebery of St. Louis, end Coe, all
collection service.
called on Mr. Jaws and Mr. /lett on January 15. Coe made, a somewhat detailed
In order
and startling report of the meeting when he returned to the bunk.
to make a complete record of it for future reference, I had doe dictate his
I have shown a copy t6 both Mr. Jay
Impressions directly to MiS8 McCarricke
and Mr. Case, and em sending a copy to you now for your information. I am so
disgusted with the whole thing that there le no use trying to express my
opinion in writing.
feel, however,reallyyou should know about the
I that
To think that James,.a member of the Eeserve
meeting and Coe' s reactione.
Board, should talk as he did to junior officers of some of the reserve banks,
to one of your own junior °Misers, criticizing you in the
and worst of




all,

3

Governor Strong

February 8, 1.225

manner he did, le unepeakable. It Is dieorganizing and demoralizing, end almost
better than anything ele, demonstrates Jemeel unfitnees for his job.
Coe tells
me orally that his impression is that in talking about you he even epecifically
referred to the amount of your salary, but he ie not certain enough of thin impressicn to include it in his written statement. In view of the fact, hoaever,
that he told Gilbert about it immediately upon his return and prepared his
memorandum some ten days later, it is not unlikely that his first Impreseicn,
that the amount of your salary was mentioned, wee the correct one.
However,
Coe's memorthat is merely an incident in a wholly discreditable performance.
andum speaks for itself, and I tam only hopeful that It may sometime prove the
basis of a frank discussion on your part with Secretary Mellon of the whole
queation of the Federal Feeerve Beard.
You may remember that you already have
told Governor Criesinger thnt some day you might take occasion to thresh out
Mr. Jay end Mr. Case have asked
the Board's organization with Mr. Mellon.
me to tell you new that they feel very strongly - as I myself um inclined to
feel - that thie last performance of Mr. James is about as good an opening to
bring up this question before Mr. Mellon as you ere likely to get, and in view
of what I have already written about James' attitude on General Lord's plan to
subject the Reserve banks to his hueget control, it may well be that now is
the right time, at least to consider making some sort of an issue on this
Fancher told me that Streter ceme back to Cleveland equally
thcle question.
He has stated
dicgueted with Mr. James' behavior at the Waehington meeting.
that he eould ask Strster to write a memorandum of his views with respect to
While I have not seen that memorandum, it may well be that it
the meeting.
will be available for you 5n the event that you care to do something about
this question in the near future. The combination of Hereon and James isabout
as poor an influence as we have got in the System to-day, and when that
influence seeps down through the junior officers of the heeerve banks as t
result of meetings such as Coe end Strater have had with 'Imes and Hereon,
I bed not intended now to write you
things are coming to a sorry past.
about this meeting, but it bee such a close /wring upon that I have already
uritten about General Lord's proposal and the attitude of James, Cunningham
and Hamlin with roopect to it, that I thought you would much batter be advised of it, especially as both Mr. Jay and Mr. Case have urged me not to
overlook it end to be sure to send you Coe'n memorandum at once.
Winston was in a very chatty frame
But to continue with my story.
of mind, discussed the Federal Reserve Syctem and its problems, particularly

to feel - an I think to all do - that

the Federal Feeerve Board, and'aetmed
there is no one on the Board whtt could better assume the job of Governor than

Crissinger himself,

The real sore spot in the situation in my mind is Mr.

James, who, with all his vigor, is generally deetructive and rarely constructive. Thile he may be beating his head up against a blank well, the
difficulty is that some day when we least expeot it, he may make a breach
The effort of always being on guard
in the tall and raise the dickens..
ic quite a °train.

with Tyatt I asked him what he
knew about the Atlanta circular. He then told me that until the Federal
Feserve Board referred to him for report my letter of January 23 to Governor
Wellborn on the subject of the Atlanta circular, he had never heard of the

In this

circular.

connection, while talking

Here is the picture'

Atlanta prepares a circular striking at the roots of the par
collection system, seodb it to the Federal Eeserve Board for approval in



4

February 6, 1925.

Governor Strong

advance, and oven the protest of both Eddy and Hereon approves of the circular
Without even referring the matter to its couneel or the law committee.
Eedy
tells me that in order to stall e bit he had euggeeted that the matter be referred to the law committee, but that the Board would not hear of it.
When
my letter was eventinally referred to Wyatt, he wrote a memorandum to the Board
stating that he believed the Atlanta circular WEE illegal as to member banks
and ill-advised as to nonmember banks; but I question whether tha Board will
have the courage to take any action with respect to
Indeed, Wyatt/6
memorandum was written on January 26 and nothing had been done I know as late

it.

-

For your information or to help
pass the time while,qierhaps, you are on the train, I am sending you a copy
of my letter to Wellbern, together with a copy of Campbellle reply and my

as rebruary 3, when I last saw WyattA.
ubeequent letter of

February 4.

In this connedtion, you may be interested to know that in my diecuesion with Winaton I mentioned this Atlanta episode. Heiiae very muoi,t
interested, somewhat surprised, and definitely perturbed on the ground that
the situation in Geor&la is tpearentiy worse than we realize up here, and

that the action of the Atlanta bank way bell

precipitate matters..

Wineton

formally requested ma to send him a copy of the correapondence, eaying that he
was most anxious to e1eCUS8 it with Mr. Mantoeh.
I have done so, but do not
know yet what has resulted. In fact, Mr. McIntosh was. in New York yeeterday
so I presume Wineton has not had an opportunity to see him.
Redneeday, after my return to the bank, Mr. Hamlin telephonedme to

tell me that the Board had finally approved unqualifiedly of the recommendation of the Governors Conference with respect to holidays of Federal reserve
You may remember that after you designated Harding and Norris ae a
benke.
committee of two to discuss this question with the Board, Hamlin toloehoned
me to have Harding and Norris prepaee a latter for him,ahich might obviate the
necessity of their going to iihehington.
After some correspondence with
beth Harding and Narris, they forwarded a letter - Which I had an opportunity

to reviee - to Mr. Hamlin. I presume that it satisfactorily covered the
eituation, eince I believe they did not call Hording or Norris to Vaehington.

In any event, the matter is finally settled, Wyatt having advised the Boerd,
at my request, that in his opinion the Board could "legally" approve of the
recommendations of the Governors Conference in spite of

his opinion to the

effect that he believed all Federal reserve banks should etay opens
Another matter about which Mr. Hamlin talked to me on the telephone

He asked me definitely to tell you that he delayed
action by the Board on this matter because he realieed that if any action
at all were taken it would be to dizapprove the plan in toto. He then told
me that in hie opinion there is no possibility of the plea passing the Board
in any form unless you can persuade Secretery Mellon to support it. Hamlin's
W&Z the pension plan.

euggeation, therefore, Was that sometime when you get an opportunity to do so
you stop off at Waehington, see Mr. Hemlin and talk over the whole situation,
and then put the queetion up to Secretary Mellon. While I don't know just
what your plans are, I rather feel - from what Mr. Hamlin says - that the

pension plan is "dead", unless you can interest the Secretary in it. Apparently.
there is little chance of any one else's doing ea.
I would like now to report back on the several matters referred to

in your memorandum of January 24 and your letter of Jcauary 25.




Governor Strong

5

February 5, 1925.

The minutes of the mooting of the Officere Council of Jenuery 11:1 referring to the uee of the telephone wires for trensectione between Boston,
New York and Philadelphie ere, I think, complete enough when coneidred to-

10-*e

gether nith Mr. Gilbertte memorendum of December t, to which the minutmo refer.
011bertie report, which I ehall. show you on your return to the benk, inctcatee

quite clearly that every safeguard involving the uaa of both code and teet word
is nor being taken in thie matter, and rib he otetee, the safoguarde sre such
that the hazarde involved in telephoning are no greeter than when telegraphing
meeseges.

I have elso read your memorandum of January 24 on the eubject of
Apparently Smith's death hoc pleoed thia
Mr. Baker's brief.
some doubt.
Angell, with whom I have talked, questions whether the appeal

litigation in

will
be procecuted, but he Is writing to-day to Randolph for some information on
that score. Angell eleo tells me that Mr. Beker hes witten to him for any
euggeetione thet he might have to make concerning arguments to be wide in the
brief before the Supreme Court, if and when it nhould become neceneery to file
sugh a brief. Angell has promieed to disown the whole situation with you and
me'before he compliee with Mr. Baker's request on this score, end is writing
to Mr. Baker to tell him that thst is his plan. In view of the delay incident
to Wth's death, I presume there ie no question that 4e will have plenty of
time to talk this over with Angell after you return to the bank.
Another memorandum of January 24 aeke whether the Badisohe Beak of

Karlsruhe in one of the German State bank, of iesue left undieturbed by the
reergeniention of the Pelchsbnk. I underetand from Mr. Crane that that is

the situation.

