Full text of Papers of Benjamin Strong, Jr. : Correspondence with the Board of Governors of the Federal Reserve System : Governor Charles S. Hamlin, 1914-1916

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de-e'

373

MEMORANDA
Credit
DEPARTMENT

for

Mr. Strong.

1914
Sept. 17,

The attached is as much as I have been able to get on Tweedy,
so far.
I have tried to interview other members of the Exchange whom
I know, but have not been able to see them as they are out of town, coming to their offices only once or twice a week.
You will understand
in mu conversation with both Holden and Allen that in each case they
brought up the subject of the Pederal Reserve Bank, and I was non-commital
to their questions as to whether that was the object of mu inquiry.




.1.4K

(PdcAATalt




3 -6

LAURANCE TWEEDY

Laurance Tweedy, the son of John Tweedy, and Laura J.
Wildman Tweedy, was bon in Danbury, Conn., October 17, 1877.
Laurance fitted for Yale at Phillip's Academy, Andover, Mass.
After gradThn, in the fall of 1899, he went to
New York and took a position with the firm of J. H. Parker and
Company.
He was only there a few months, when he was taken ill
with typhoid fever. When he recovered he went to New York again,
and in May 1900, joined the Consolidated Cotton Exchange, and
has been an active member there ever since, serving for two
years as one of the Governors.
In 1906 and 1907, he entered the firm of Sutro, Tweedy
and Company, with Victor Sutra '97, and Griswold Smith '96.
On October 22, 1901, he was married to Miss Alice
Burbank, daughter of General J. G. Burbank, U.S.A. They have
three children - Laurance, Jr., born December 5, 1902, James
Burbank, born September 13, 1905 (and died December 29, 1905)
and Alice Bradford, born August 7, 1908.
Laurance's business
address is 33 Wall Street.
His residence address 227 Raymond Avenue, South
Orange, N.J.
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33 Wall Street.
LAURANCE TWEEDY,
New York City.
September 16, 1914
Mechanics & Metals National Bank, mr. Roe said this young man was of the
firm of Sutro, Tweedy & Co., which had offices in the building at No. 33 Tall
Street, where the Mechanics & Metals National Bank used to be. He said that
he was not acquainted with young Tweedy, but knew his father, who was a very
The family, he understood, cane from Connect lout and was very
nice man.
respectable.
Jenks Merritt said that he knows Tweedy as being a member of the Con17.
solidated Stock Exchange, but does not know anything in particular about him.
Aocording to the directory of the Consolidated Stock Exchange, Tweedy has been
a member of the Exchange since May 25, 1900, and is a member of the Arbitration
Committee.
ETL.
September 17, 1914
New York Consolidated Stook Exchange, Mr. Lynch, Secretary, said he knows
nothing regarding the personal affairs of Tweedy, but that the latter has been
a member of the Exchange since 1900, and for three years was one of its Board of
Governors. He has always met his obligations andconducted himself with due
propriety. He is an active trader on the floor, and,while his appearance is not
impressive, he seems to be well spoken of by every one, and Lynch knows nothing
against him.
J.Frank Howell said that Tweedy is a trader who used to be in the commisSaid he is married and, he
sion business, with Victor Sutro as a partner.
tninks, lives in the Oranges; that he is "very honorable", and he has known him
for 10 or 15 years; bears an excellent reputation, and, while he would not Julpress one at the outset, as he is not flashy, "he is a man", and Howell said
that, while there is no reason ror his recommending Tweedy, he is glad to be able
He
to speak in high terms of him, as he cannot do so about a great many men.
said he does not know what Tweedy is worth or what his Income may amount to, but
that he never seems to want for money, and all relations that Howell has had with
him, which were quite numerous in the past, have been very satisfactory.
Hathaway,Smith,Folds & Co., Mr.Holden spoke in very high terms of Tweedy
as to his qualifications for the position in question; said that he is a neighbor of his in South Orange, where he has lived for 9 or 10 years, and, while he
does not know him intimately, he has had occasion to see more or less of Tweedy
and the latter impresses him as being a man who has something to him. He is
quite a student, and, in conversations which Holden has had with him, he has
demonstrated the fact that he has studied questions on finance and is well read
Holden said that Tweedy gave his name as reference
on the "Tederal Reserve Law.
and he not only saw Mr. Woodward in regard to Tweedy, but wrote a letter to
Holden told me Tweedy is an
Woodward setting forth Tweedy's qualifications.
unassuming char, strictly honest, and a fellow who, he believes, could meet
people and would know what heaas talking about. He married the daughter of
General Burbank, has two children, and, besides owning his house in South Orange,
has some little income, he believes, from money he got through a relation.
His family came from Danbury, Conn.
Mechanics & Metals Natl.Bank, Mr. Allen said he had not seen Tweedy for
several years, until about two or three weeks ago, when he came to say that he
Allen said he
was going to apply for a position in the Federal Reserve Bank.
knew Tweedy in college and that he was a very hard-working and persevering
fellow, and he is glad to say a good word or him without knowing just what
While he could not tell me
success he may have met with in recent years.
very much about Tweedy, he said the latter 'handles himself well".
EWL.




.




Mr.Lawrence Tweedy was in the employ of Spencer
Trask & Co. for a number of years, first in a clerical capacity in the New York office, and afterwards as a salesman
in our Albany office.

His work at all times was satisfact-

ory and his leaving was due to an offer received from the
Guaranty Trust Co., which, in his opinion, presented greater
possibilities for advancement.

In the opinion of the writer,

who is well acquainted with Mr.Tweedy, he is bright and energetic and possesses a very pleasing address and personality.
He is a Princeton graduate and comas of a good family and is
very gentlemanly in manners and bearing.

His work showed am-

bition and his ability was entirely equal to the work of the
various positions that he held.

His advancement, however, had

not reached a point before he left us that would make an opinion possible as to his executive ability.

(Signed)

J. Graham Parsons.




September 14, 1914.

Mr.Lawrence Tweedy is, I understand, a young man
about 31 years of age, who for the past two years has been
in charge of the London office of .lessrs. Bernhard, Scholle
& Co. of New York, who are dealers in securities. Prior to
that time he was a clerk in the employ of the Guaranty Trust
Company where for about two or three years he had occupied a
position in the Bond Department, for the last year or thereabouts having been manager of that Department. He is very
highly spoken of by the officers of the Guaranty Trust Company, who say he is a bright, intelligent young man, but of
rather limited experience in banking outside of the security
business. Prior to his employment by the Guaranty Trust Company he was in the employ of Spencer Trask & Company, Investment Bankers, of New York, having had charge of an office
which they established in Albany during the latter period
of his employment.

3(-3 Beaver Street

New York City,
Sept. 9, 1914.

Dear Sir:-

The Hon. Ben T. Cable has told me of his talk with you regarding my desire to obtain a position with the Federal Reserve
Bank of New York.

In compliance with your request I have the honor

to submit a summary of my business experience and qualifications.

I am 36 years old and was graduated at vale in 1899, obtaining
special honors in Finance,

These honors were accorded me for work

under Prof.J.C.Schwab in investigating the fluctuations in the
price of gold during the years 1861 to 1879.

Shortly after my graduation, I cane to New York and worked
for the Cotton

xchange House of J.H.Parker & Co.

In 1900, I joined

the Consolidated Stock Exchange and have been an active member there
ever since, serving as one of the Eoard of Governors in 1906-7.

For two years I was engaged in the commission
tor Sutro under

business with Mr. Vic-

the firm name of Sutro, Tweedy & Co.

Having a keen interest in financial affairs, I am desirous
of entering the banking business, as it offers a broader and better
field than the line of work in 7,:hich I am now engaged.

The new Reserve Banks are

in

part an extension of the Clear-

ing House System which is more highly developed here than in any
other country.

They present new problems ard offer opportunity to

many to use their talents and be of service to the community.
I am in a position to take up at once any duties that might




Hon.Charles S. HamlinPage 2.

be designated to me in connection
with the organization of the
Bank.

For reference I can give the following:
Hon.Ben T. Cable;

Mr. A. B. Holden of Hathaway; Smith
Folds
Co; Mr. Marvyn Scudder, 55 Wall
St;
Yr. Hendon Chubb of Chubb
& Son; and Dr. Granville White,
Vice President of the Mutual Life
Insurance Co.
Thanking you for your interest in this
matter, I am
Yours respectfully,

V43AAVQRAiie
'Hon. Charles S. Hamlin,
Federal Reserve Board,
Washington, D.C.







f

'1

October 30, 1914.

To the Honorable C. S. Hamlin,
Washington, D. C.
Dear Sir:

On Friday, October 23rd, at a meeting of the
Honorable the Secretary of the Treasury, the 41e.ne,rabI41.-4he,

Comptroller of the Currency, representing the United
States Government, Sir George Paish and Basil B. Blackett, Esq., representing the Chancellor of the Exchequer
of England;

the members of the Federal Reserve Board;

and representatives of banking institutions in this
country;

the undersigned were appointed a Committee to

confer with a Sub-committee of the Federal Reserve Board
-tke,

andA

representativesof the Chancellor of the Exchequer

on the subjects discussed at the meeting.
Your Cannittorrr:r,o
tee recognizes the (e-xtraloz44-liery-Tmtlard) of the financial
situation both in England and in the United States, and
is conscious of the responsibility assumed in attempting
to deal with this matter.

It desires, on behalf of those

it represents, to express to our English tz.i.azda its

-s4-neere admiration for the energy, courage and ability

with which the English Government and the Bank of England
have prevented, by extraordinary but adequate measures,
tfittit{

the financial catastrophe Ulimot

ttleitteli
otherwise. have en/\

veloped the business rorld.,

-2-

Your Committee also takes pleasure, on behalf
of the banking community of the United States, to acknowledge to the Honorable the President of the United
States, the Honorable the Secretary of the Treasury, the
Hernera434-e-t+me Comptroller of the Currency, and to the

other officials of the United States Government not
omitting the Governor and Members of the Federal Reserve
Board, who have so recently taken office,its appreciation of their co-operation with the merchants and bankers
--tho

of the country in devising ways and means to meet the
difficulties of the present situation.

Your Committee submits its report herewith in
the form of a proposed letter to Sir George Paish, and
Basil B. Blackett, Esq., representatives of the Chancellor
of the British Exchequer, accredited to the Honorable
the Secretary of the Treasury of the United States.

Attached to this letter are various memoranda mentioned
etia.

therein, all of which

submitted for your Information,

and as the best judkment of the Committee on the subjects
discussed, as enumerated in the letter.
/roticylitro

In the course of our(discusbion? it has come to
be understood that a definite proposal, or proposals,
would be submitted.

ak/O-ndifti)

Inasmuch as thoseAwho are to con-

sider proposals 14-London have not yet had opportunity




-3to examine the memoranda submitted, and particularly

in view of the fact that much of the information and
many of the opinions contained in the memoranda sub7 ruiti`
m it t ed are of a delicate and confidential -ellarraatea.,

which it would be unwise at this time to make pubic,
we beg to urge upon you the necessity of regarding the
privacy of this communication as being of the utmost




importance.

Respectfully yours,

October 30, 1914.

Sir George Paish,

Basil B. Blackett, Esq.,
Representatives of the Chancellor of the British
Exchequer accredited to the Honorable the Secretary
of the Treasury of the United States.
Gentlemen:

At a conference in Washington, convened by the
Honorable William G. McAdoo, Secretary of the Treasury of
the United States, which was attended by the members of
the Federal Reserve Board of the United States, and rep-

resentatives of banking interests of this country, the
.




undersigned were appointed a Committee, representing the

banking interests, to confer with you in order that, after
exchding
views as to financial conditions in England and
A
the United States precipitated by the war in Europe, they
could submit to you memoranda outlining the conditions
discussed, and possibly consider and submit to you, for
transmission to England, such proposals as, in our judgment,
would be to the mutual advantage of the business interests
of both countries.
Based upon the interchange of views at the recent
conference, and upon facts that have developed in recent
conferences in New York and elsewhere, and upon our general
knowledge of the local situation, canbined with information
in our possession regarding the situation in England, we




-2submit the following explanatory memoranda.

Because of

the inherent economic differences between England's posi-

tion and that of the United States, and the differencesbetween

Banking Systemsand Banking Methods in your coun-

try and ours, this memorandum is necessarily elaborate,

but it will, we trust, afford you a full comprehension of
the situation.
FIRST:

A statement of the position of the New York
01; courtikautifit 7

banks on August 3reter04001 of the reasons why it

was deemed desirable for the banks to issue
Clearing House Certificates, and to apply for
Aldrich-Vreeland currency; including a state1 60u, Of

me i,o1"-the-peititiolti.--errrthat
*-iuernira0

day, of the Apa nits

-emmi the Clearing House Association.