Teur letter of January 25 refers to several matters:
Judge Sibley's opinion in the cane of the Capital Grain & Feed

Company ve. the Federal Belerve Bank of Atlente. I egree with your conclusion
that an between Judge Brandieel dictum and Judge Sibleyle decision, there is

no quention that we should be guided by the letter end that in any other case
eimilar to the Cepital Grain & Feed Company case that mIght arise in the future,
the Penerve bank could protect itee/f not by continuing to send direct but by
making preeentaticn'et the counter.
,

The'oircular of the Atlanta bank relative to checke drawn on
banke which have in the peat .madeAmsetiefectory return a. In view of Judge
Sibleyie donieion just referred to, the Atlanta bank has ten alternativee,as
I fointed out In my correepondence with Wellborn end Campbell - either to
or isle()
remove the bank from the par liet in the case of a nonmember bank;
to preeeat over the counter in the ()Fee of v011ember bank, aa indeed In the
case of a nonmember bank,which they have left on the par lint. But the
correspondence which I am enclosing giveo my detailed views with respect to

this matter.

Stone Mountain Memorial coins.

I rather think that the matter is

now satisfactorily dirpoeed of In view of our supplementary letter to Governer
Wellborn along the lines which 'I outlined to you in my letter of January 21.
The McFadden

bill.

The bill

seems to he having rough sledding

In the Senete, and while I underetend thst it is to be reported out this week,
It will probably be with a number of amendments.



8

February 6, 1925.

Governor Streng

I have been very remiss in not having written you
My throat.
(5)
more often, but to tell the truth, I left the bank on January 23 end buried
myself in the woods in South Carolina, pretty much out of reach of the teleI started a letter to you while there
phone and with a minimum of mail.
and then, not being certain of my plans about going to Atlanta, I postponed
I want you to know,
writing until it was almost too late to send a letter.
though, that the week's rest and complete isolation from the outside world did
me an immense amount of good, and I came home feeling very much...more rested
My throat cleared
physically and mentally than I have felt in many months.
up entirely while there, and while it has bothered me a little since my return,
While the
I think that is due solely to the sudden change in temperature.
nights were cold in South Carolina, the days were deliciously warm, and I feel
the difference. I only hope that when you return yourself, you will take
every care because the change will seem all the greater to you owing to the
I am continuing my
fact that you have been farther away and longer away.
I feel younger than I have
sun-ray treatments upstairs and reveling in them.
in years, in spite of the fact that I passed another milestone only last week.

We all miss you a lot at the bank, but everything seems to be going
along most satisfactorily so far as our end of the game is concerned, and I
Ae I have lreedy stated,
hope you will not have us too much on your mind.
however, I feel that the situation in Washington is going to .weeet.some drastic
treatment before many moons, and I don't know anyone who is going to initiate
It is a pity that you who already have so
It more satisfactorily than you.
much of the System's constructive work on your bank should also have to be
I don't know anyone, though,
the buffer against its destructive influences.
who is better able to present the whole thing to Secretary Mellon than you
are yourself, so here's hoping that you are able to put it on your docket
for some early oonsideration.
With all sorts of good wishes to both you and

Sincerely

Miss Bleecker, I am,

yours,

Dictated but not read.

Mr. Benj. Strong,
The Breakers,
Palm Beach, Fla.

GLH.MM
ence.




/^.

16)44444A

MI8C84.1 40M 8,4
FEDERAL RESERVE BANK
OF NEW YORK

SENT BY

SEND TO FILES

COPY OF TELEGRAM

Feb. 10, 1925

Benj. Strong
The Breakers
Palm Beach, Florida

Thanks telegram.

Consulted Miller just before my trip South.

He reported temporarymondition result of °old.

Nothing serious and much

better now.




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Copy of Longhand Letter
Friday, May 29th [1925]
ON BOARD S. S. "MAJESTIC."

Dear Mr. Strong;

Our trip is about over but not complete until I scribble off
a brief report to date. The weather one way or another has been poor;
too hot, too cold, too damp, too windy -- too something nearly all the way
The ship's log reports a "rough sea" or "very rough sea" every day
over.
but one. And yet with all this it has been a good trip for this ship is so
immense that the sea bothers it but little, and there are plenty of places
to hide from the weather. I have had a miserable cold all the way over and
have coughed day and night but otherwise I never felt better and have had
my five meals a day quite regularly. Poor Crane on the other hand left the
dining room last Saturday not to return until last night when the sight
of land gave him courage. But he has been quite happy in bed, so he says,
lots of sleep and a good rest!
I have seen the Logans from time to time, also Peacock, and last
night we all had a farewell dinner together. They all asked to send you'
their best. Mrs. Logan particularly wanted me to send you a good report,
but I told her the thought of Col. Logan at a dinner party with only a
plate full of spinach and half a lemon was a form of cruelty for which it would
be hard to forgive her. I made a bad beginning, when first we sailed, by mentioning the 20 pounds I have lost. She immediately prescribed a stiff course of
training for him -- gym four times a day, an electric bath each evening, and
a diet of spinach and lemon! Every time I begin to think how lonely is the
life of a bachelor something like this confronts me to bid me pause! But he
seems to revel in it all, and I would fail miserably if I inadvertently
pictured any regrets!! They certainly are fine, and I mention all this diet
business only because it has been a source of considerable by-play. Mr.
has been great. We have discussed nearly everything in the world but
There was no conscious effort to avoid that -- we touched upon it
the credit!
(Peacock
/ long enough to have him express the immense admiration he has for the way you
and Norman handled it and then passed along. I found we had a great hobby in
common when I once mentioned that it had always been an ambition of mine to run
a boys school! I never knew that had been his profession until fifteen years ago.
There are several others on hand whom I know, but apart from some
twenty or twenty-five souls we have the most awful looking lot of humanity I
have ever seen outside a New York subway. It surely is discouraging.

1

Crane and I have done but little work thus far. I wired you about
the faun of our statement respecting any possible transactions under the
I meaht t6 talk with you about that before I left New York for I had
credit,
discussed it briefly in Washington with Crissinger who seemed a bit worried
I shall
about it in view of some inquiries that had already been made of him.
be most interested to hear what, if anything, is done about it. I assume any
part of the credit used must be clearly reflected and identifiable in the
weekly statement. The public interest in the whole transaction seems to make
that essential. That being so, we cannot very well smother it in an item
"all other resources" and/or "bills bought in the open market" where all
Then, too, any sterling
foreign balances and sterling bills are now included.




- 2 -

1

deposit resulting from the sale of gold is not really comparable to other
sterling deposits -- since it is so restricted as to possible use.
Indeed,
both the sterling deposit and bills bought, while legally our assets I
suppose, are in substance only an evidence of part of the B[ank] of E[ngland's]
dbligation arising under the terms of our contract. That being so, it strikes
me, we would be justified in making a new entry "gold sold abroad" or some such
phrase which would be all inclusive of the B. of E.'s two different obligations
arising from the purchase of gold,
to pay in gold in N. Y. at the end of
two years (if not before) and to maintain a sterling balance or bill account in
the meantime. I am so anxious to get your reaction about this before I do much
about the form of cable or other withdrawal that I hope you may already have
wired or written me about it. Whatever is done should be entirely frank and
entirely consistent with the fact that we are selling gold under the terms of
a contract providing for payment as outlined.
I have had two wireless messages from Gov. Norman, one that we have
reservations at the Savoy and the other that they will meet us today at
Waterloo. Monday is a bank holiday, I am sorry to learn. We probably won't
be able to accomplish much by way of a start until Tuesday.
But whatever I do,
I shall keep you posted.
I can't tell you how glad I am to be on this trip and to have all the
opportunities it will give me.
I think you know how much I appreciate
My only regret is that it means, too, that I must miss being with all of you
at the Bank. But I shall finish my job as quickly as I can and start back at
once. If I limit my work to a few quite specific tasks, I do not believe it
will take me long. I do feel, however, as I think it over that entirely
apart from this gold business Crane might very profitably stay over, at least
until the end of June , spending some of his time on the Continent as well.
This is already much too long. So much spare time on shipboard makes
one forget the press of time on others ashore. But I know you will forgive me.
My best to everyone at the Bank -- and do not work too hard!
Ever sincerely yours,
(Signed)

P. S.
now!

Tell




GEORGE HARRISON

Mrs. Shurtleff I would give much for an hour of her lamp right

FEDERAL RESERVE BANK
OF NEW YORK
July 10, 1925.