(44reumm46.

-War'
SECOND:

A statement of gold shipments made prior to 14. P/exadt
AuguSt -40 in payment of obligations, -ateact

estimate of the probable additional indebtedCe tg

ness of American merchants, banks, and +/wirers
THIRD:

to Europe on or about September 12th lasti
5filSwi a 4 /4 aniosttiii Sx-ivvt WAtti:14, (64 6444144t mai* ,Effi,
A statement explaining the reasons why the
hAtttrexar

4-aat-ax-riatee4-1 settlement of balances necessarily
irtm.49

A

fails upon New
York City and not o the country
A

tri&420
44C




- 3-

at large, and-4:4341transe-n-why a weakening of

the New York City banks, -through e

deple-

tion of gold reserves, is serious, and is
reflected at once in lack of confidence and
curtailment of credit throughout the country.
FOURTH:

A statement

....nizatirlirmiet' the syn-

litti-,O-

dicate,to guarantee the payment
&- 440
irt, ii,e141
about $80,000,000,of New York City Agit, due
in London (and Paris) up to January 1, 1915.
FIFTH:

A statenent of the necessity for and the
creation of the so-called "Gold Fund", the difficulties under which it was completed, its
lVtUu

method of operation, emMrthe expenses
-4104:44-±ttritsr..mellreretTft, and the risk of

loss incurred by the participants,

incidentally, a memorandum with regard to the price paid
by the Bank of England for American eagles delivered at Ottawa, and certain questions on
which the "Gold Fund Committee" desirs5informa-

SIXTH:

tion, having to do with the price allowed by
the Bank of England for gold delivered in Ottawa.
A statement of the object and the terms
and conditions of the so-called "Cotton Loan
Pool" of $135,000,000, and of the method by
which the cotton crop and its movement to
market is financed 4'etetraiut *Luicia-.




-4SEVEYTH:

A statement in respect of the Federal

Reserve Bank of New York now in course of

organization, and its bearing on the matter
under discussion.
EIGHTH:
A statanent in respect of a possible
credit of B20,000,000,

arlOPIA the Committee's

opinion in regard thereto,
Mitt& 7)14,*T

etettpk.3

and (1/94+gleaka

"141.

&let daiii'

These statements are submitted for consideration
and discussion and are put forward for the information of
the conference as an expression of the belief and opinion
of the Committee.

At the general conference between the Honorable
the Secretary of the Treasury, and the Federal Reserve
Board, and the full Committee representing the bankers of
the United States, at which this Committee was appointed,

with the information then at hand, it was expected that this
Committee, after conference with you, and a careful canvass
of the financial situations in England and in the United
States, would have some specific proposals to submit for
the consideration of the English Government, or of the
financial interests in England.
With the New York City Gold Syndicate andthe

Gold Pool Committee funds aggregating $180,000,000 (only

a small amount of Which has as yet been availed of), and




with the completion of the Cotton Pool Loan Syndicate,
all in this country, and with the expected early conclusion of arrangements to reopen the New York Cott-on Exchange

with full protection to its members as to

existing con-

tracts, and with the arrangements made by the English Government to discount pre-moratorium acceptances of English

Banks and Accepting Houses, and to postpone pre-moratorium
liabilities to post-moratorium business, and the resultant
facilities offered for new acceptance business in London,
this Committee is of the opinion that the only additional
step necessary at the present time to adjust the international commercial situation and. enable bankers, corpora-

tions, and business firms of the United States to meet
obligations as they mature at normal rates of exchange, is

an understanding that the free purchase of American cotton
by English spinners and merchants shall be encouraged by the
bankers and goverrment authorities of England, and that
arrangements should be promptly made to open the usual
channels for advances against cotton or for the discount
of cotton acceptance bills.

The Cotton Loan Pool is estimated to provide
funds to enable the banks and merchants of the South to
carry over four million bales of cotton until February 1,
1916.

The best expert opinions estimate the excess over

the consumption at not over five million bales.

This




-6-

Committee is of the opinion that the present low price,
being considerably under the cost of production, will
tend to induce cotton merchants and spinners of America
and Europe to buy somewhat in excess of their needs, and
that this inducement will result

in

the absorption of

considerably more cotton than the mnount generally estimated.
pa,talfalS7/t01.1

No retaraanes has

been made

kt-gdfli
,,,M.amar.a.113.8.....a.g.c.omloanyi,nt, to the international security

markets, or to the opening of the New York or London Stock

Exchanges?
The measures above enumerated we believe are
adequate and will eventually correct the international
commercial situation,

but would

be entirely inadquate

should any considerable volume of securities be thrown
upon this market on the opening of the New York Stock
Exchange.

has been

Until, therefore, the commercial situation
adjusted, and the

exchanges have

turned in our

favor, arr discussion bearing on the opening of the
New York Stock Exchange to a free

and unrestricted market

for American securities owned abroad would be premature.
Respectfully yours,




kt-t,

Cx.IP'-ax.Q

t$61
P

iv

FIRST

THE POSITION OF 1fl NEW YORK B.ANES

At conferences of New York banlars held. immediately prior

to the declaration of war by Fingland, opinions were unanimous that

the banking position in this cou_ntry would shortly develop along

lines similar to those ex-perienced. in-the fall of 1907.

Up to the

time of these conferences gold to the amount of about iill.30,000,000.

hal been exported from the country aid it was feared that, in addition

to the contraction of credit resulting from this large loss of gold
aul

reserves, a further largeskcontracti on. would be imposed upon the New

/

York banks by reason of the withdrawal of funs by banis throtuhout
the country WhO might be inspire l_ -A rear to strengthen their position

by increasing their reserves.

In 1907, after the crisis of the

panic had passed, (on December 2nd) the reports of the National Banks
Tital7F,nti

to the Comptroller of the Currency indicated that even 44-1.66n the

country banks, as 'cli. tinguished from the Reserve City aid Central
6Srat

Reserve City ban7K-s, held excess cash reserves of .415,000,000.; and

it must be borne in mind that this leaves out of consideration 42
C4X0567.44t4 7710id-c

--64411-1-er acctrmtlation of reserves yv about 18,000 State banks, as to

which figures have not been compiled.

In order to meet the strain

imposed. by this probable clevel opmen t , the New York Clearing. House

Association decided to issue Clearing House loan certificates for
the settlement of clearing balances between members, and the Sec-

retary of the Treasury announced his intention of is suing AldrichVreeland notes, as authorized by existing law.

These measures

P°si
./718°

on of the N. Y. Banks

-2-

afforded protection to the banks of the City of New York, both
National and State, and

ev*A4-15-64

retain te about 4240,000,000.

gold. reserves vhich thr held at that time.
Of thera.gold. reserves :14.a-1-4-41f-leiTe-/TreT--Ymerk..4rewies,

ii80,000,000.

was shortly pledged for the payment of the debt of the City of New York,

end, of that oinount, about 460,000,000 is still to be furnished, less
Sae&

viiiatipaw.er mount is ft rnis he d. in exch ange .

Of about 420 , 000,000 already

paid, 415,000,000 has been by shipment of gold ani 45,000,000 by purchase of exchange.
CentTatthd.
Of the 4;100,000,000 -i-r,i/r4rt-,."41

to the gold. pool 445,000,000

was pledged by the banks of New YorhA 6f which 411,250,000 has nav

been called.
raaar-ly




426,250,000 has therefore been taken to date, leaving

00
01/147,0
-1,i464);3"pirek4) still -to be furnished cat of the present

t the present time the Clea1.1.43 House banks

City bank reserves.
OMNI

New York

044A.1

'.,11.en the se obligations were en tered.

shon a iiht excess reserve.

1600.0 /5:640.00*7T41,00*,15010 4444,11

into, the New York bonks were 31011107 their legal reserve.
/N.

.7hen the-.2edera1

esLve Bonk of New York is organized.,

dor

it

leinft10174 67,0.

is estimated that a total of 412E3,000,000 will be 4619.1fekt-94-e'
New York Ci ty National baalz to make capital and reserve payments '464,-, A164

for their own accounts

those of their out-of- tovm correspondents.

Simultaneously, the reserve requirenents will be reduced frau 25,, to

g/c
16, aid, it is estimated that, after Mak. i re these payments
4128,000,000, the reduction of reserve req.-ulna/lents will leave art excess
ero

tirtatkO of the National banks of New York City aggregating
rose rveS in the

If this calculation is correct, we must consider
the result of the completion of the three o rations referred t o,

about 40,000,000.

The Position of the N. Y. Banks

-3-

namely, the withdrawal of the entire anount of go ld. vh.ich may be called.
for an account of City of New York and the Gold. ALM., ani the paynients

and reserve reductions resu.lting fran the organization of the Federal
Reserve Bank.

The total payments to be made, aezregating, about

93,750,000, will be partially offset by ihe 40,000,000 gained. in
reserves, due to r%duction of reserve requirements, leaving the New
41041.6611? ,S7oneteos

York institutions at 440,000,000 belaca the required legal reserve.
The anaorit of deficiency in reserve may, by the terms of the Fedora

Reserve Act, be further offset

attlitislett) 0.144) triad 4,
member banks

of the*

privilege of rediscounting co mineral al paper; at the time of
opening of the Federal Reserve Bank. -44.-.44eftezet===wakeiliprer,




SECOED:

GOLD SIIIPLIENTS PilIaa TO AUGUST 5BD

An exact statellent of the diipments of gold during the first
seven months of 1914, and of its destination, would require considerable
investigation, which time doe s not permit.

In general it may be said

that in that period the bralm of the City of New York exported, in

round figures, $130,000,000 of gold, largely in eagles, the principal
amount having been taken by the Bank of France, aid, indirectly, by the
Re i schbmik.

The inducement s of fered by those institutions to attract

gold in settlement of international balraces were understood in this
country to have deprived the Bank of Eng3and of the opportunity

afforded at that time to strengthen its golrl holdings, and undoubtedly
was occasioned by the willingness of the English Market to continue

to extend accommodation to its customers in the United States in the
accustomed volume.

It is possible that the occurrences of the past

few months in international exchrage tray be explained by the fact
that Prance and. Germany did not renew current American indebtedness

as freely as the English Marlt did.

Investigation conducted by a

special committee appointed at the request of the Federal Reserve

Board in the latter part of September disclosed the fact that, as of
September 12th, the total ascertainable current international debt
maturing between that date and January 1, 1915, amounted to about




450,000,000.

The items investigated included bank boraces , matur-

ing securities, interest mid dividend obligations, commercial credits,

finance bills, end indebtedness for securities sold.

As to some of

Gold Shipments Prior to Aust 3rd:

these accounts, estimates were necessary, and. it is recognized. that

information of this character is inaccurate and liable to be misleading.

The offset account s were db. osn to be about 4150 , 000 ,000 , leav-

ing the net indebtedness as of that date maturing before January 1st,
in round figures, $300 ,000 ;000 . due to Englai d, Frai ce , Germaiy,

Canada, and, to sons extent, other European countries.

The an aunt s

maturing were about equally proportioned. over the fall period of the

year,

40.jt

should. be

ttutsAio

that a co ns id erab le port ion0

of the 4.mari can indebtedness to the London Market, maturing in the
period. between October let and

January 1st, was created. in anticipa-

tion of the purchase of cotton bills, vthicb have always been considered cash in the London Market.

No further data has been obtained in connection with the

present amount of the current international indebtedness, hut opinions
asked of bankers conversant with this matter vould probably justify

the belief that over one-half of the net indebtedness has been paid.

at the present time.,

Amp,'
01-40,444,67-

6-0114,4*,

Elcciwatel,

AAA,.

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THIRD;

THESiiITTT.roxizIT

INTSFITATION.LL BALANCES IN

COI) 'JT.T.SINTIITLLY UPOL '11.12e.1
NE-.7 YOM CITY.

The international exchanges reflected fears or the effect
of the outbreak of -041r. war, by the latter part of July, an'i even before August 3rd there devel oped in Ameri ca an insi st eat dem-n(1 ibr
'mat-1,4

exchange to meet -cirs.4.1-Elt obligations to Europe. ugeri-Eitw0000ft;eqept._.+9-4e-

The de.claration of war, and the ittaiii4,24,r-s4.T. suspension of

shipping facilities, caused. such an interruption of the merican
export trade as to dangerously reduce the supply of exchange.

The

following statement is made at sone length in order that the position
taken by the New York banlz vith respect to go Id exports may be
understood.
bout SO ;:> of the foreign commerce of the L.tlantic Seaboard

passes through the Port of New York.

It is

AmOnTr

the large s5 manufacturiat;

umataeaus

center in the United States, and. is the: market where the quotation
for foreign exchange is nude, and where foreign bills are assembled.
for remittance to E-ar.ope for co lle cti on or di scount.

There is no

city in the United. States vhich can make a quotation ibr exchange,
without a quotation fr am New York.

The burden imposed upon the

reserves of the balks of New York, theft the gold movement is adverse
in both t1

foreign and domestic exchanges, has at times under our OM--

?raiment banking system, proved to be too heavy for the banks to
carry without employiru emergency relief measures.

In 1907 the

only such measure available was to issue clearing house loan certificates
eetertticAi

for settling babnces between members, vhichi,afforded no relief to the

rest of the country.

The new York bail

Pita/

suspended free dai-pment of

-2-

currency to their co rre sponden. ts , Fu-r1 the i lane i ate result was a
maximum premium of 3-l/2

on bo th currency aid gold..

This year the Aldri eh-Vreeland Currency Act re m it ted the

mpr

.-Airm. use of an emergency currency vh ich was acceptable to the people

of the country.

iithin a few days after Augu st 3rd, the New York

banks were able to freely supply their correspondents wi.th cur Toney ,

and. at no time since that date Las there been a premium on either
gold or cu rrency in .this co untry no 1"; in fact, has New York exchange
atiliegact
Peoropworret.
Ain
o
s_]4 at
4i..i.e.r..o.uut in 411/' part.) of the country
f-

AC- distrust of the ability of the New York banks to promptly meet

their obligations to thei r correspondents.

This currency not being

available for the sett lement of int ernat ion al balances, and it-having
been impo s sib le for the balics to

ip

id to Europe , London exch mige

reached a premium equivalent to a very co nsiderable premium on fj) ld

Had, this situation occurred in our domestic exchanges, di strust of
the ability of the New York banks to meet their cof imitments mid the
ard
demands of their depositors might have ari ero 1\76_ t h serious consequences.

London exchange , after the first violent rise o a maximum of

s even

dollars. for cable transfers, gradually reacted until a fairly level
price was established, in t'ne neighborhood of five do llars to the
pound, wi th fluctuations within a range of about five cent s either way.
In normal tire s exchange at this level would have caused a large export
of gold, the burden of irh I ch would. have fallen not only upon the bmi-Lm
LOMA

of New Yolk City, but indeed upon the comparatively fewbaiis 'di ich
draw exchange or vh ich carryA
. accou_nt s of private firms which draw
Aimbwatts.

exchange, bub vhich do not carry gold reserves.



tthe suggest ion of

-3-

the Federal Reserve Board, a committee of banlers formulated a plan
for assembling 4100 ,000,000
gold for export, in order to make ex-

4047

change and to di sGribute the burden among institutions all over the
United States instead of inlpoaing it upon a few of the banks of New
York City.

tevaM Yt ate/0x 6,,r,

t 4,cete

er-74 do' newt!:

This li;100,000,000 wasx in addition to the4;;' 80,000,000,

pledged by the banlm of the City of New York for the paymaat of New
York City obligations maturing in Europe during the balance of this
year.

The necessity for pursuing this course, instead of allowing
a free movement of gold, arises:




FIRST:

From the fact that the gold reserves of the United
States are scattered among about twenty-fie thousand
national and. state banking institutions;

SECOND:

From the fact that 'those banks in New York vh ich
might ship gold vcruld be unable to recoup their

gold reserves by calling loans; and,
THIRD:

From the fact that it is impossible for a bank which
parts with: its gold for export to recoup itself
through the excharge,s from other banks, and because
av out 4,0 el .404A4

the proceeds of sales of exchaage are payable in New
tSeit:itt. ault40"-/Iff

York funds through the Clearing, .House and =tAsettled

either in clearing house loan certificates or
Vreeland notes.

ch-

..VOU.?2H:




MI NEW YORK CITY DEBT.

The City of New York has for maay years been authorized, by

the terms of its charter, to borrow money in anticipation of the payment of taxes.

With the growth of the city, and. the enormous in-

crease in the tax levy, the amounts of these borrowings have increased.

to such an extent that at times the city iS indebted to the marlcet on
4A1

short loans to the extent of 4A00,000,000. ivhich ilat- ordinarily

liquidated at the time taxes are paid in the fall, and., in recent
years, in both the spring and. fall, as the tax levy is now divided.
into semi-annual payments.

The movement of the cotton crop in the

fall of the year ordinarily furnishes su_ch a large volume of exchange ctigefi

that borrowers have been able to count with reasonable certainty
upon lower rates in the fall 'Gila" in the spring, and advantage eeiecf-Aia4 lora-

e's..itetic-trfet, has been taken not only by the City of New York but by

other municipalities vhich make similar loans to borrow large sums
of money in the London market.

On Lugist 3rd the City of New York
P4V-04-

had so borrowed a 'total of 82,000,000., a small portion in Paris,

but the greater part in London.

The breakdown of international

exchange imposed upon the City of New York the na Gess ity of meetirg

this large obligation by the export of gold.. The city carries its

accounts in a large nunlier of institutions, both national and. state,
located in the City of Net York, and, under ordinary circumstances,
would have had. no difficulty in obtaining gold in large amounts fironi

those institutions.

The conditions existing early in igu.st, however,

made it impossible for the

dif4:0 40>t/C444
-b
to

furnish the anount of gold

/,
'

,

The New Yori..?: City Debt;

At)

required, and, had the city been obliged to purchase exchange at the
rates recently prevailing, the loss would have been enormous.

It

was therefore determined by the bailers who undertook the solution

of 'this problem to ask all the baaks in the City to contribute to
a fund of gold amounting to about ;;i;80,000,000, in proportion to the
The co ntracts entered

amount of th e ir respective gold holdings.

into be

t he City, the contributing b anks and the 141a,nagers o f

the transaction (J. P. Morgan & Company, and. Kuhn, Loeb & Company)

provided, for the sale of :1P'100,000,000 of obligatiore of the City

maturing in one, two, and three years.
the issues undertook to
cent

The banks Ithich -and erwro to

Itt into-014o )

furnishA

if required to .do so, eighty per

of the amounts of 'their sub scripti ons to the syndi cate in

gold, having the option, however, of furnishing sterling exchange

in place of gold at the rate of I4.90 a pound.

The practically

unanimous response of the banks of the city to the call made upon

than, as well as the universal approval of the trmisaction, indicates
Prari9a.vmeAtraY

that the ban'kers were correct in their belief that aAdefault in the
payment of this indebtedness of the city dould not be contemplated,
and that the consequences would be so serious as to justify the
pledge of gold involved.

While it is now

recognized that "-

the city could. have extended a large part of this indebtedness in
London by the offer of an. issue of new notes payable in London in




sterling, the city authorities/ nevertheless/ felt, no doubt influenced by the pressure of pub lic opinion, that it was to the city s
advantage to extinguish the debt at once, and avoid the possibility

of loss at a later maturity, rather than to advance its position and




The New York City Debt.

-3-

to take the chance of being able to get gold six months or a year

later.

The contract so made by the banics of New York placed. one-

third of their entire gold holdings miler contract for export, to
extent that exchange could not be furnished.

the

Lttention is here

called to the fact that tlz privilege of furnishing exchange in
place of gold permits any contributor to this furri to avoid the
loss of g3ld by purchasing exchange aid, therefore, contributors

to this fund are, to soire extent, competitors in the market for the
purchase of sterling exchange.

FIFTH:

THE $100,000,000 GOLD FUND.

Statement "third" largely explains the necessity for providing a fund
of gold by the method adopted, and it is the belief of the Committee that
the success of the plan affords evidence of the willingness and intention
of the banks of the United States to furnish the means to their customers
for paying foreign indebtedness which the banks of New York alone, withGov

out endangering the situation, were able to provide.

Voluntary contributions were obtained from national and state banks
in all central reserve and reserve cities (52 in number), those cities,

under the law, being required to hold 25; and 12i5 cash reserves, respectively, as against

C

in other cities.

Contributions of gold to the fund

were received from 1,494 different banks, located in all parts of the
United States.

An amount in excess of $100,000,000 was promptly pledged

through the co-operation of the Secretary of the Treasury and the Federal
Reserve Board.

Pending the payment of the first call of *25,000,000, nine

New York institutions advanced *10,000,000 in gold for shipment to Ottawa.
Pron.-pit,

This enabled the Committee to meet the urgent demand for exchange, which

A
was selling at about
The Committee desires to call attention to the fact that the gold
fund was not created for the purpose of making a profit, but rather to
atv

n\ cteat

CUA-0

4itt,tal

exert an influence in bringing about a decline in the rate of exchange.
The policy of the Committee has not been to sell exchange freely.

This

would certainly have resulted in the accumulation of exchange by debtors
who desired to insure the protection of future maturing obligations, and,
unfortunately, might also have resulted in releasing exchange to the




The

100,000,000 Gold Fund

( 2)

contributors to the fund provided to meet the obligations of the City of
New York.

It was rather the

tt22illn
'

of the Committee to use the fund

to prevent an undue advance in exchange rates, but, nevertheless, to per-

mit rates to follow-normal fluctuations and thereby induce American obli/N

gore to arrange for renewals in the expectation that the creation of ext.-attempt.

change .3pr restoration of export trade would avoid the necessity of export-

ing any considerable portion of the gold fund.

.464

This Committee, of which

two members are also members of the Gold Committee, is convinced that the
policy adopted was a wise one, and that the purposes of the gold fund have
already been largely accomplished.

After allowing for certain large pay-

ments made for account of the United States Government, for which the
Government reimbursed the Gold Fund Committee in gold, the total amount
of the fund has been reduced not over one million pounds, and is substantially intact.

PROFITS AND LOSSES OF THE GOLD POOL.

Misunderstanding is liable to arise with regard to the ultimate profit
and loss account of the Gold Fund Committee, and we are informed that the
iatfivtLirti 44,0

attitude of the Bank of,.EnglandAill possibly due to the belief that large

profits will accrue to the Gold Fund contributors:

Consideration of the

following will, we trust, make clear the Gold Fund Committee's position:
ABRASION.

The legal limit of tolerance on American gold coin is onehalf of one per cant.

Eagles furnished by the Sub-Treasury at New

York will rarely show an abrasion exceeding one-quarter of one per




The $100,000,000 Gold Fund

(3)

Eagles shipped from western points, however, where gold coins cir-

cent.

culate much more freely, show a larger percentage of abrasion.

The Com-

mittee must figure on a loss of from one-quarter to three-eighths per
cant. for abrasion.

INTERESTfAtktpu944The gold furnished for the purpose of this fund is taken out of bank
reserves, and held in safe denosit in New York, and is not held as a part
of the reserves of the New York banks.

to make payments in installments of 25.
anticipation of

The contributors are called upon

first payment of 25, in

which $10,000,000 was advanced by certain New York banks,

was made as soon as the fund was completed, and the expense of transfer'ring this fund from all parts of the country was paid out of the fund.

In

order to arrive at the cost of exchange, it is also necessary to make
allowance for the interest during transmission, and during the period when
the gold is held in storage in New York, for all the expenses of shipment
to Ottawa, as well as for abrasion; the gold being received by the Committee at its face value, and sold to the Bank of England at its bullion
value.

It is impossible to estimate the interest cost involved in ship-

meats which have not yet been made, but a calculation has been made as
to the first shipment, with allowance of interest to November 30th, and
it is found that London exchange on the basis of this calculation costs
the contributors about 4.92-3/4.

The average price realized for exchange

sold to date will slightly exceed 4.95, and, after making allowance for

2c1

interest allowed by the London banks, it is probable that if the account
was




closed

at

the

present

The Slog,000i000 Gold Ftnd.

(4)

C-6

time by selling exchange against balances now in London, the result would
be a loss to all the contributors to the fund.

This is occasioned by the

thetar
declineinexchangeafterthd_Atransfer to Ottawa was made, and before the
entire balance was exhausted.

At the time the fund was created, the Committee desired the co-operation of the Bank of England on two points only, pending a discussion of
other matters of importance which could not be then taken up by cable.
First:

A better understanding of the basis on which the
Bank was purchasing gold shipped to Ottawa;

Second:

An arrangement for advances, without interest, upon
advice and guaranty of shipment from New York to
Ottawa.

AS TO THE PRICE PAID FOR ATIORICAN GOLD:

The value of the grains of gold in the English sovereign in American
currency is

$4.86656

One ounce of American gold coin contains fine gold of the
value of

$18.6046

$18.6046, at the rata Of $4.86656, equals

76sh. 5id.

which is the value, expressed in sterling, of one ounce of American gold
coin.

This is the exact price which the Bank of England was paying for
American Eagles just prior to the outbreak of the war.

Reductions were made to a net price of
3d. being further deducted for American Eagles shipped to
Ottawa

making the net price for Eagles delivered in Ottawa




76sh.