My dear Governor:

I have been most remiss in not having written to you sooner.

The truth

of the matter is that in an effort to clean up all of the accumulation of routine
matters concerning my various departments, as well as to prepare the way for a
little peaceful concentration on the job you have given me, I have not had much
time to bother you.

Gilbart is away on a very much needed vacation.

He has worked hard and

continuously for sometime and without a fair share of his proper recreation.

But

advisable as this is, it has resulted in my spending a little more time the past
ten days with my men and the workings of my departments than I would otherwise
have had to do.

My program, however, is pretty clear.

I have about cleaned up all

that I wanted to get back of me, and plan next week definitely to devote most of
my time to what, for the lack of a better name, we may call the Inquiry.

has been away, and you know Mr. Case is also on his vacation;
was not feasible to begin this job before now.

Mr. Jay

so that it really

In my next letter, however, I

hope to begin a definite report of progress.
In the meantime there are a few other matters to which I might refer:
(1)

The form of the Board's weekly statement.

And transmitted to Governor Crissini-er.

Your cable was received

He plans to be away until July 14 or 15.

I talked with him on the telephone, however, just before he left arid he told me

that nothing would be done until his return.

The present plan is for me to go

to Washington to talk over the whole question with Smead and the Board.

The one

suggestion which you made to change the item "Bank balances at interest" to



rernor Strong

KEDERAL RESERVE BANK OF Nt,

'Due from Foreign ban

July 10, 1925

interest," is one which Smead and I had already made.

I think it is most advisable, and I understand that Governor Crissiager is entirely favorable to it.

There are one or two other minor changes which Smead and I

talked over which may be helpful, but I shall write you about them after I have
had an opportunity to talk with Governor Crissinwer about them.
(2)

Our gold payment policy.

Mr. Dewey told me last week, when I

happened to see him, that Boston has now commenced requisitioning the Treasury
for large amounts of gold certificates in order to commence substantial gold payments.

He indicated that other banks would also follow suit.

If, therefore,we

are to pursue our present policy of maintaining the certificate circulation at
about its present figure, it will be necessary for this bank to make a very substantial reduction in the amount of its payments.

That will in turn result in

larger payments of our Federal reserve notes and increased printing costs.

I

discussed the matter briefly with the directors yesterday in anticipation of my
visit to Washington next week, and they all agreed that our present object of

maintaining the circulation at its present level is important and that we should
pursue it even though it means increased payments of Federal reserve notes by
this bank.

I am a little out of patience, however, with Boston and the other

banks that are now to commence gold payments when we least need them.

For three

years, with the exception of Chicago during the past year, we have been the only
bank to pay out gold.

All the others have refused to cooperate in spite of re-

quests both by us and the Treasury Department.

Indeed, they failed even to pay

out as much gold as they received, thus making it that much more difficult for
us to accomplish our purpose.

And now when we are not trying to increase the

°insulation, but merely endeavoring to maintain it at its present level, the

others commence payments - and I presume for no reason at all other than a belated recognition of the amount that may be saved by doing so.

This may be a

most unfair assumption, but the day is hot and muggy and I am a bit cross anyway.
I am enclosing a copy of my letter to Winston concerning this and other matters.



PEDE RA L

Governor Strong

RESERVE SANK OF NEW YORK

I am enclpaing

July 10, 1925

the agendkof the Currency Conference which is to

meet in Washington next week, and to which I made some reference in my letter to
-)Mr. Winston.

You may remember that we originally planned to have Gilbart go to

this meeting, but inasmuch as he is away on his vacation and there are a number
of matters in which I am particularly interested, I plan to go myself instead of
calling Gilbart back.

Gold payments for export.

I am sending you for ready reference in

case you have need of it, a recapitulation of our large gold payments for export
purposes through July 3.

You will notice that the total payments during June

amount to only $6,110,627 - very considerably less than in the five previous months.
Our unofficial record of imports for the same month, however, was only $949,000.
The Department of Commerce figures for the whole country are not yet available.
Our only exports during July have been a little over $1,000,000 to Mexico, and our
imports thus far this month amount to only *214,000.

In this connection, while

it seems that the flow of gold has at least temporarily slackened in each direction,
Dewey tells me that Winston is rather inclined, without having given it any careful study, to pay out larger quantities of gold certificates in anticipation of
possible heavy imports later on.

Dewey himself agreed with you and me that

even if there are large imports, we should not try to offset them by more gold
payments, but rather keep our circulation at about the present figure.

This in

part explains my letter to Winston, to which I have already referred.

I believe

he has just forgotten the earlier conversation that we had on this subject and
that he will play along with us when I have a chance to talk it over with him.
Recharter.

The day before yesterday, Mr. Jay told me about the

plan they have been discussing to have the American Bankers Association recommend
a recharter without amendments, and yesterday I read his letter to you dated
June 29 on the same subject.

I told,h.m substantially what you yourself said
yesterday, that is, I, too, feel that the

in your cable No. 79, which arrive




A

4

Governor Strong

July 10, 1925

lan is excellent, provided they are right in their assumption that the question
of recharter is bound to arise this fall in any event.

v:)I

Apparently, from all that

hear, there is not very much doubt about it, and if so, I believe that "the

riderless recharter" is about the best slogan for defense that we could make.

Mr.

Jay is probably writing you himself concerning this and I, therefore, mention it
only incidentally.

Mr. Jay, Mr. Young, Burgess and myself went over your cable
1.1

yesterday afternoon, and as the element of time appears to be about the only thing
concerning which there is any difference in any of our views, that was really the
only feature we discussed in detail.

Mr. Young is very much impressed with the

view that now is the best time to tackle the recharter.

He bases his conclusion

in this regard on the fact that the coming Congress is likely to be the most conservative and most favorable Congress that we will have in any time before our
present charter expires.

With farm prices such as they are now and business quite

generally contented, the conservatives and Coolidge in particular are much in
favor, and it is difficult to answer the argument that he made.

In any event,

it seems to me that there is nothing to be lost by devoting the next couple of
months to a preparation of a report based upon the new slogan rather than trying
to propose a suitable list of amendments.
(6)

Consolidated statements of borrowers.

You may remember that at the

Conference of Governors last November, an amendment to the Board's regulations was
recommended and subsequently made effective by the Board, concering consolidated
statements.

In short, the regulation requires that in any case where a borrower

had subsidiary or affiliated corporations, consolidated statements will not be
a sufficient basis of determining eligibility unless they are accompanied by a
separate statement of each of the affiliated companies, or unless the statement
itself represents a separate statement of the particular borrower.

While the

banks and most of the borrowing concerns in our district appear not only to
understand the regulation, but are most helpful in cooperating with its enforce-




Governor Strong

5

Client, there seems to be some

general

misunderstanding

Washburn-Crosby

statement,

for

in other Federal reserve

Minneapolis raised some question about the

districts of just what it signifies.

4:

July 10, 1925

instance, feeling that perhaps the consolidated

statement in that case is all right because all the affiliated corporations are
owned 100 per cent, by the parent company, and because none
companies borrows in the market.

of the

affiliated

Mr. Mitchel] was in my office last week and

we talked it over with him in some detail, saAkI think he not only got

our point

of view about the matter, but also expressed himself as entirely in accord with it.
The Armour case came to a head when McDougal telephoned rather critically
to us that we had turned down Armour & Company paper in this district while they
are taking it in Chicago.

A8 a matter of fact, the only statement that we have

been able to obtain from Armour & Company is a consolidated statement of the parent
company and twelve of its

fifty-nine

in spite of

subsidiaries.

this fact, we have taken every piece of Armour paper the first time it has been
offered by any of

lation, but

our member banks since May 1, the

effective

date of the new regu-

we have done so with the request that that paper be

unless a separate

not

statement of the borrowing company was provided.

offered

Only one of

our banks has submitted the paper the second time ( the Park Bank), and
ly withdrew it when we reminded them of our original conversation.

apparently

has heard of this and has

felt

again

immediate-

But McDougal

rather indignant that we are "turning

When I discussed the matter on the telephone

down" paper that Chicago is taking.

with him, he admitted that the only statement that he has contains

assets and

said

liabilities of some of the subsidiaries butAthat in his opinion, in view of the
circumstances of that particular case,

eligible, and that he felt we should
him that our

action

in the

the

follow

past, which

statement was satisfactory and the raper
his judgment in the matter.

I told

incidentally had been discussed in some

detail in correspondence between Mr. Morris and Mr. Childs of Chicago, was not

at

all a question of judgment, but merely a question of fact regarding the new




Nevertheles

6

regulation.

Governor Strong

July 10, 1925.

To make a long story short, I told him that if he could tell me that

he had a separate statement of the borrower, as the regulations required, and that
a study of that statement showed the paper to be both eligible and desirable, we
would take it in this district at least until we received a. copy of the statement

He told me that he would be glad to wire me to that effect at once

for study.

as he was convinced that they had a statement which complied with the regulations.
I immediately telegraphed Mr. McDougal confirming our conversation, and enclose
herewith not only a copy of that telegram but also a copy of his reply of tc-day,
which indicates fairly clearly that when the matter was put up to him squarely, he
regulation
realized that he lacks the statement required by the A and is now endeavoring
to get it.

Morris feels that he will not be able to get a satisfactory separate statement, for we have heard rather indirectly but confidentially that one of the men
trying to sell Armour paper in this district indicated to one of our member banks
that a separate statement by the borrowing parent company, exclusive of assets
end liabilities of the twelve subsidiaries, would show a reduction of some
$12,000,000 in the assets side of the statement and no corresponding reduction in
the other side.

On thinking over my talk with Governor McDougal, I rather feel that
he himself had not gone into the thing as thoroughly as he might have and that our

IlEg

telegram put/it up to him as squarely as we had, prompted a consideration which

resulted, in a measure, in agreement with us.

But this is only one instance,

and I think something must be done quickly to promote some better and more
uniform understanding of the new regulation on the part of the reserve banks.
I can think of nothing else at the moment to write you.

This is already

too long, but I thought that you might be interested in getting a few side lights.
Everything at the bank seems to be going along in first-rate shape.

On Monday,

July 6, we cleared over 298,000 checks at the Clearing House - more than 100,000




July 10, 1925

Governor Strong

7

On the same day we

over our previous highest day.
cur transit department,

and with

it

all

had about 375,000 ohecke in

things are going along very smoothly.

In fact, better than they have anyprevious summer.

The training class works like

a charm, and is a pretty good offset not only to vacations, but what would be a
normal let-down due to the oppressive weather.
is high.

It is still hot and the humidity

I was glad to hear that you have started to Berlin, chiefly because it

means a quick approach to your much needed vacation, which I hope that you enjoy
and profit by.

I would like to be over there with you!

Please give my warm

personal regards to Governor Norman and to all the rest of your party if they are
with you.

Most of all take care of yourself, and don't worry about us.

never write you about anything except our troubles.
entirely too much space!

Anything else would take

So you can always be sure you know the worst.
Affectionately yours,

111/04erk

Mr. Benj. Strong,
c/o Bank of England,
Threadneedle Street,
London, England.

En cc.




I shall

FEDERAL RESERVE BANK
OF NEW YORK

July 21, 1925.

Dear Governor Strong:

I was in Was 'ngton the better part of last week at a meeting of the
Currency Committee,
Board.

representatives of the Treasury and the Federal Reserve

While I begrudged the time that this trip necessitated my being away

from the bank, I believe the meeting was most successful so far as it related
to questions of currency distribution and payment.

my last letter to you to some slight confusion incident to our gold payment
policy, but Mr. Winston, who addressed the conference, fully supported our
present policy, and while favoring gold payments by other Federal reserve banks,
expressed himself as being definitely in favor of maintaining the present certificate circulation at about a billion dollars.

Th

that as other Federals commence gold payments it will be necessary for this

bank and possibly the Federal Reserve Bank of Chicago to reduce the amount of
their payments proportionately.

Other than the question of expense involved,

I see no objection to our cooperating to this extent.

Indeed, there is some

advantage in having payments a little more general among all twelve reserve
banks rather than limited as at present to Chicago and New York.
I had a long session with Smead and Goldenweiser concerning the form
of statement, and on the strength of your cable No. 80, which approved the
recommendations contained in the memorandum signed by Smead and Stewart, we
have prepared a form of etatement which will read as per the enclosed copy.
We decided, however, not to recommend a change at once, since we thought it




Governor Strong

2

July 21, 1925.

might be well for you and Dr. Stewart to look over the enclosed draft before it is

r-

made effective.

There is only one matter to which I want to refer specifically,

and I do this in order that there may be no question or future misunderstanding.
It is this:

If, as Governor Norman suggests, and as we all seem to think

advisable, we make a public or newspaper announcement whenever the credit is drawn
upon, stating specifically the amount so drawn, then the following weekly statement
0010

will reflect the amount of gold bought by an increase in either or both of the
following items:

"Bills bought in open market"
Or

"All other earning assets:
Foreign"

Pi4tfAtg-r

By a simple process of deduction, knowing the total amount cf the credit
used, and picturing the increase in the item "All other earning assets: Foreign",
it will be readily known just bow much of the gold sold is represented by sterling
bills bought in London.

I mention this not because we have any objection to that

fact, but because Governor Norman was a little hesitant to have our statement show
it.

I see no way of avoiding this difficulty other than by lumping all of our

foreign assets, which you know is impossible on account of the requirement that we
also show in the statement the maturity of all bills bought.

Of

even only a few days, will necessarily elapse between the announcement of any use
of the credit and the publication of the weekly statement, and furthermore, if the
item "All other earning assets: Foreign", which will include foreign loans on gold,

should become sizeableor fluctuating for other reasons, it would not be so simple
by the process of substraction, which I have suggested, to find out how much we
have invested in sterling bills.

But there is the pos

proposal giving a fairly accurate means of determine the amount of bills so bought,
and I want to be sure that you understand that fact, even though I do not see how
it can be avoided, all things considered.




July 21, 1925.

Governor Strong

3

In view of the advisability of changing the form of statement as soon as
it is possible and as far in advance of any use of the credit as is possible, I
wonder if you will please cable me " O.K. " when you receive this letter,

SO

that

we can make our recommendation to the Board and perhaps adopt the amended statement at once.

I hope your vacation is giving you a real rest and that you are not
worrying too much about what is going on here.

The past week has been a little

cooler, and while we have all been fairly busy owing to the absence of a number
of us on vacations, we have nothing to growl about.

I shall write yeti again

by the Saturday boat, with particular reference to the Inquiry matter.

Mr. Jay,

I understand, is going away about the first of August, and we went to get the
whole thing on a fairly satisfactory working basis before then.
told you, Mr. Peple of Richmond is now at the bank working with him and Burgess on
certain publicity matters, but I am not certain just what their exact program is.
With very warm personal regards both to yourself and Governor Norman,
I am,

always,

Sincerely yours,

Benj. Strong,
Bank of England,
London, England.

0/0

GLH.MY
Enc.



FEDERAL RESERVE BANK
OF NEW YORK
July 31, 1925.

My dear Governor:

While it is getting near closing time for this mail, Burgess, who is
the news gatherer for you, asked me to write you a note regarding the enclosed
draft of letter to the Federal Reserve Board, concerning the Board's letter
X-4377, dated July 10, 1925, which is also enclosed.

When the Board's letter first arrived, it was the inclination of the
officers to let it slide just as we have overlooked other letters encroaching

upon the directors authority in order that we might wait for some vital question to make our issue.

In considering this new Board ruling, however, Mr.

Young said that he thought we could not properly accept the Board's position.
All of the other directors present agreed with Mr. Young.
Re have not yet had a meeting of the board with a quorum present to
consider this draft and as Mr. Jay and I both feel that it is important to wait
until then before dispatching it, we are holding it up for the present.

Very

likely it will not be until sometime in September that we have a quorum.

In

any event, it will not be until after we have had an opportunity to receive
your views.

If, therefore, you have any suggestions to make, please let us have

them.

I understand that Burgess is sending you with his pile of stuff, a
copy of a memorandum that I prepared relative to the conversation I had with
Mr. Merla of the Mexican Congress.

It speaks for itself.

I would like to

add, however, that Marla came to us with a note of introduction from Winston
and a request that we do all that we properly could to give Merle information




-2-

Governor Strong

regarding the Federal Reserve System.

July 31, 1925.