3d.

76sh. id.

The $looLooq,000 Gold Fund.

(5)

A.::

&ran

It hashas been stated to us that theel.4.11,..ee of 5d4is made

wawa

the

following items:

An allowance for the cost of melting and minting;
An allowance for the cost of transferi.inz Eagles from Ottawa
to London.

As to the first item, inquiry arises as to whether the price which
the Bank of England is required by law to pay for bars (77sh. 9d.) does
not make allowance for the cost of coining bars into sovereigns, and that,

therefore, a shipper of Eagles should not be required to make this additional allowance, which is already covered in figuring the equivalent of
the bullion value of the gold contained in American Eagles.

As to the second item, the question arises as to whether the Bank of
England should not, if the exchanges turn before the gold is shipped to
London, than allow in the price at which it resells the gold to New York,

a rebate of the charge which it has collected for the conversion of Eagles
into sovereigns.

The same question will arise as to 3d. deducted from

the price allowed for standard bars.

The Gold Pool Qommittee feels that the deduction of 5d. on Eagles and
3d. on bars is not justified under the circumstances, but a clearer understanding of the reasons for these deductions may change the Committee's
views.

As to an arrangement for advances without interest, the request which
was made for this accommodation at the time of the first shipment grew out
of an emergency.




Exchange was selling above five dollars a pound and the

The $100,000,000 Gold

Fund.

( 6)

Committee desired to be in a position to draw exchanga at onpa before the

dui eittivier eis,ifttMti
necessity for

gold shipped could be received and weighed at Ottawa
accommodation on that account is now passed.

With exchange approaching the point where gold exports become unprofitable and without a better understanding with the
Of-

as to the rate which they will make

on Eagles

Bank of England
ef

irony

exported to Ottawev the

Gold Fund Committee will find it impossible to make any considerable
6.4-&NCr64,

a ptrrit

shipment of gold without risk of loss on such shipments.

The Committee desires to be in a position where it may furnish exchange so

long as
el-

'




it may profitably cover with gold, but not to

Artioth Advni- 14;

risk of4.1+,,e4iitiA4Atft-i-ft-44-8 exchange market.

run

the




SIXTH:
THE COTTON LOAN POOL.

It has been generally estimated, and. this Committee
believe6with reasonable accuracy, that this year's American
cotton crop will somewhat exceed 15,000,000 bales, and that
Ateuet)
the world's consumption of cotton will leave an unused balance
of the American product of about 5,000,000 bales. At the
conference in Washington, it was suggested that the maximum
credit to finance the cotton crop would be required. at the
time when the maximum of the crop had been pi4ed, and the
minimum marketed, that is to say, about December 1st, at which
time it was suggested that a credit of $300,000,000 might be
iti2-4-4avu-a 4
zeirdett.
This does not take into account two factors in the
-

situation.

First:

The method o f finmacing the growing

and gathering of the crop.
Second:
The difference in price between this
year and last year.
As to the methodd, of financing the crop, it may be generally
stated that the initial adiTances are made before the crop is
planted.
The", are largely made_ to the farmers by merchants
attl
Am supply houses, and are increased as the work on the crop
advances, the merchants taking a lien on the growing crop and
borrowing money from their banks.
By the time the cotton
is gathered, the last advance is made. The marketing of the
crop through the ginning and compress companies and the cotton

factors is a process of liquidation, and the problem coneta eia,
F4
fronting the South todevyt, is not that of arranging new credits
with which to finance the cotton crop as a whole, but rather

//The Cotton J.89..an Pool
-2
of providing a temporary credit to be employed in facilitating
the liquidation of that portion of the crop which can be marketed.by
enabling banks to extend or renew the loans that have
/
PftiolArt,

attl -fr4ju1.et tliuo 't Pi.

already been made *6 financ*lthe surplus which may not Ices4mar)1\

keted.

This may be described as a process of clearing or

lt

a- Proem) ri,

shifti rgif, oans rather than as the , oreatil ofts new credit,
As to the second point, namely, the price, it is of course
-,attuq
evident that with cotton at six cents, those banks which loan
A
en( i
on cotton .eai . carry two bales this year against one bale,at
twelve cents, last year.
In order to facilitate the process of liquidation,
which contemplates that 10,000,000 bales will be sold and

5,000,000 bales will be carried, a credit is inillecourse of
being arranged, amounting to $135,0009000, to be handled by
the following plan: $100,000,000 of the advance is to be

secured by a first lien upon cotton pledged at not exceeding
$35,000,000 is to be
six cents a pound, middling grade.
secured by a second lien on the pledged cotton, t-he-Ax.t.tor parturk
of the loan to be provided by the banks of the cotton growing
states, to wham, or through wham, the loans will be made. A
fund amounting to three per cent. of the amount of the loans
made is to be set aside to cover the expenses of managing the
transaction, and to pay any losses incurred. The fund is to
be administered under the directionof aCommittee consisting of

t.

members of the Federal Reserve Board, the business, however,
to be conducted by an operating committee, and, under its
management, local committees, the machinery for the appointment



4
A

'




The Cotton Loan Pool
- 3 -

cia

40444e6

of which has already been sasitaneale.

This Committee believes

that the cotton loan fund will be inadequate to restore normal
conditions in the market for raw cotton, or in the cotton
manufacturing industry, unless it is supplemented by energetic

measures to bring about better facilities, both in the United
States and abroad, for marketing, financing, and manufacturing
cotton.

Last year, sales of cotton to Europe furnished

this country with $534,000,000 of

Ptirmou,

retards the free

p rices for raw

exchange.

Anything which

th trtq

sale of cotton, or the restoration of stable

cotton, will also

rezard the restoration of

normal conditions in the international exchanges, and work
injury both in England and in the United States.

In the

opinion of this Committee, it seems desirable that the following measures be adopted:
First:

That the fund of $135,000,000 be completed
and its

administtation

undertaken at once.

Second: That the New York and Liverpool cotton
- exchanges should be opened.

Plans for

opening the New York Cotton Exchange have

reached a point

where it may be reasonably

expected that the exchange can open at an
early date provided necessary

co-operation is

afforded by the Liverpool Cotton
by the

English banks.

Exchange and

A fund has been

pledged which will enable,hr.alcigho.46:4001%

members of the New York

Cotton Exchange"mmi.

The Cott on Loan Pool_




4

MID

40

who are commItted for the purchase of cotton, at
high prices, to margin their contracts down to

7-1/22cents.

With this relief

confidence is

expressed that they may

exchange with

open the

a reasonable expectation of beig

able to meet the market conditions which will
Co-operation bf the Liverpool Cotta

arise.

Exchange on similar lines i6-necessary before
it will be feasible to open

the

New York Cotton

Exchange.
THIRD:

It is also essential that no

contraband

question as to

be permitted to arise in regard to

export cotton.

The Committee notes with great

satisfaction that the British Government has
already recognized
FOURTH:

this

situation.

Any restraint which may have been imposed

upon English merchants or spinners in the purchase of cotton should he removed.

Reference has

been made to some agreement or understanding which
we hatidbeen advised exists in England

respect.

It is not underetood

Government

has

standing,
English

not

in

thie-

that the British

brought about any such underin fact, is it understood that

purchasers of cotton have any definite

agreement among themselves

in this

regard.

Advises have reached this country, however, to

The Cottgaltpan Pool




5

the effect that some of the English banks
have exerted a strong influence in restraining the free purchase of cotton by English
cotton merchants and spinners, and it is
vflckJI 6t //Mu ad.., fa

hoped that the English banks w*kt encourage
the purchase of cotton within reasonable

limits.
FIFTH:

That the usual means of financing purchases of cotton by English merchants and
spinners shottld be reopened through advances
---itticatierA)
against cotton bills40) the discount market.
^

SEVENTH::
FEDERAL RESERVE BANK

vo

The first installment to be paid for the capital
',-haos=Isrrr-eattdkeitt4zr4oe.-ra-idstock of the Federal Reserve Bank
C16-vv,e-,t.
The plan asw-aoatrempi-ated provides for the
on November 2nd.
transfer of lpite reserve deposits-a these banks, commencing

with November 16th.

If the operation is successfully con-

cluded, the Federal Reserve Bank of New York, within a period
of -six months (and possibly at the end of three months) will have
received payment for over $10,000,000 capital stock in gold,
,6y/mor
and will have received on deposit ab.e.at $100,000,000 of tha
reserves of the National Banks of New York State7ami-/e0.044--(1
'NAO., 'ma-rt.
The Federal Reserve Act provides that not exceeding
50% of the initial reserve deposits may be made out of the
ve,Ack fru

proceeds of commercial

Out. 44, /it* se /L.

h.k.c ALM,

Acute

paper rediscounto64,-41sommamoommbanks..-

It is therefore impossible, at this time, to forecast the condition of the Federal Reserve Bank of New York resulting fram,
oltrefd
the initial

transa,ctions, as the amounts of

discounts awaited

.4g-4y the member banks will depend,-(4)014 ?Tairw-

tottat

"a-`1 40vIN:1-

s74 or-1u.;

IttAvvtrt.

Upon the rate of discount established by

the bank;:
Ptifewlml
Upon the rate of interest T.12-evidel in the
City of New York; and
Somewhat upon the extent to which the New York
City Banks are required to make payments for

(lakpL4- q

444c6 4,; 4641"e,

account of their correspondents located in
Federal Reserve Districts.

The Federal Reserve Banks of the United States

the course of



establishment.

are

in

Calls for payment on the capital

Federal Reserve Bank:

-

2

The ability of this bank
to furnish gold is a matter for future consideration7 ata
ritt- 4444'
OAT,
'hat- a-1G; 611 ge-,06fi oi
stock have already been made.




tiTtutlA

c.nd),' Or-

r to

,




SEVEN:

SUPPLEMENTALMaM'ORAIMUE

TO THE FitDERAL RESERVE BANK OF NEW YORK CITY

It 'mist be borne in mind that there is no certainty as to the
amount# of gold rhich will be paid. into the Federal Reserve Bank at the
comraencenent of its operati on.

The capital pwmants vth ich must be

.11B

t

within a period of from ila d ys to six months, in gold, total about
),000,000.

The payment of reserves, aggregating 4;100,000,000 , raw

..;;; made in United States notes end silver certificates. ..a).1.1.e it is
4tt Nhtreon.
hoped that the banks of
.triti-d di strict will make a. cond. der able portion

of their reserve pa,vrnents in gold., it is, nevertheless, quite possible
that a large proportion will be made in legal tender notes, aid. the
ability of the Federal Reserve Bank to accumulate gold. frau other

*ant

sources than the United States Treasury will depend_ upon:
A

The degree of confidence 11 ich the bank enjoys from it s
mauber banks, which now hold. the principal gold reserves.

A change in the present currency laws, readjusting the
various forms of 'Dd c erti fi cates aiid legal t ender no tes ,

lent-9P

so as to withdrawsOfsmall denominations 0 gold. carA

tifi Gates from circulation.
No transacti on involving the present pie dge of the credit

of the Federal Reserve Bank to furnish gold would be justified until
the bank has been in operation a su-fficient length of time to demonstrate

its ability to accumulate stzTfictient gold. reserve to justify such. a

transaction.

,OIGLITH:

\-)

0

CREDIT OF 20,000,000 STERLING.

Oktut
Your Committee has been informed. that --etortritttn a

month ago, when the visit of Sir George Paish and Basil B.
Blackett, Esq., wa

tr
proposed,

one of the subjects to be

considered at the conferences would be a possible credit
which would, in effect, afford means for extension of the
obligations due in England by bankers and merchants in the
United States.

If it had been possible to arrange such a

credit by exchange of cables at that

hate approved of the transaction.

tine,

your Committee would

It would have supplied

exchange at a moment when the demand was urgent; and it would

have insured us against any serious drain on gold reserves for
the time being, and given this country a period for readjustment

.4pAr

during which local conditions could have been- ttidge to meet

the extraordinary situation.

Since the date when the suggestion of a credit was
made, exchange in large quantities has been supplied to the
'ePte
restored t.itreerh the knowledge
market, and confidence has beeV-6761
/
that the New York City Syndicate and the Gold Pool Committees'
operations have been clau4alairaa.t.441,--tre-4e effective.

From in-

formation which your Committee has gathered, it isstrongly
of the opinion that a continually increasing supply of exchange
is in prospect.

The export of food products and raw and manu-

factured materials that Europe needs in the

present

crisis

(not to mention munitions of war), must continue; mills and

manufacturing companies are working overtime on orders for
goods which, in many cases, will not be ready for shipment



00 000 STERLING CPEDIT




- 2..
for some months, and which will make a corresponding supply
of exchange.

The opening of the New York and Liverpool

Cotton ExchangAbes, coincident with the completion of the
Cotton Loan Fool, if accompanied by assurances to the merchants and spinners of England of the willingness of the
English banking community to finance reasonable purchases
of cotton from the United States will also add to the supply
of exchange.

For this, and other reasons that it is not necessary
to elaborate here, your Committee is convinced that the
caa eatiRa4pmettl--

adoption of any extraordinary or unusual measures at this

A

time are unnecessary, as such action might, in fact, be
interpreted as an expression of the belief of this Committee

that the present situation requires such measures, and
because ;AA-unusual measureSAm likely to bring about un-

expected and possibly undesirs41. results.

It will be noted that the foregoing relates entirely
to the commerci,a1 situation.

No account has been taken of

the possible operiing of the New York Stock Exchange, and the

additional demands that might arise if any considerable
amount of English owned American securities were resold /VS &Iv
this country.

Your Committee is firmly of the opinion that

it is premature to discuss the opening of the New York Stock
Exchange until the adjustment of the commercial situation

4-40.441
has been demonstrated.

In the meantime, with a view to
rt

this step, it is recommended that a Committee from the
New York Stock Exchange be appointed, which Committee should

A-20,000_,000 Credit.




- 3 -

visit London for conference with a like Committee from the
London Stock Exchange, and for a careful study, of the situation there.

A tentative arrangement for a large Ster-

ling credit, predicated on the understanding that its re-

payment will not be made in gold, but in commodities and
manufactured goods, would emit-l-ly make it possible to
consider the opening of the Stock Exchange sooner than it
kr oto
*ogle
As this step is recognized
would otherwise be safe to doA

414,014,

to be a desirable one from the point of view of both
countries, a present discussion of the form of such a credit
and a tentative agreement
would be bene,424#1,..___

as

to its terms, at this time,

0

4:

Conditioned upon the undeXstanding suggested in -paga=47r-Alir/

memorandum Eighth, and withe view to assistance in meeting
conditions which may arise t rough excessive sales QLAmerican
1Wa 4iiiiis
bthy,
tt4t4s1
4,
4.
i
e"),..wio
01,41.01.4)
eld in Euro)
seclj.ritie
1

P.

(.3

.149-4.evagremteft that A

evolving sterling credit of

1,20,000,000 shall be granted under the authority of the

English Government, or the Bank of England, on the following plan:




Oredit to be available as a supplement to
and only after the $100,000,000 Gold Fund
has been

shippedliglart

raizt

Drafts at 90 days, with one agreed renewal, on an acceptor, or acceptors, to be designated by the grantors.

Drafts to be forwarded direct to England for
discount under an agreed arrangement, and demand or cables to be sold against them.

Drafts to be drawn by the Gold Fund Committee,
or a new committee representing guarantors, consisting of banks, trust companies and banking
firms in the United States acceptable to grantor.
Proceeds of sales of exchange to be loaned upon
security of approved bonds and stocks as collater-

al, with the obligations of borrowers, who are
satisfactory to the guarantors, to maintain a margin of not less than twenty per cent. (20%) of the
face value of the loan.




-2-

Drafts to be drawn only as required to supply
exchange to take the place of gold remittances.

Drafts to be covered at maturity in the usual
way if exchange can be purchased at or below the
cost of exporting gold.

If exchange cannot be purchased as above, and

payment of the bills would require the export of
,AartriCi4
gold,
the 90 day renewanto be granted, provided that, in the opinion of the Federal Reserve
Board, a further loss of gold would be detrimental to our financial

(b)

604mit*m

4Q4:14.j.t..

The grantors of the

redj.t to be ent'tled, aftet

the first renewal, to 44Laa.F4 payment
in part, in New York exchange.

in whole or

Such dollar bal-

ances, however, to be used only in the purchase
of American products.




November 2, 1914.

Sir leorSe

atoll ZBlackett,

liepresoutatives of the Chancellor of the British ,sehequer
accredited to the nencr-_ble the sorotary of the Troseqry

of te Qnited
leatlemee%

a canters...we

in /.sishington, convened by the !qmorable

Nekolco, l'iecretary of the rreN18177 Of the ;3111ted Antes,

which 'ate attended by the members or the ?ederal fieterve i.ioard of the

United Astes, and representatives of ban1cing intereste of this country,
tho undersiGned sere nrrointed a Committee, renreeentin6 tho banking

Interests, to confer sltl you IU order that, aftor exehancing

ate

to final:vial conditions in 4ag1and and. the United ;'Astes precipitated

by the ver in Ilurope, thoy

onbmit to you memoranda outlining the

conditions discuesed, ar0 possibly consier stuA submit to you, rer
transmission to Ingland, such proposals as, in our jA44.444, would be

to the mutual ad'untsge of the business interests of both Countries.
Based upon the interchange of viva, at the reoimt conference,
awl upon fsets thet 1-eve developed In recant conferencos in 10. York

sad 110110ere, sM van *nr general knevledge of the local situation,
combinod volt11 information in our possevelon roger:Aug tho eitution in

AWAnd, so submit the followin explsnatory !moorlands.

Decaus* of

the inherent economic difrorences between ktglan-6.'s position

40 that

of the Aited fAntee, 4n4 the, differtww betrem banking opqms
bankinc mnthods in your rg,untry and

'And

.1.rs, this mimOralftri LP asoestmrily

elaborate, but it /mill, w5 true, nffori you a full emprehonelon or Oe
situation.
.3

sh

21,,r




-2A etsterkerat of th.0 position of the Nee YOrk banks ou

.117

August 1st, and thereafter, of the reasons 110.7 It was
dm (IRMA desirable for the, tertIrs to issue Clearing Komi"

certificates., and t.':o ariply tor '1.drich..freelon4 enTrency;
Lae ltacitnii, a stat...ettelit ,a or 'WepASt

of thS raelltMre )f

1- St

tilia Clearing lonso ,ssoci*tipn.

st,,terient of oold aiint made prior to t. irith
of August inpnyreent of obils/.tiona,

estimate of the

probable additional inde.litedn.ess of .,;.,arican etere!7ante,

bunks, 40 corporations to l'-, tirope on or about September
12thlg....st5 and a. et.20,ene.nt of ths ersentre s esport ttalnallter

far Auwat, 6epteriber,and '..,ctober (estimnted) 1914.
A statement expll

1.: he rf.-4tIsorts viy

tt1mnt. of

intornationsi 4%1w:toes necess4rily ft.11.0 upon the beaks of

lel York ity an-1, not of the country at large, arta itiv
ookeeing of the Ara York City U.NZIke. thronch depletion Of

goi'3. resrvls, i
o f conf I dono

rions.

le reflected at on

In laeit

f4n_ei curtailment of credit throuetout tt 0

Otoolltry,

_Ile

A statement respectinz the awn State co roo01 to gl,asrant ere
the psyriont of about 47-8010,11,00 of

of no* York `-:ItY,

London (and

to met the debt
ria) up to Jbreaary

1, 191.5.

ft tAteront or the necessity for and t!le creation of the

ao-oalled 'Gold Pend.'" tho dirrieulties =dor
completed,

it

ih it ass

method of opelPation, the expeneom thereof, e1(44

the risk. of loss incurred by the p.ertielpszte;

incidanta1,




143.9m. zgksh

a neneranAum with revard to th-J!,- prieo paid ky 1;1'4' Amit of

:leeti for mmeriaan 4ing1ee delivered at '4tinna, mai ofartsla

.:Alons on alqcb tbe -.0o1d Ned Oammittear &Asir's iaforwstion0

havink; to do with the -rice allowed V .11/# 4q1k of ',:4:And

for Vgai delivered in Melee
A, $t.terant of to objeet And t:01 terms and conditions of
the 96-4111.ed 'Cotton Loma ?ool or 434,000,0:0. and of Vle

thn cettalllisplind Its movessat to 4102*Mot IS

rinovoed, with eartAn espostlons.
A statement In row400t or the Pederel Were, Boak of 5:se

York one In coarep of orioultetios, ssA Its boarinc on the

teeter 114p dIresseles.
A ebetemest in respo'zt of

t

possible credit of 1620010,003,

Owl leneIttoe'e ivinlon in rovird thereto, an0 a aucotetad

plea Atoll It be adopted at a las.,

let*.

Thee* Okatements Sr@ sobmitted for WSWOrVIOn and disondistv-

efal ern pot rerieri for the inforwel,ion of

th

nrre4,e4 an cwmts-

sloe of t114' belftf and opinion of the ;ocvdttee.
At MOO COOsTs1 aonferene, betimes thollonorobli the 6beerstery

of tole Trogsqry, und ttto Anima '4serwe Ucayali, end 111A,A Pali dellnittee

reprotemttne thg7 beeksre of to Oaltod. Asti*, Itt which thie OOMMittee

Iva avnoleed, with t!,*, infnmetion then at bead, it woo ospestqd that
this Allimittne, sfer eomfmmenee

yam, sulk Serefol ensiess or title

flnanA.,1 oltsAlons In Wien. end ts t.,he United Metes,
eomo specific propc,e0a
;T'ov,wimmont, etr or 14/1.

taw*

sobmIt for ttte constailr Ion of $210

financial intorsts in Angl-nd.

44th the is York Aty 4oid 4aCiloste au,_ the i4o14 Pool Conetttw




ae0r0,_ 41e

-4

fmnds neerelestine 4:140,000,000 (onlo a seen seoten of ehlab has as yet
boon evoiled of), end with the completion of the JOtton Pool Loan

Oates All in this e,,untry, And vith the elpeeted eerly coeclusion
of arrengeeents to reopen the tele Tore Ootton IsObeeee, with full ere-

toction to its members es to existine contrecta, end with the arreneenente
de by the lielith eevecneent to diseount ere-uorstorium ecoepteaces of
Walsh benhe end aceeetine

ittes, and to postpone prl*moratorlum liablii-

tion to post-moreterinm booteeee, an the resalteut Aeoilittes oiTered

for now occeptence ta ifl:leeedo* this 'eoemittee La of the opinion
that the only adeitional step neeeseary at the preceat time to sCluse,
the internationel comeeroisa eitmation and enable beakers, eorporations,
end besineese firms of INIr United 4tota0 to meet 0411e:et-ions as they mature

St noemel retee or exchange, Is en ueoerstenftlee that the free ourohoel
Ø f !arricee cotton by leglieh erineern ane merchens shall be eneourseed
by the honkere end governfeeee auteeritiee or . Ifitelerel, sue ehet erreegeeents
mhOuld be premptlei msee to epee the neeel dennelic for 341'440'4 eesinat

gotten or for the elecount of cotton aeceptance bills.
The Catten 'i:.oan Poet if eatimeted to provide fund* to enable the

ba),

rvt merehents of the dermh to cerry ever four million bales of

ootton until Febreary 1 1916.

The boa werert opinions estimete the

EMPOM ovi, the aorta-mention at not ovor five million bales. "'hie Committee

In o" tb0 opinion that the present Toe eriee, beint lonsilernblo under the
cost of production, rill tend to luduce ootton marabout* and spinners of
merioe aee 'unix) to bey eozerchat In OXOWNI of their meads, am. tIlat this

tadneement will reselt in the ebeorption of considerably rum ootton then
the amount gomerally astimatd.
So sapar

atAtm.

-

be

4

e 1a regard to he internationsl




York or :;...onclintok

security rAarlitets, or to Cis* 0I:waine,-. of the
':bx01,15agea,

Vleatfturee above enumerated se bellfrifsz ors a-,:o.u;ste sod

frviatuany oorreet t*". int ;oat tonal. CW.:PrAC. re 1. s1 ituat Ian, bat would
of seourit les bo
bo ant irc. :14 taadefluete should any corusiiierbio Volume
V)rown upon tiMs market on the opening of Vie 60-0 York 3tock ?msYnfin,ou
-Vtprefore, th,", nortoterots2 situation haat boon .adjooted,

Us/trine on the °netting
eoto,ton6sa have turned in our favor, arty .7.1coussi. on

nn4. uorestr)cted, mirkat for
or ',NI, SON York ;Itock '''ausb1:144,10 to a fres
..,Tterittert yecuritios ovizuki

brow' nou14

pram-tit:we..

Anapeot tally yours,

(Ste6

.eaktA) iir11-471A)

/304
a),

rrInAei

)7,itta.