He has been all through the Bank with

Persons, and has been introduced to the heads of some of the departments, with
instructions to the departments, of course, not to let him have any detailed or
confidential information, but rather just to hit the high spots.
grateful and seemed satisfied.

He was most

The subject matter of my memorandum is a sub-

sequent question that came up after he had been through the bank.

While some

of the men in the bank did not like him very much, he seemed rather a decent
:fellow, a graduate of Columbia, and pretty keen, but withal, he impressed you
as being essentially the politician.

Hurried
,3., but sincerely,

G/7
7Ayi.

Benj. Strong,
Bank of England,
London, England.

c/0




FEDERAL RESERVE BANK
OF NEW YORK

August 6, 1 925.

My dear Governor:

I have just returned from another trip to Washington where I have had a
three-day session with Dewey and other members of the Treasury Department, and
also with Governor Crissinger, about various matters that have come up.
My chief purpose in seeing Mr. Dewey was to discuss with him more concretely than has been possible in the past the whole question of making arrange-

ments whereby the Federal reserve banks might act as redemption agents of United
States currency, technically as well as in fact as is the present case.

At the

present time we are required to accept deposits, make exchanges, and also make
redemptions of United States currency.

All redemptions or any unfit deposits are

charged to the Treasurer's account, but credit is not finally passed by the Treas urer until receipt and verification of the currency in Washington.

This is bad,

both from the point of view of the Treasury and the Federal reserve bank.

The

Treasury loses interest during the period of transit and also has all the additional
expense of a second handling of the currency in Aashington.

While it is true that

we are reimbursed for postage covering the shipments of mutilated currency, nevertheless I believe that our own expense in handling would be considerably less if

we were permitted to make the final count and destruction at the Reserve bank
rather than in Washington.

Certainly, from the point of view of the Treasurer and

the Reserve banks together, there is no answer to the argument of economy.
Confidentially, the Treasury Department is also considering reducing the
size of the currency from the present size to a bill about the size of the Philippine bill;

that is, 6" x 2 1/2".

This change in the size mould be made applicable

to all denominations and all kinds of currency now in circulation.

Because of the

narrow width of the proposeor.bill it is doubtful whether it will be possible any




2

*FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

8/6/25.

longer for the Reserve banks to cut mutilated bills in half before shipment to

(7 Washington.

If that is oo it will be necessary to insure all such shipments for

full value and all of the saving that might be effected by the reduction
in size
(which the Treasurer estimated would be over $1,000,000
a year in paper alone)
would be more than offset by the cost of insurance.

If the programme to reduce the size of all currency is to be made effective, the necessity of authorizing the Reserve banks to destroy the
currency becomes
obvious if only on account of the insurance question.

The chief difficulty that I

see with the programme is the provision of the law which requires that the Federal
reserve agent shall send unfit Federal reserve notes to the Comptroller of the
Currency for destruction.

Whether it will be necessary to change the law or perhaps

to have technical delivery made to some representative of the Comptroller on the

premises of each Reserve bank, is a matter that will have to be studied, but the
point which I have emphasized with Mr. Dewey is that unless it is possible for
the
Reserve banks to destroy unfit Federal reserve notes on the premises of the
respective banks, the programme to reduce the size of the note would result in
a most
exhorbitant insurance charge on the Federal reserve banks because of the fact that

it would no longer be possible to ship mutilated currency in two lots
as at present.
One other question.we have been discussing in the programme is to permit
all Federal reserve banks to act as custodians of unissued United States
currency,
a very important step to make so far as the Treasury itself is concerned since
that currency becomes outstandiag at the present time as soon as it leaves Washington

nd does not become retired as an obligation of the Government until it is

returned to Washington.

The currency float is consequently very large when you

consider the amount in transit to and from all Reserve banks.

I understand that

the solicitor of the Treasury Department has already rendered an opinion that it
is entirely legal and proper for the Treasury under the Subtreasury Act, to appoint
us custodians of unissued currency.



FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

3

8/6/25.

All these matters I discussed in some detail with Dewey, Broughton and
- Hand, and they have now prepared a programme outlining each question in some detail
)

and indicating those points that must be decided as a matter of law and those points
that must be decided as a matter of policy.

Dewey is much interested and, being

quite persistent, I rather feel that something will be decided one way or another.
At any rate we have done our job in expressing our views with regard to the savings
in expense and the ease aadfacility in operation that would result from an adoption
of the various proposals in question.

If it is decided later to approve the pro-

gramme regarding currency it will then be proper to consider the whole question of
The

having the Reserve banks destroy paid coupons and bonds of the Government.

shipment of matured bonds and coupons, as well as exchange bonds from the Reserve

banks to Washington amounts to an immense item each year and seems entirely unnecessary as a matter of practice although the law now makes it imperative.

It would

be my thought that nothing should be done to amend the law in this regard until

after we might have tried out the redemption and destruction of currency by the
Reserve banks.

One other thing before I stop.

Press dispatches seem to indicate that

Schacht may soon begin withdrawing gold from this country.

Your cable, which was

received this morning, indicates that we may expect some imports of gold from
London.

In any event it is likely that we will receive gold shipments from London

before any use of the gold credit.

While it is a matter of little importance to us

I sin wondering whether you have discussed with Governor Norman and Schacht during
your informal conferences the feasibility of shunting gold from Lonedbn to Berlin

and having the bookkeeping done in New York rather than having shipments coming
from London to New York and then back again to Berlin.

It may well be that the

transactions will not be sufficiently near in size or time to make a programme such
as this feasible, but it might be interesting to talk it over most informally as
long as you are over there.



FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

4

8/6/25.

Mr. Jay left Saturday, the 1st, for Murray Bay and, as you know, Mr. Case
returned Monday, the 51d.

Everything seem& very quiet here and as I know you are

receivink, current reports from Burgess regarding the ordinary operations of the bank

there is no occasion for me to bother you with them in any detail.

The inquiry business is going alnng rather slowly, but we are having someone at work on almost everything.

I am still waiting, however, to get any further

suggestions that you may have to make since receiving the outline which I sent you
some time ago.

The inadvertent omission of page 5 from the original outline may

well have perturbed you, and I mention your ccammts now, not with any impatience
in view of my own delay in getting the programme to you, but rather witb the hope
that you will not forget to let me have whatever may occur to you.

Your letters keep us all interested and somewhat on our toes, although we
are distressed to know that your trip so far has been so strenuous as to tire you
out, as you say it has.

I only hope, however, that you are getting some rest and

relaxation now and that Governor Norman too is beginning to benefit by a little
vacation.Ihaverather smiled to myself ever
you two to take a "vacation" together.

since I first heard of the proposal of

It doesn't seem possible!

We all miss you and hope you are not worrying about things on this side.
tith kindest regards to your whole party, I am,
Most sinoerely yours,

?coul_c4

cp_L

(dictated but not read)

Benj. Strong, Esq.,
C/o Bank of England,
London, E. C., England-

GLH/RAH




MISC. 3. I-75M. 9- 23

FEDERAL RESERVE BANK

OF NEW YORK

0, "ICE CORRESPONDENCE
To
FROM

DATE
SUBJECT:

August_ 14,

192 5

SALARY INCREASES RECOMMENDED AT
DIRECTORS' MEETING ON JULY 30, 1925.

Mr. Harrison

On August 4, when I was at the Treasury in Washington, I presented to

Governor Crissinger our letter of August 3 transmitting the recommendation of our
directory to increase the salary of seven different employee in amounts aggregating
$1,320.

I explained in some detail the facts referred to more briefly in the letter

itself.

There is no need to review them here.

I did, however, emphasize the impor-

tance in the mind of the directors of gradually raising at least to $3,000 per annum
the salary of those employes such as paying tellers and men in the cash custody and
vault division, who have direct contact with or coOtrol over the cash of the bank.
I also handed to Governor Crissinger a separate memorandum showine, the amount by

which the salary liability of the bank had been reduced since January 1, 1925, about
$288,000.

Governor Crissinger expressed himself as being considerably interested

and apparently favorable.

He said that he would take it up at the meeting of the

directory on Wednesday, August 5.

At noon Wednesday I called upon Governor Crissinger about other matters
and he told me then that action on the salary recommendation had been postponed until
the next day, August 6,.when each of the four members of the Board present might have

an opportunity to read over the recommendations of our directors.
I returned to New York Wednesday night, and inasmuch as we hed heard no
further report from the Federal Reserve Board by Tuesday, August 11, I telephoned to

Governor Crissinger and told him that we were anxious to learn of the action of the
Board in order to prepare our payrolls for the 15th.