,t aonforonces of Now York hmikers hold immediately prior

to the declaration of uur by Ahgland, opinions were nnanimous thnt
tUa bamking pOxiltion in this country mould shortly devolop along

lines sililar to those exporioneed in th, fall of 1907. up to tho
time of 'ales+) conforenoos geld to tha :!4mount of about 130,0(.0,000

bad bean azTerted from the eountry and it vas fearei that, in ad,i1-

tion to the contraction of redit recultin from this large loso of
zola resorvos, a further and Larger contraction z1d ho impOsed 4010
the DOW York hs:Mks by roaeon of the withdrawal Of funds Wif bubo

throucbout the country Ato 441 bo inopired tbrough tow* to

otrengthen their ponition y incteeing their resorves.

In 1907,

after the oriels of the peal° had passed (on December end), the reports
of the Nationol %inks to he Comptroller of the Currency inOloatod

that,evon at that 'time, country Laukr, as dintiguiAed from the
and CenralJleserve City

osorve City/banks, still hold ONSeos cash roserves of ,11b,000AJO:

sod it meet be borne In mind that thin leaves out of consideration
the accumulation of reaorves doubtless made by about 111,00 aUte
blinks, an to which neuron have not bov.0 compiled.

In order to moot

164, otraln Supomed by this probable development, the New Tor* ClearinE

Noure Asoclation decided to leaue Clearing ECUs.) loan cortificates
for the settloment of cienring balancoe between ehersbore, and the

Secretary of the 7re1sary announced his Intention of issuing Aldrioh.

Th8 kgillAthe rieT.j&




Vreeland notee as authorized by existing law.

"else MoWtUreS

afforded protectien to the :EnzeLs of the City of 3ew York, both

Zetional and Stete, anu enubled them to retain about ;,240,000,000

goLi reserves ehloh they bele at thut times
Of those gola reeerves, *00,000,000 wae tiort1- pledged or

the pent of the debt of the City of row 'fork, and, of that amount,
about 60,000,000 Is etill to be ferniehed, less slob amount as in

furnlehed in sechange.

ee about 020,000,000 already paid, el5 000,000

has boon by ehipment of gold and :,.6,0e0,000 by purellase of (=hence.
Of the 100$0e0,000 contributed to the gold pool,
eua elseged by the banes of 17ew York City, of which

5,000,000

.1,:4io,ouo has now

been called. 4Z6,260,000 hkix, therefore been tuame to date, leaving

95,750,000 still to be furnished exIt of the present Nee York City bulk
reservos.

At the preeent tiers the Cleerine Rouse banks show a SUal

alteatia oalb reeerve.

When those oblieetions were anterod into, the

Sew York bunko were from 415,000,000 to A:CAW:1,000 under their legal

reserve.
When the Federal pee- rye 'arnIc of New York is organized, it

Ira estimated that a total of about :120,000,000 will be eithdrawn froa
3ow York City nUtIOnal B44g0 to aeee capital eee reserve payments both.

for terAr own eceoUnts end for those of their oat-oteteen correspendents.
Simulteneeuely, the reserve requirmeDuts will be reduced from 25' to

32%, and it in eltheeted that, afterreaking these payments of
4104000,000, the reduction of reserve requiresonte will Leave excess
reserves in thy vaults of the National Banks of Now York City aggregeting

Cf




about 00,000,000. If thil osiou.;.stion Is correct, we iztv:t Oonaider
the result or the oompletiAl Of the three cr,._ rationi, mforrod to,

4, the sithdrawul Or thf.., entire amount oaold 10410b way be celled
for on soomult ty the City of Vow Turk ema the 4e3.1 Fund, and the
ympasnU and reserve reduction resultinc from the o4Ani,sation of
the rem/ma Reserve Belo*.

totillpegaMmts to bo made, actreg4tirc

about 493,760,000, will be partially*ffset by the ;60.1,000,000 gained

In reserves, duo to reduction of reserve requiromnts, leavinc tho
Now York institutions pocAbly ,:35,000,000 to '40,0U0,000 below the

ro4uired Legal. reserve.

he amount of deficiency in reserve mrq by

tho terms of the redaral Meserve Act, N) :ruzithq)r ofrast, it menbor tUra0

are alieltod

d avnil or the privillice Ot rediseecntink: wootaereicU

pas..ier.,, at the %Imo of opening of tho 7eder4 30sorve 3unice

Statement of the Members of the New York Clearing House -Association
From Reports as required under Article III of the Constitution.

For Week ending Saturday, August 1, 1914.
qos.

'CAPITAL

MEMBERS.

$2,000,000
2,050,000
2,000,000
6,000,0oo
2,500,000

I Bank of New York N. B. A
2 Bank of the Manhattan Co
3 Merchants' National Bank

4 Mech. & Metals Nat. Bank

Bank of America
8 National City Bank
12 Chemical National Bank
13 Merchants' Exch. Nat. Bank
Is Nat. Butchers & Drovers Bk
17 Greenwich Bank
21 American Exch. Nat. Bank
23 National Bank of Commerce
28 Pacific Bank
30 Chatham & Phenix Nat'l Bk
31 People's Bank
33 Hanover National Bank
36 Citizen's Central Nat. Bank
42 Market & Fulton Nat. Bank
44 Metropolitan Bank
45 Corn Exchange Bank
53 Importers & Traders' Nat. Bk
54 National Park Bank
59 East River National Bank
63 Second National Bank
6

65 First National Bank
67 Irving National Bank
70 Bowery Bank

N. Y. County Nat. Bank
72 German-American Bank
71

74 Chase National Bank
76 Fifth Avenue Bank
77 German Exchange Bank
78 Germania Bank
8o Lincoln National Bank
81

*NET PROFITS

Garfield National Bank

Fifth National Bank
83 Bank of the Metropolis
84 West Side Bank
85 Seaboard National Bank
91 Liberty National Bank
92 N. Y. Produce Exch. Bank
96 State Bank
97 Security Bank
99 Coal and Iron Nat'l Bank
100 Union Exch. National Bank
I18 Nassau Nat'l Bk., Brooklyn
82

102 Brooklyn Trust Co

103 Bankers Trust Co
104 U. S. Mortgage & Trust Co
105 Astor Trust Co
106 Title Guarantee & Trust Co
107 Guaranty Trust Co
108 Fidelity Trust Co

110 Lawyers Title Ins. & T. Co
"I Columbia-Knickerbocker T. Co
113 Peoples Trust Co
114 New York Trust Co
115 Franklin Trust Co

"6 Lincoln Trust Co

117 Metropolitan Trust Co
119 Broadway Trust Co

$4,346,800
4,719,900
2,097,700
8,874,600
6,186,600

LOANS AND
DISCOUNTS

$22,317,000
36,130,000
20,489,000
80,745,000
26,538,000

LEGAL
TENDERS

SPECIE

Average.
verage.

Average

On Deposit with
Clearing }louse

Member. carrying

25% Cnah Reserve

$1,218,000
1,541,000
1,457,000
5,882,000
2,749,000

$4,224,000
9,482,000
4,254,000
15,416,000
5,052,000

LEGAL
NET DEPOSITS

CIRCULATION

$20,668,000
41,900,000
21,158,000
85,528,000
26,499,000

$772,000

Average

42 089,000
4,357,000
2,115,000
516,000
2,520,000

13,252,000
2,218,000
205,000
57,000
205,000

196,234,000
24,790,000
8,858,000
2,171,000
10,822,000

5,000,000
25,000,000
500,000
2,250,000
200,000

4,693,300
16,690,600
1,009,800
5,357,900
435,800

47,846,000
140,272,000
4,871,000
25,247,000
1,967,000

10,217,000
21,903,000
728,000
3,696,000
409,000

1,552,000
6,231,000
840,000
1,579,000
148,000

47,890,000
117,971,000
4,927,000
21,852,000
2,313,000

3,883,000.
7,912,000

21
23

1,173,000

28
30
31

3,000,000
2,550,000
1,000,000
2,000,000
3,500,000

15,054,800
2,371,200
1,948,100
1,779,400
6,916,000

77,634,000
22,339,000
9,221,000
11,717,000
63,823,000

21,082,000
5,111,000
1,498,000
i,603,000
15,850,000

2,582,000
611,000
984,000
312,000
3,269,000

88,412,000
21,819,000
9,257,000
11,595,000
75,814,000

50,000
1,531,000
56,000

1,500,000
5,000,000
250,000
1,000,000
10,000,000

7,676,000
14,344,700
65,200
2,870,500
23,177,700

26,591,000
90,034,000
1,561,000
13,867,000
115 527,000

3,759,000
19,503,000
452,000
3,102,000
25,158,000

2,387,000
2,572,000
107,000
123,000
2,159,000

24,077,000
91,241,000
1,766,000
12,625,000
106,457,000

50,000
3,497,000

4,000,000
250,000
500,000
750,000
5,000,000

3,468,600
789,000
1,916,800
706,200
9,645,700

45,247,000
3,163,000
8,667,000
4.215,000
102,020,000

9,082,000
786,000
1,536,000
979,000
23,462,000

3,063,000
71,000
768,000
212,000
5,460.000

48,208,000
3,403,000
9,127,000
4,180,000
115,201,000

1,579,000

100,000
200,000
200.000
2,000,000
1,000,000

2,091,600
803,800
7.000,300
5,789,800
1,290,100

12,928,000
3,219 000
4,901,000
15,027,000
9,293,000

2,610,000
509,000
1,137,000
2,963,000
2,332,00c

062,000
367,000
253,000
1,169,000
142,000

14,425,000
3,481,000
5,582,000
15,522,000
9,586,000

250,000
1,000,000
200,000
1,000,000
5,000,000

505,000
2,089,900

3,998,000
12,968,000
3,761,000
25,099,000
24,400,000

779,000
2,120,000
706,000
5,950,00C
5,218,00C

244,000

4,241,000
12,784,000
4,752,000
29,267,000
26,680,000

2,271,00C
5,891,00C
1,88o,00c
1,083,000
2,145,00C

1,430,00c

666,000
309,000
1,276,000
618,000
350,000
180,000
939,000
375,000
785,000
I08,000
490,000

75,9,700

2,598,500
2,844,800

926,Q00

520,000
1,752,000
1,433,000

1,000,000
$1,500,000
1,000,000
1,000,000
1,000,000
1,000,000

345,500
604,800
1,008,000
1,121,700

9,317,000
19,134,000
10,832,000
6,981,000
10,017,000
7,927,000

1,500,000
50,000,000
2,000,000
1,250,000
5,000,000

3,706,700
13,065,500
4,211,400
1,201,300
11,614,000

26,451,000
126,045,000
36,838,000
21,422,000
33,045,000

2,193,00C
14,824,00c
3,432,00C
2,097,00C
2,618,00c

10,000,000
1,000,000
4,000,000
2,000,000
1,000,000

21,222,100
5,307,900
5,388,900
7,348,300
1,566,800

187,702,000
7,534,000
55,877,000
48,628,000
16,360,000

18,729,000
842.000
1,218,000
5,501,000
1,839,000

1,140,000

3,000,000
1,000,000
5,000,000
2,000,000
1,500,000

11,545,300
5,565,500
555,700
5,892,600
848,500

45,951,000

928,300
T.750,700

10, 708, 000

9,901,000
29,899,000
14,129,000

.......

Decrease

Decrease

Decrease

Cash Reserve ,Required, (25%) $363,644,500

(i5%)

72,186,450

$435,830,950

85
91

394,000
394,000
267,000

92
96
97
99
100

118,

3,677,000

21,394,000

1t3

ir6

"7
119

41,578,000

41,578,000

Decrease
163,000

Decrease, $13,430,250

Decrease,

1,798,450

Excess, $ 8,603,050

272,752,000
60,537,000

71,646,000
7,045 000

Totals, all members

2,058,755,000

332,889,000

78,691,000

Decrease

Decrease
53,065,000

'3,234,000

Cash Reserve Required, (25%) $355,687,250
73,318,500

$429,005,750

Trust Companies' Reserves with Clearing House Members, $56,547,000

Decrease

Decrease

106

Deficit,

1,423,407,000
635,348,000




346,000
495,000

Excess, $10,401,500

Actual figures this morning:
Totals, Nat. and State Banks
Trust Companies
"

August i, 1914,

82
83
84

3,094,550

Decrease, $16,524,800

Decrease, $3,677,000

Trust Companies' Reserves with Clearing House Members, $61,095,000

(15%)

1,454,578,000

451,000

21,692,000

$444,434,000

Clearings this Day

245,000

114

1,935,821,000

$1,838,183,016.11
1,588,913,808.47
296,815,972.90

81

29,554,000
7,541,000
8,669,000
20,436,000
53,940,000

61,095,000

July 25, 1914,

877,000
343,000

76
77
78
8o

3,338,000
1,042,000
1,016,000
2,223,000
1,642,000

85,054,000

"

72
74

527,000
129,000
223,000
250,000
692,000

363,380,000

Clearings for Week ending August 1, 1914,

446,000

3,946,000
997,000
1,049,000
2,746,000
1,384,000

2,056,190;000

$411,580,000

71

613,000
280,000
376,000

296,930,800

Cash Reserve in Vault, $344,398,000
,,
67, 182,000
Trust Co's: "

70

197,000

17,988,000
981,000
1,388,000
4,448,000
2,252,000

4.6,000

175,300,000

Banks

67

107
108
110

Totals, all members

1,582,000

65

141,517,000
5,900,000
/1,883,000
38, 688,000
15,156,000

481,243,000

Increase

49,000

669,000
4,936,000

53
54
59
63

102
103
104
105

61, 095, 000

Banks : Cash Reserve in Vault, $374,046,000
"
Trust Co's : "
70,388,000

42

20,788,000
102,559,000
28,179,000
15,590,000
20,843,000

6,973,000

2,286,000

36

2,696,000
11,028;000
7,156,000
1,576,000
2,322,000

74,081,000

17 State, June :to, 1914
15 Trust Co's, June 30, 1914.
As of July 18, 1914.

33

45

10,795,000
12,753,000
6,987,000
10,125,000
6,720,000

12
13
15
17

44

24, I 15,000

63,415,000

.4

6

198,630,000
28,644,000
8,954,000
1,973,000
9,649,000

299,965,000

.4

3
.4

32,916,900
7,755,000
761,800
111,100
1,070,100

173,907,700
32,382,600 }1,425,7oo,o00
90,640,500
630,490,000

Aggregate

2

25,000,000
3,000,000
1,000,000
300,000
500,000

112,600,000
16,450,000
46,250,000

Aggregate

1,888,000
4,930,000

NOS.

3,679,000
397,000
475,000
48,000

Totals, National Banks
State Banks
"
"
Trust Companies
*As per official reports
29 National Tune ,O, 1914

Average

56,547,000

1,422,749,000
488,790,000

41,737,000

56,547,000

1,911,539,000

41,737,000

Decrease
10,692,000

Decrease
46,776,000

Increase
3,000

Deficit, $11,289,250

Decrease,

$35,004,250

Deficit,

Decrease,

8,595,250

6,136,500

Deficit, $17,425,750

Decrease,

$43,599,500

Decrease, $10,692,000

Balances for Week ending August I, 1914,
"
July 25, 1914,
Balances this Day
August I, 1914,

$109,601,8(0 65
95,095,253.82
23,383,391.37

OO,106D:




-To2!7.114110173 -a OR

AU4UST

41 exact statement of the Shipments of oold durin6 the first
aeven months or 1914, ond of itc destinstion, oculd reqoive consider-

able inveatigation, Alio+ tie does not permit.

In generel, it my be

eold that in that period the bauXs of the inty of Kee York exported, in
round figures, 4130,0O0,000 of gold, largely in tooles, the principal

=oust havino been taken by the rank of France, and, Wireotly, by
the Re/ohs:bank.

The inducements offered by thooe institutions to

attract gold in settlement of international balances uore

rstood

In this oountry to hove deprived the Bank of Ingland of the opportunity

afforded at that A.me to strengthen its oold holdings and undoubtedly

was oocaoioned by the willingness of the Inglish mart to continue to
eotend accomoodation to its oustomare in the United Itats in the
000ustormd volume.

It in possible that the occorrences of the past

few months in internationol exohonge may be exolainedoby the fact thot

rrace and 0ermany.did not renew current American indebtednees as freely

as the laglish market did.

Investigation condusted by 6. speoiol com-

mittee opointed at the regnant of the 'oederal Reserve Board in the lattelo
part of September disclosed the foot that, 3$1. of September 12tb, the total

escertoinable current interomtional debt maturing beteen that dote and
January l, 1916, amoonted to about 4460,000,000.

The itens invootigated

included bank hal noes, maturing seourities, Interest and dividend

obligotions, commercial credits, finance bills, an indebteaoess for

securities sold. As to some of these accounte, eetimateo were neaesoory,
end It is recognised that information of this coaraoter is loaocuroto
II




Albas*A0 44.iaitsiMe-4
sad liable to ba misleading. The offset accounts were shown to be akon*
460,01Y4000, leavinG the net ladebtednote et of that Antio sestnrina-

before January 1St, in round fit,ures, 0040.:0,003 due to Ingland, Pmnce,
lemony, Consd, and, to some extent, other lampoon countries.

The

amounts maturing were about eqwilly proportioned over the fall period

of the yo.r.

It should bo unierstood tiv,t i conelfutrablo portion of the

lloerican indebtedness, 10 the London mrket, oaturine, in the perioti betv-

Oetcher lot and Jounnry 1st, was created in anticipation of the purcheee
of ootton bills, which have alwa:0 been conslOored cash in the J-,crOola
markot.

Ao Porther dkta has beon obt, toed in connection with the present

amount of the current intl.mational indeaednest, hiw opinions asked of
4ankers conversant with this matter sonid)probably juOtify the belief
that over ono-b41f or thq not indobtodnees bze been patd. at the present

tine.
The foreign trade, etclusive of gold and silver ol1pmenta, was
1,011,00 adverse to the United State* in Augnst, )17,00,000 in its
favor in VAptomber, an] will probab

lotober.

be

4c

54,000,009

in it favor for

%est year, 6n3 In 1912, for these mu:ths, -.be balancers in

raIDT of this United Antes wore,
413,0N,000

460,000,000

Aanber

64,000,000

47,000,000

ober

77,000,090

139,00n,000

TY-PPA




2-

'"*"

lAXL:ZA210

0? N44

"";:113

11*Y.

"

The iitoroit1onz1 exchanges reflected fears of the affect of
outbreak of

by the Latter part of July, ad even before August

ard, there dere1ope0 in America rin inaiatent deTazd for exchange to meet

maturinp obligations to 'Swope.

The doolaration of wnr, and the

suss:anal:on of shim-Asa facilittee, cauee0. such an totorruption of the
Azmricen export trade as to dangerously reduce the supply of exchange.
The following st-toment lz msd: At aornc. length in order that the
position taken by the New York banks with respect to gold oxyorts may

be better underotood.
About 604 of the foreign c mmorce or the Atlantic seaboard
passes through the Part of NOW York.

It to the largest manu!

turinn

and bankinp zerter in the U Ate notes, and is the market where the

quotation foP foreign exchange la made, are where forel9u bills are
annombled for remittance to Europe for collection or discoutt,

nem, s

no city in the ilnite Antes which can make a quotation for e
without a quotation free Bow York.

of the bankso

upon tho reserves

ew York, when the .mold movement is adverse in both the

foreign and .?tii
JOYUi

7he burden impoesoll

4as at tiN93 under our old bark1n7 system,

to be too heavy fo- the banks to carry without employin emergency

relief eurea.

In 1O7 the only such measure available 'ova to issue

clearing Lone loan certificates for settliw. b:1

between megbors,

:ho ottlemontoof intornatIonol.
,A
tell In GfOld. etc.




-2o

towvor, arforded no roller to t

root of tOe .,7oroltrod.

The Xew

York %was in 1N7 suspeOde fr4a ablimat of ourr0000 to thoir correspondlots, &Ito the immediate moult was a Mr 4.31m01 prOMitft of Z.-1M; on
both corrouoo :!szsd goid.

rhio geor the Oldriob-Vrooload

romy Act petrol tod the

oromot uso of an omergonoy currency which ea* aceoptable to the poop

tho oovntro.

Within af

days altar Auoust

rd, the Xow YorW banOo

wore able to freely opOly their corrospondonts with. corrency and at re
time einoe that date has there been a premium on oithor cold or corroney

in this ocuotry nor, In. fact, as :goo or exebooge in otor parts of
the co rtry tudicoted distroot of the abilIt7 or .0* ZOw Fork hanks to

prouptlo root tor ObligWome to their corresIondonts. This ourroney
11,0t bet.M1 available for tho Apettlegole or into,!nstional balances, ood. it
hovino. boon Impoostblo for the booOs to *hip rold to ,:t7rope, London

coMooro roocboo s rramium oouivolont to 4 voro consi4oroble predt
goId.

on

Ead this situutluo occurrod In our 6onloAtSe oxel. vas, d1itrut

of the ability of the lieW' 'fork bognxs to moot %bar comoltmoots and the

demands of their dopooitors mpht hovo oolsyn and vith seriouo conoeg0000es.

london euhanoo, oftor tho first vi loot rill° to a mosil at of

oovon dollaro for aoblo transfors, gradually reac'ed until a fairly level
orioo Mat stublishela, in the nolghbortood of riTo

*liars to the oonnd,

with fluctuations within a rolou of about five cooto oltOor woy. In
norrel times oxohalkos at this level would hove cousoOg large oroort of
gold, the bordoo of which wonld loovo rollen not onio uoon the honks of
ratively foe Largo bonlem which

Zow loorlt City, but indeed i1O

draw osoonoc or whloh earry the aoo lots or :rivoto firos whi(Al draw

oichanre, bt

io

o not themoolvos carry gold renerveo. At the
14

1b4Le:SAAIVIAILAIAMI0?TatIPWa

Delemees_in Golds_etc.




segeeetion or the Apeteral Meeerve Ilmrd, a committee or bunkers formulated

a plan for assembling $1004000,0e0 of geld far sepoTt, in order to make
exabange and to thereby distribute Cie bur&m

inetitetions ell over.
the Vetted At-us instead oC Inestar. It upon a fey o' the bas42 of Veer
Ye,k

on

The ban,'s of :reev Yore :ity pledevel 445,000,0)0 of the aeon-t.

This 0.0o,aw.ty)o was in addl_lon to the 4t0,, 0,000 plortged by the banks of
the
New rerk for tho pee-rent of II** fork City obliMtiOns vatmaring!

tn %urope during eel blame of this :mar.

The necessity for purentm!:

this course, insteut of renewing, n free movement of paid, arieos;

mar:prom the f-ot that the eeld reserves oT the Unttee etztos
are etattered among abiet timente-five thousand national and

state banking institutions;
Prom the fact ttat thane banks in Am York whieb might ship

cold eeuld bo aleb e to recoup their geld reserves by ealling
loens; and,
'Zrin4

Prom the faet that it le impossible for a benk etieh parte
elth 5t4 meld for esport to recatv itvelf throueh the exchange*
fror$ other berem, and because ,eo peoeeees er ezias or eeehaefe,

as evil aa of ioees paid, are payahIe in Xse York feede tlerourb
t:ee Aearine :eulles and have since Aaguat lot brave 0041414

either tu eleartne Votiee leen certificate* or Aldrich-Treelend
notes.

LT Milt




The city of :few York has for 7Aany yoars boon autho47e4,by

42i* terac of its lharto, to borrow money In asticipation of the pay-

aunt of taxos..

with the growth of the City, and the enormous inorease

in the tax lomy, tho aeunts of th ao borrowin6e havo ineroased to

snob.= extent that at ti cea the Cit la indebted to the market on
short loans to the extent of W10,000,000, vhioh loans are ordinarily

liquidated at the time taxes are paid in the f141, and, In recent yoars,

in both the spring and fall, au te tex levy is nou divided into semiThe movenv,74, of thc cotton orop in the fall of the

annual payments.

rImm ordinarily furnishes auoh a lar.e volume of exohangt at that
season that borrowers have been able to wunt with ***gleanable oartainty

Upon lower rates In the fall tkrim in the spring, and advantuee ham been
taivon (yr that foot not oy:Ily- by the City of :Tetr York but V other unniel-

palitica utich make atilar loans to borrow large suma of money tu the
Lorolon m4rat.

04 August rd the City of N3vi York had so borrosed 4-

total of 01,009,0Q0, a small portion payable in Faris, but the Greater
part in London.

The breakdown or international sT,ohange imposed

on

the City of Vow York the n000esIty of mooting this large obligation by

the onport of gold.

::40 City ourrioa its accounts in a large number

of luatitutLims, both natlam4 and state, boated in the City of
2ow York, and, under orolnary oiroomitanoa, woult . have bad no difflmalty




In obteinine gold in largo amounts from theee thtittikflP.

The eon-

ditiono *elating early in Nueust, heeevr, eeee it impossible for tho
City's Sentare te furnish the emeantof gold required, and, bad the City
been oblieed to 7earetase, exatuce at tee ratee iexiontly prevailing,
t'he loss meld beim been onerous

It was therefore determined by the

banters who undertoek the solution o; ULU prob/em to asik all the benee
in

the City to contribute to a rend of gold mounting to about

80,000,000, in proportien to the amouet of their reepective gold
eeldings.

The contrects outered into btiia the City, the con-

tributing banks, ene the eemeeert% of the trewection J.

. Ilerean

COmeeny. und Wu. Loeb ge Company) provided for the eule of 400,0e0,000

of obligations of the City

turine in eao, teo, ace. three years.