He told me then that the

'Board had not yet acted upon our recommendation but that "two members of the

execu-

tive committee have voted against it" and that, therefore, be was a little skeptical
of the chances of



successfully

passing the recommendation at the Board meeting on

MISC. 3. 1-75119 -23

FEDERAL RESERVE BANK

OF NEW YORK

Oi :ACE CORRESPONDENCE

August 14,

DATF

To

192 5

SUBJECT:

"RON!

-2-

Wednesday, August 12, when it would come up for action.

I reiterated the importance

of the matter from our standpoint and the interest of the directors in these particular salaries.

He said that he would do all that he could but that he rather felt

there was not much chance in the circumstances of getting favorable board action.

At one o'clock on Thursday, August 13, not having heard anything further from the
Board, I telephoned again to Governor Crissinger to ask what action had been taken.

The telephone connection was not very good and at first I had some difficulty in
hearing him, but after some questioning and some repetition and a. gradual clearing
up of the telephone line I am able to report the substance of the conversation as
follows:

Governor Cris singer said that the Boardhed finally approved the recommendation, although not unanimously;

that they had done so only with the understanding

that he should advise our directors of the feeling of the Board that the directors

themselves had been most remiss in having allowed to exist the situation which the
proposed increases aere designed to correct;

that he, Governor Crissinger, wanted

to impress upon me how mild everything that he said over the telephone was as con-

trastedWith what was actually said by the Board at its meeting concerning our directors and their remissness in not having taken action earlier;

that he could not

impress upon me sufficiently how vigorously some of the members of the Board blamed
our directors for not having raised these salaries last year.

He also explained

that while he did not feel quite so strongly as other members of the Board, he
nevertheless sympathized with much that had been said, and then reiterated that it
was only with the understanding that he write a letter of "censure" (I am fairly
certain, though not positive, that the word

censure" was ueed) to our directors

that the board, by a split vote, approved the recommendation.




He then said, and

WX.11-751,9-23

FEDERAL RESERVE BANK

OF NEW YORK

OiJICE CORRESPONDENCE

192_

DATE

To

SUBJECT:

-3-

FROM

this seemed most inconsistent to me, that the recommendation of the directors would

not have been approved at all had it not been that, by a strange coincidence, the
Little Rock Branch of the Federal Reserve Bank of Kansas City had just sent in a
recommendation of a salary of $2,800 for a teller at that branch.

The Board, con-

trasting that salary with the salaries paid to our tellers, he said, were prompted
to pass our recommendation but only with a severe criticism of the way our directors
were running things.

At first I had little opportunity to say anything.
seemed considerably worked up over the whole matter.

Governor Grissinger

I finally had an opportunity,

however, to tell him that perhaps the Reserve Board, in taking this action, had not
had an opportunity to consider the salary record of the employes under question,
that as a matter of fact, while 1 had not the figures before me, each one of the
paying tellers (and it was only the paying tellers to whom he had made any express
reference in the conversation) had received an increase last January of between $200
and $250;

that the directors had recommended the present increase with the clean-

cut statement in the letter of transmittal that they anticipated making further increases the first of January next wiLla a view ultimately to raising the salary of

all of the tellers, cash custody and vault custody men at least to $3,000. Governor
Crissinger then stated that the Board's criticism of the directors laid in the fact

that the directors had not raised these salaries the full amount last January instead
of doing itin the way we now propose.

I said that I presumed it was only because

past exp,rience had led us all to believe that there would not have been much chance
of getting the Federal Reserve Board's approval last January of an increase for the
whole amount which the directors now contemplated doing in three different steps,

and that


in any event, as a matter of procedure, it was perhaps better in the cave

MISC. 3. 1-7SM-9 23

FEDERAL RESERVE BANK

OF NEW YORK

OiDACE CORRESPONDENCE

DATE__

To

Su

FROM

_192_

ECT

--4-

of younger employes with low salaries to have a definite plan of gradual increase
rather than to make too big a percentage increase at one time.

Governor Criesinger

intimated that the Board disagreed and that it would have been better to have raised
the full amount last year.

In short, while I was advised by Governor Crissinger on Tuesday, August 4,

that two out of four members of the Board who were on the executive committee had
voted against the increases, and that while even when Board action was finally taken

approving the recommendation it was not unanimous, nevertheless those three out of
four members that finally voted for the approval did so only on the ground that our

directors be criticized for not having corrected the situation at one stroke last
year rather than attempting to do so by gradual increases last January, at the
present time, and next January, as proposed.

Furthermore, what seemed

sistency, was the fact that Governor erissinger stated that had it not been for the

coincidence of the Little Rock salary it was very probable that the Board would not
have approved our recommendation at all.

The vote to criticize our directors for

,

allowing such lcw salaries to continue in the case of such responsible employes came
only after two out of the four men present had previously voted against the increases
as members of the executive committee and indeed when at least one member of the
Board voted against the increases in any event.

I told Governor Crissinger that in my opinion the record of increases already made for the employes in question, taken together with the proposal in our
letter of August 4 to make further increases next January as well as at the present
time, showed a quite consistent programme to adjust the salaries in question to the
responsibility of the work perdormed, and that I thought that our directors might
care to state



those facts in a letter to the Board after receipt of the Board's

.
olISC. 3., I-75M-9- 23

FEDERAL RESERVE BANK

OF NEW YORK

CORRESPONDENCE

DATE_

To

192_

SUBJECT

FROM

-5-

To this Governor Crissinger replied substantially as follows:

letter.

I wouldn't attempt to make any answer.

dc. that.

"I wouldn't

Just let it go," the inference and

tone clearly being that nothing the directors might say would help the situation in
the minds of the Board who had ordered the criticism.
While I was very much provoked and exasperated during the whole conversa-

tion, not so much at what was said as at the evident desire of Governor Crissinger
to impress upon me how

indignant

the Board is at the way our directors have allowed

such responsible work to be handled by men on such low salaries, nevertheless, I am

quite certain that Governor Crissinger had no idea of my temper of mind. I think I
maintained a perfectly courteous, consistent and logical position throughout.
is no evidence that he thought otherwise.

There

In concluding I thanked him for having

given me the info:mation in advance and told.him I would report it all to our directors.
But before allowing inc to conclude the conversation he referred to another
matter;

that is, my letter of August 1 0, concerning the revised form of weekly

statement of condition of all Federal reserve banks.

He said that the Board had also

considered this matter at the same meeting, that they had decided to make no change
whatsoever at the present time and not to consider it further
a full meeting of the Board-

not be

until

October.

until

there should be

I asked him when that might be and he said it would

I then reminded him of what he himself had said in a meeting

which he, Dr. Stewart, Smead, Governor Strong and I had had,in New York, that he
thought it might, be advisable if any change were made in the statement to make it as

soon as possible and as much before the use of the Bank of England credit as might
be feasible.

He said he remembered that and also called attention to the fact that

he himself had asked. Mr. Bmead and me to prepare the revilrd form of statement which

I sent in my letter of August 10.




He added, however, that there was no use bringing

MISC. 3. I-75M. 9 23

FEDERAL RESERVE BANK

OF NEW YORK

O

CORRESPONDENCE

DATE

To

192

SUBJECT :

FROM

6-

the matter up again at this time, that the Board was determined to do nothing until
the full number of members were present.




FEDERAL RESERVE BANK

OF NEW YORK
August 14, 1925.

My dear Governor:
3, 4,
When I last wrote you and referred to my Washington trip of August

Crissinger concernand 5, I forgot to say anything about my discussion with Governor
for three of the paying
ing a few salary increases which our directors had proposed

tellers and four other men in the bank.

In view of what has since transpired I am

Board transmitting
enclosing a copy of the letter of August 3 which we wrote to the

the recommendation of the directors on this subject.

It speaks for itself.

All of

because of the developments
the recommendations in this letter have been approved, but
which I have made of a
incident to it I am also enclosing a rather hurried memorandum

yesterday(immediately Lreceding the directors,
telephone conversation which 1 had only
meetin)g ccncerning these particular salary increases.

The letter from the Reserve

has not yet
Board to which Governor Crissinger referred in his telephone conversation
matter
been received, so that it is difficult to tell how far the Board has gone as a
Crissinger stated
of record in criticising our directors in the way in which Governor
they had voted as a condition of the approval of the salaries.

The whole affair would be funny, were it not so pathetic, and only illustrates
to dealing with anyhow utterly inconsistent and illogical the Board is when it comes
thing that concerns this bank.

I am convinced in my own mind the certain members of

for an opportunity to
the Board in their antagonism against us have just been looking

instead of voting
blow off steam, and through some strange psychological reaction,
intimated that they probably
against the salary increases as Governor Crissinger first
themselves an opportunity
would do, they approved them merely for the sake of giving
earlier/
for criticising our directors for not having taken the action

concerned
Incidentally, you may be interested to know that all of the men
and the three paying tellers,
received regular annual increases for the last three years,



FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong

8/1 4/25.

,aose salaries seemed to be the/basis of the Board's resentment, received $200 and $250
increases only last January.

Until we have seen the letter from the Board, however, it is difficult even
to suggest what if any further steps our directors should take.

Mr. Saunders and Mr.

Runkle were the only members present at the meeting yesterday then I reported my telephone conversation with Governor Crissinger, and they were both more amused than anyin fact somewhat delighted because it made a record which would logically

thing else,

preclude the Reserve Board from declining to approve any salary recommendations which
the directors may make next January.

The fallacy of that argument, however, lies in

the fact that the Board cannot be expected to be any more logical at that time than it
is now!

I am to-day revising my memorandum of the conversation with Governor Crissinger so it may be slightly changed upon the draft which I am enclosing.

However,

because of your interest in it I am particularly anxious that it shall go off in the
mail to-night in order to catch to-morrow morning's bout.
You will also be interested in the latter part of the memorandum referring
to Governor Crissinger's remarks about the new form
ently is considerable pique about this also.

cf

Tnded

weekly statement.

There appar-

there is a disposition on the

part of the Board to be ugly about anything that concerns

us.

I forgot to mention that I believe only four members of the Board were
They were, I

present at the meeting at which these various flare-ups took place.
understand, Crissinger, Hamlin, Miller and James.

The preparation of data for the so-called inquiry is progressing, though
slowly.

Burgess, Rounds and Gilbart are may lieutenants and nre farming out various

matters to different parts of the organization for investigation or report as the case

*
might be.

I am beginning-to feel for the first time that we are getting somewhere, al-

though the results are not yet very tangible.

I have been anxiously awaiting to re-

ceive some comments from you concerning the outline which I sent you last month.

I

knot how busy you have been and how diverted with other more serious matters, but if




FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

3

8/1 4/25.

Pou get a chance to let me have your views I shall welcome them.
To-day is scorching hot and the humidity high, but every time I complain I
am only reminded of the fact that it is not nearly SD bad as it was in June when I
was away, so I get no comfort from anyone else.
Everything is going along quietly and smoothly.

As you will notice from

some of the officers council minutes we have started negotiations rather informally
with Governor Criseinger concerning the procedure to be followed when theFederal
examiners come for an examination.

In my last conversation with the Governor he sug-

gested that he, Herson and I have a talk about it as soon as Herson might be available
in order to map out a programme that would satisfy us and at the same time be workable
from the point of view of the examiners.

I think this can be done but feel very

strongly that it must be done with the amicable cooperation of Crissinger and even
Her son.

My very best to all of you.
Most s

Benj. Strong, Esq.,
C/o Bank of England,
London, E. C., England.

GLH/RAH
en ca.




cerely yours,

Mi.. 3.1 30M-4.22

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

FILTS
FROM '

SUBJECT.

AtAku-, C7, 1g25.

192

Employment of

Colonel Hiram I. Beare

George L. Harrieon

After finiehing a eonversation about not reporting to the :'eate
De' rtmene the loan made by this bank to the Bank of Poland, Hr. Eddy of
1641."eneeeen,141
the Federul eserve Boerd, teliing to me over the telaphone4 referred to

a conversation whtieh he had hed

r

eleehone with He. Zeiler yeeterday

uow.erning the, oupleyment of Colonel Bearse, end. in eml,nfy.Ing hie statemelee to Mr. Saller, explained that it 50,4,D Geverner Crieeinger who w o

ptic.ulL1rJ.y intereeted in tide mutter.

He -aid thtt Governor Crieeengee

vented to know particularly whether Colonel Bearee Ind come to tie for

emiloyment or whether we had eeught him :tit, thet he :,ne,;oned a tendency

on th i,aet el' the

Fede,el

I told him that Colonel

reserve btnka te em.;:ley

-nd Herine o2fieere.

are had not come to us for emoleyment, th-

he.7 decided that it ets nee( sary for us to reorceniee DUI pleteeLfe
eystem, that we had ne one tee:enable in the bank with the requieite exper-

ience, that we hed intervieved no less than 35 endidutes, that one of these
possible °and:T.-de-tee

to u

and who-

an Army tficer whem Cenerel Bummerall hed referred

we felt did not reeeeese all of the ua15ficatic'nu rhieh we

needed for the rtrtieuler jeb, thet we heard of Colonel Deeice only in
interviewing a reference given to us by another applicant, and th,t ef had
ourselves requeeted that Colonel Bearss come to us for an interview in the
event. that ht might be interested in possible Hmpleyment with Ub.

I added

that Colonel Beares wae outstanding :Along all the candidates whom we had

interviewed and that he possessed e combination of experience, character

and ebillty which seemed particularly to qurl:fy him for the work which

the directors had in mind.

I said that in the circumstances we considered

the ealary of $4,000, which our directors recommended, as very modest.




MISC. 3.1 6031-1142

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
FILES
FROM

DATE

August 27, 1925

Fmployment of

SUBJECT:

Colonel Hiram I. Beeres

Georgo Lo_Harrison

Mr. Eddy then said - "Oh! there is no trouble at all about the salary.

Thot is all right, particularly if Minneapo1i i

-rititled to pay an ex-

Army General ,1'.5,000 to take charge of their protection men.

The only

question at all was the question of our employing ex-military men Who, in
the opinion of Gove000r Criseinger, might not have the necessary other

qualifications for o job of this kind.

I then told Mo. 7ddy that In my
matter wYch it ue,e

opinion the cualifications of the canditiote were

primarily ouh duty to determine, particularly in view of the fact that we
had an opportunity to interview the candidate and to study hIs ,,ua.lifica-

tions, _ad that the only real question for the Botld ueoo the moval of
Vr. Eady rather intimated

the salary which h-d been fixed by our directors.

that he was inclined to ogroe with me in that position, and stated that he
lould hove a talk with Govornor Crissiner =Jai tell him whet I tod said
abou. Colonol Hearse, and telephone me again later on during the day to

say whother it would be necessary, in .v.v of what I hea told him, to write
the letter which he had yesterday requested Mr. ,"iftiler to send for Governor
Crissingeres information.

P. ?.

I telephoned M . Eddy at 430 this ofternoon tc ask him whether

he la:. n opportunity to toAk with (30vernor Criesinper sbout the abore motter

whtther, thortofore, he could tell us whethorpr not.we should send a

further letter about Colonel Bearss and his qualificr_tions. He told me that
he had talked to Uevermer CriEs!nEer sbout our conversotion and that

Crisb1n63r ms entirely eatiefi

rioh the explanotion I had Given him on

the telephone, and that he therefore had written



'-ooe-r.nor

a

memorandum to the Board

1 92_

ea

aa

MISC. 3. I -75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Tc
FROM

FILES

DATe_Au61A
Su BJECT.

192

Frployment of

Colonel birom 1. Beares

.Georg_eHarri_e_on

requesting the approvel of the salary recomnended by cur director. for
Colonel Beerso.

He said thht he thought there was no doubt th:t the

wetter eould be approved and that we would hear nothing further about it.

'e mentioned incidentally that in talking to Covecnor Crissinger

had told h'm that I wee i.nterested in this matter of the employment of
Colonel Beers not only f-om the point of view of this bank but from the

ooint of vie-t or the

5Pcitem as

c.

thole.

I eeked him what be meat by

that statement and he said thet he had understcod me tc eey en the telephone
in the morning that I thought it wac neeeceary not only for ue to get come

such man ace Colonel Le::ss to take care of cur pretectien force, but that

It might be lise for all of the other Reserve beakc to do co too.

I told

him that he auet be thinking cf come cenvercation 4Lth some one else eince
I had made no reference

tever to any of the other Leeerve tonke, that

our intereet was only n perfecting our own lAsotecticn eystem, end that
while what he eaid might be true with regora to other

eserve bank, I knew

nothing about it and I did.mot feel in any way qualified to cuggcet what
other heserve banks ehould or ehould not do in this regerd.

In any event,

I insisted that I had made no reference whatsoever to the other Reeerve
benks for I did net even have them in mind when I was talking to him in
the morning.

He then admitted that perhape he vac thinking of EOM, other

convereGtion, but mentioned that even co no harm was done end that Governor

Criesinger hed said he was going to suggest for the program for the next
Governors Conference the whole question of the organization of the protection

force in each of the reserve banks.

http://fraser.stlouisfed.org/
GUI MI
Federal Reserve Bank of St. Louis

t/5

FEDERAL RESERVE BANK

- OF NEW YORK
August 28, 1925

Dear Mr. Strong:

I have before me your letter of August 11 regarding the possible adaptaYou

tion of our money counting machines to the needs of the Bank of England.

say that they are considering using them in connection with the printing of the
currency notes and have asked whether it would be possible for the inventor to
send the mechanical drawing of the machine in order to permit of their determining its adaptability to their purposes.
Lard, the inventor, was in my office this morning.

I told him of the

problem, and while he is, of course, most sympathetic, he feels that at the
present time all of his force and efforts must be devoted to the contract which
he has with the Federal reserve banks.

In fact, he explained that even now

his organization is not quite adequate for that purpose alone.

He says quite

frankly that the drawings of the machine would not be of any substantial help
to the Bank of England in determining the auestion they have in mind.

He seems,

however, to be quite certain that the machine will take care of notes of the
size of the present currency notes and could readily be made adaptable to a

different size note in the event that when the Bank of England takes over the
currency issue it should decide to make a note of a different size.

We have

made a study of this in connection with our own particular problem for, as I
think I told you, the Treasury is very seriously contemplating reducing the

size of our present currency to 6 x 2 1/2 inches.

While such abill would be

5/8 of an inch narrower than our present bill, the machine, even as built now,
will handle the reduced size just as effectively as the present size.
already experimented to verify that fact.



We have

2

Governor Strong

August 28, 1925.

,EDERAL RESERVE BANK OF NEW YORK

Finally, before leaving my office, Lard said that as soon as he has

his manufacturing program established to the point where he can dispose of his
present contracts, he will be glad himself to go to London with a sample machine
to demonstrate it there if they should be interested in it at that time.

He

feels that he cannot afford to go just now, particularly in view of the fact
that it would be impossible for him to undertake any new commitments until
after he had disposed of the pending contracts.

You may be interested to know that some of our counters are now
registering over 24,000 notkls a day on the machines, as contrasted with 10,000

or 11,000 notes by hand.
I have had two or three interviews with Mr. Gilpin of the Clearing

House, relative to the reduction in the amount of our assessment for our limited
membership.

The Officers Council, you may remember, just before you left for

Europe, authorized me to settle on the basis of $10,000.

I very frankly present-

ed all the facts to Mr. Gilpin, told him that it was impossible to measure in

dollars the relative benefits to the Clearing House and to us because of our
membership, and suggested that some arbitrary figure might be the most satisfactory way of disposing of the ouestion.

I mentioned that some of the officers

felt that a complimentary membership might be desirable, but that most of us
did not favor that;

that sdlne of the officers felt that $5,000 per annum was

a proper figure, while others of us felt that even $10,000 represented a very
substantial reduction from our average payments over the past few years.

To

make a long story short, they themselves finally proposed a flat fee of $7,500
per year, with an informal understanding, on which I had insisted in each of
my talks with Mr. Gilpin, that we might bring the matter up again at a later
date if conditions justify it.

In the past we ha

of the amount of our assessment, so that we have already paid through October
of this year.

Our next payment will be in November at the new rate.

whole, we are much satisfied with the way the matter has been settled.



3

Governor Strong

August 28, 1925

FEDERAL RESERVE BANK OF NEW YORK

You may be interested to know that after numerous interviews with
various applicants, our directors have finally approved the recommendation of

the Officers Council to employ Colonel Hiram I. Bearss to take charge of our
protection force, with a view not only to reorganizing the force itself, but
to reviewing and possibly revamping our whole system of protection.

I think

it needs it badly, and Bearss is certainly far superior to any of the men who
have been referred to us.

Sailer fell upon him merely by chance, and he seems

to be excellent in every regard.

His war record was exceptional and in my own

talks with him I was much impressed with his personality and general make-up.
With all, he has a good sense of humor and that may be helpful!

We recommend-

ed the salary of *4,000 a year, and the Reserve Board held us up pending some in-

quiries by Mr. Eddy, which are covered quite fully in a memorandum which I have
dictated for the files, a copy of which I am enclosing.

It may interest you

particularly in view of other discussions which we have had on the question of
the Board's power to control our directors' right to make appointments.

It

is quite amusing the way Eddy fell into my trap about the question of the salary; as the memorandum shows, he stated flatly that the Board held up the approval

not because the salary was out of line, but because they questioned the qualifications of the man.

While I have not yet received formal advice of the Board's

approval, I understand from 'Mr. Eddy that there will be no longer any question

about it, so that we All be able to take Colonel T3earss on the first of September.
It is possible that this has already been reported to you through Mr. Sailer, but
I thought you might be interested in the memorandum of my talks with Eddy.
The collection of data for the possible inquiry is progressing slowly,
but I think it has finally begun to reach a fairly tangible stage.

Burgess is

away, but Roberts, Gilbart and Rounds are all working for me quite vigorously.
They are a good crew, and I am not as depressed about it as I was sometime ago
when, because of vacations and the necessity of some trips to Washington, I was

up to my neck in the every day bank work.



Indeed, I have not been able to give

Governor Strong

August 28, 1926

FEDERAL RESERVE BANK OF NEW YORK.

nearly as much time to the job you have left me as I had hoped, but I feel that
it is going along pretty well and that we will have it in shape well before it

0 will

be necessary for us to use it, even if not before you let back.

I had hoped

to get some suggestions or criticisms from you on the basis of the memorandum
that I sent you sometime ago, but I know harrbusy you have been.

I hope, however

that even now if you have any thoughts that occur to you that you will send them
along.

Mr. Case has just came in to show me his letter to you dated August 26.
Paragraph 6 of that letter relates to the $10,000,000 credit to the Bank Polski,
and refers to an article in the Journal of Commerce which strongly sug,fests that

some one at the Reserve Board published the fact of the loan.

You may be interest-

ed in some subseeuent developments, represented generally by the enclosed Dow Jones
at almost the precise

clipping which came out on the ticker early this afternoon,

time that Sailer was telling another representative of Dow Jones over the telephone
that we had nothing to say one way or another on the reports about this credit.

Mr. Case strongly suspects - and I agree with him - that this Dow Jones statement
was obtained from the Polish Legation, a fact which he is now trying to confirm
over the telephone;

but since it had previously appeared in an article in the

Journal of Commerce, which Mr. Case has already sent you, it is natural enough
that they no longer feel it necessary to keep it secret.

The whole thing, in

my opinion, can be traced back to the Reserve Board and Midis or his representative.

The last two paragraphs in the Journal of Commerce 'rticle make this

pretty clear.

Mr. Case is now giving to the newspaper men the enclosed state-

ment which Mr. McGarrah has approved of.

Ve cannot any longer deny any

knowledge of the thing!
Paragraph 6a, of Mr. Case's letter of August 26 refers to a memorandum

of remarks made by Mr. Gliwic concerning Mr. Mellon and assurances which he
is alleged to have given to a member of the Belgian Debt Commission about our
readiness to extend a credit to the National Bank of Belgium.
 in the enclosed letter
ed
http://fraser.stlouisfed.org/
bearing on
Federal Reserve Bank of St. Louis this matter.

You may be interest-

dated August 27 which has just come from Mr. Winston

August 28, 1925

5

FEDERAL RESERVE BANK OF NEW YORK

I think there is no other news not covered in Mr. Case's letter of
Some of this duplicates what he wrote you then only because I had

the 26th.

dictated most of it before he showed me his earlier letter.

The rest is

intended to be supplementary.
all keep pretty busy but well.

Kenzel goes away next week on his

vacation, but Jay returns about the same time, so that the bank
well covered.

is

still pretty

The Reserve Board is still sufficiently contrary to keep us all

interested and amused when not too mad to overlook the funny side of it all.
It certainly will be good to see you back again.
that you are not overworking yourself on that side.
rest before you come back.

Please try to get a real

You deserve it, and I am wondering whether your so

called vacations have not been so only in name.
Always, sincerely. yours/

veal
Mr.-Benj. Strong,
c/o Dank of England,
London, England.
Eric s.




My only hope is

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