The

beCks which underwrets the isemse nnortooc to furnish the Manaeere,

if required to to so, elehty per oent4 of the meweeta of their subooriptious to the eyndicate in cold, having the option, however, of

fernizeline sterlinc exchange in place of gold at the rete of
a pined.

'e4.90

The'pructimelly unanimous response of the banks 01' the city

to the eel/ nude upon them, an well as the universel approval of the

trensection, leelcates thet the bankers were oorroct In their belief

that a posteenoseret or default in tba Nowt of this indebtedness of
the AV 00Uld not be contempleted, aaa tbet the conseveneoe would be

so aerious as to justify to pledge of gold involved.

ehilo it is

uow reeeemieed tbet Lbe City °Quid /save exteand a larro part of thin,
indebtedneea in esneon Ar the offer of :in. ilvale of nee notes payabie

London in sterling, tho city authoritiee neeerteclese felt, no doebt

'cno Now ',"or4 Oity Ddit.




influenced by the pro:flare of pu'ollo opinion, that it war; to tho

City's advantage to extinguishhe debt at once, and avoid tho
possibility of loss at a lator maturity, rAth r than to advance its
9coitIon and to tako the °bum of bein tibia to

t wad oix months

or a your later. The contract so made 1:5, tho Osnizo of ;ow York
lacet ono-third of their entire gOld holdings under coatzact for
sYport, at least to tho axtcnt that exchange could not be furnldled.

Attentiwat

ero aul_el to the fact that the priviloge of furnishing

exchange in place of gold 2srmit,1 Any comtributor to this fund to xvold

the loss at gold by. parehusiais; =bingo and, thoreforoolontributors
to this fund are, to some extent, annpetltors In the 015,4010 for au
parohase 01 sterlinc osohanign.




3totomoot "'third" lArgelv explains the neoesetty for providinc s
Dead Of gold by the method adopted, -end It is the bolter of theommittee,

that the socaosi or the plan 4f rords videm.co of the willinmess and
Inte-,tion of the ilanke of the. Onite-, Antes to furnish the swans to tht..ftir
:matemore for 0.7 uq: foreign indebtedness

"Oh tø ba:nke of :ow TorX

niono without endanper int th4 a Vitiat ion, were utfible to Ix'ovido.
Voluntary contributions wore obtalne rrom national erd state

bonlui in ell central reserve and reserve nit lee (52 In 1110bor), those

oit0 es, nodor tc lea being roquirod to hold. 25; and 12b: cosh reserves
relpoct Ivolv, eks apalast Cr, in other ott les.

.:ontributions of rold to

tbe fund wore mei ve6 from 1,424 dM'orett banks, locatel Ifs all part
of the United. Antes. An amount in excene of 4100,0,00 wns prompt37
pledged th

71h 'VA co:operation of the 3ecreter7 or the .?roneury awl the

ftderal Y- osorvo Board.

:iendintrtepagrent of the rim,: cAll of

425,000,0004 nine New York lost itntione advanced 43000,CIU0 in cold

Fr shipsorct to Ottawa. ?hie enabled Vise committoe to pramptl7 root
the nrent domed for evollawre, which was A fq11tIr at about $5.0g.
Zho

ommIttes ,osires to call tteOtion to tte ft tbra the

gold Pend was not creato41 for the purpose of makinr o pro,fit, lint ratter
to met ar emergenoy end thereby exert on influents in bt'ingine 411mAt a

decline In tLe rote of oxvhaego. The poliny of the 'o.rmittoe has not been

to sell exchange freely. rhis would. carted nly hove resultoitl to thte
twoumulation or inoxs:4100 by debtors who doelre to insure ths 'protection

Of fetre

oblightions, and, onfortwv4telv, mtpilt also have

Dae..:14224pe0

Oole eund

reeulte ill releasing. oxebenge to the contributors to tee Nee provided to
meet the obliettlens of the Cite of Mew Tea. It was rather the police
of tho Comettee to use the need to prevent ae undue edvance in exchange

-etea, bet, nevertheless, to peemit rattle to folloe Miner nereel eleztu_time and thereby induce, Aserioen obligeme to arranew for rseveale in

tbs expeetation that the creation of exciange followlne m reatoratiot of
etport trade would avoid the eeeeeeite of extortiue ane consieerable
eortion of tee Fold fund.

Thie :emeittee, of which two eenbers are alec

eenbera of the ecold ?end Oomnittee, Is

on thee that the policy adoeted

wee a ',tee one, and that the pirrelea of the eeld rued _have elreade been
ereole accomplished.

After ellowlee ror eertain large payments meee

for sceseet of the United etetes Gevernment, for which the Goverment
reimbursed the Gold Teed Committee in leod, the total aeoumt or the

fund has been reduced. by not over one millioe ponds, mut Is substan-

tially intact.
lteji jpoz& jox..

Xisunderstendlue Is lieble to eriee with regard to the ultieete
profit and lose aocount of the eold eued eommittes, ant we are ieformed that

the attitude of the Seek of 'Zeeland later referred to 1140 possibly due to

the belief that laree profits will license to the Gold eond centribetors.
Consideration of the folloolne will, we trest, make clear the Gold 7-ned
Committee's eositiont
43"eleIee.




The leral limit of toleranee on American tTeld eole is one-half
Of ems per cent.

lefties fernieshee lay tee eub-Zreesere at New YerX will

rerele show an abrasion eleeedine ono-quarter of one per cont. eerie*
shined from eeotern points, however, eilere eold .:101DS circulate north more

The

100,0 .0.00,9

!und

freely, aloe a /treer percentage, of abrasion. 2be,,oeseittee mat figure on
a loss of Aeogm oneeenarterto three-eihths .por cent. for abrasion.
INT4M=1, I4




110i3-eJ.

The

ru ashed for the purpose of this fttud la taleen out of

back reeerves and held in safe Arposit in Nes fork, and is not heid as a
part of the reserves of the 141e Tork barks.
on to eake payments in instal .mecto of

The contributore era called

25,4.

TM first paement of 25, in

anticipation of wIJIch 40,W0,e,0 wag edveneed be certain :law 'fork bunko,

it made ae 7.,ocon ns the fwad ITE.3 ,:eselAetod, and the eseense of transforrine
this Pued from all parte of the oorntre was raid Ont or the fuad. In order
to arrive at the oost of exehemee, it le also necosear7 to esee allowance
for the interest during trunsmisslon, and 3uring the reriod when the

it ha/ in storage in. BM York, for all the ox7poloaoo or shipeent to cAtees,

as -sell as for abrio;

the

Id beite received he the* Oommittoe at tte

;sze volee, and sold to the lank of 4ne1and at Ito bullion wane.

It is

Imposaiblo to estimate the interest cost involved in abipments which have
not yet been made, hut a culoulation has been made se to th

first shipment,

with ellowunes of tntcrt to lovembor 30th, and It Is found telt Lesion
exchanpe on the basis of this talculation toots the contributors about
4.92i-3/4. -The average price realise,: for exchanee sod to date sill
ellrhtly exceed. 4.95, *rut. after maidne allogeance for 2jf interest allowed

by the London banks, it Is erobabIe thet if the aecouet Ma cleacel ut the
present tins be ellinm exchange aeainst balances now. In Widen, the

result eon/d be a loos to all the eentributore

he

the ^mad.

This /a

octastoned by the deelino In each/sere after the first transfer to Ottawa
was made, tnd before the entire ba,lence was exhausted.
0..t the ti.lo the rud wv,I. created, the aammittoos deatro,2 the

Gold ,

ag-110 .#0.




ocoperatlen of
or other

of '

two points only, pendin 4 distlueslon

of imiortence which oould not 14 then taken up b7

utc,

bettor unnerst47" ding of tle hauls on vt.lot the 3suk

17irstl

rurthasing gold whippez. to Ottawa;

4u rrrement for

2oe:,

and

2erant7 of

X11

Dees

ithont In

t, upon advice

f1t from Nov 'fork' to Ottawa,

GOLDs

?be value or: We grins Of rold In %4.e English sovorelmn in

........aatm..4.
On

040/36646

ounce of American lold coin contains fine gpla or the
Value Of

4046, kt th.e rate of 4.e.66156.

01

wtieh Is the value, expressea in storlinr., of aae oumlo of American

?his la the ezaot
,gles

whltb the Unk of . 4:ingland was puyinr

t prior to tbe outbreak or thl war.

nations were neAo

net price of.,

her deduute, for Amorloan 1141es slappeil to

.. .... ....... .............. .....

Zd.

making tho not price for Naglos dalverod 5n Ott we

It haa boon stated to us that the ra4ection or 5d. was mile
In ordor to oovor the following itomel
(a) 4n allowance for the cost of

thtin
(hi An allowance for the coot of t eneferring arlos from
. 1ttn

Utteen to London.

As to the first
which the 4ank of .Suglend is

inquiry artist' as to Cwther thertce

r ':-Irea by law to pa7 'or bars (770. 94.1

(loos not make allowance for the c:let of colninc- bar Into sovortim

, ftnd

that, tberefore, a ehlwer of Eagles Should not be reouired to rake

%his

4old

71,0




ad4it,onal allowance. which Is already *overed lu fienrinr the equilmlent

of the bullion

uf the gold contained. iu AnOrican Laelos.

As to tho tea.

lten, the question &rises as to liether the Bulk

of Snitinod shoul4 not, if the exec:Lances tum before, the

is shipped to

London, thou allow in %Ls price at willoh. It resells the 7o14 to

M'At,

York,

s. rebate of th chare which it ie co.lected tor the nouveraton of 2,aglae
Into eaveroirtas.

sans question will arise as to Zd. deducted from tiJA,

VICO AilaWed tor 7,. ardard haro.

;old

elo

tft deduction of 54. on
Zagies and Zd, et bars ti not 4ustlfiee. ender tkie circumstances, but a
?he

oo

eloaror ondsretsoding

orzmittost

o

tireasons far these deductiona may cbanre to

tonmIttaLea flee*.

A9 to an arra/woat ('or advances witbout interest, the senet
which was mailx for this ancoerodation at tiv tire of the first shiovnt
grew out of

wmtrency.

Useta-V9 wao oolliap Tabowo five dollary a

4nd tbe Josemittoe desired to 14e In a position to draw ow:b.

st

Once before tho f7e14 'shine zgraid tm receive and aelvbed at Ottrove. an
credits confirmed.

:::"1.10 oozesaity

or hzcomndatiori on t'rt aocennt is

new rasoed.

With exchsoce approachIng the rolut whore geld arporte boom*

unprofitable aad without a bster nndorstezdio? with %be 3onk of 1;tg1on4

us to the 'ate wni,A they will maks on Lalos orportod to nr from OtUwa.
the 3old Pend Lomnitteo will find it imposalblo to TielLe an7 considerable
shipseut of .,11,1d rA ono tt

thout risk of loss on a parttoe of ouch

ahIpTonts.

ne '''_ommittoe desires to bc ia 5 1:ositIon nLero it mny rornist
exc:,nge so

nsU

prof-tablg cower with void, but not to run the




:1100aXli220 9o1d !and

rIsa cw a ra

A

-6-

dt%f,-.1Ine I% the Gazhanea meeet.

p,um:




2_112111.922.1.,

It has /Amu gonsially estimated, and this Committee believes

with reasonable accuracy, that this year's

or on cotton crop will

somoehat exceed 115,000,04) bales, and tbnt the world's reducea oonsumption

of Gotton will leave an
5,000,000 bales.

unntod

balance or tas Angnican procluot of about

4A the con eruo InWashington, it was augLe ted

that the canimum ovedit to finance the ootton crop wed ae required ut
the time when th(anTimamof the crop had boon picked, and the minima

marketed, that is to

about Deoember iot, at which time it was mig*

gootod that a oredit of 300,000,0W stiJit be required.

This does net

take Into aceount two factors in the situation.

virst:

The method of financing the owing and

catherin of tho crop;
lecondt

The difference in price between this ye: r
4114. Lan% year.

14) the suithod of finanoinc the crop, I:, may be goncrally utated t4at

the initial admanees aro made before the, crop is planted.

They are

lar4o1y made to the farmers by merchants and supply houses, and aro

incrinsed an the work on the crop advances, the morebnts taking a lion
on tim rowing am arid borrowinc money from their banks.

the cotton 13 gmtherod, tholast adiseco Is rade.

4y- the time

The mulooting

or the

op through the gin.nin4 and compress compazdes and the cotton factors




Cott,:as

n j,>001.
2

is a process of liquidation, and the problem Oonfrontiw; the 0outh at

tAis season is not that of arranging new credits with which to finance

the cotton erop as a whole, but 1.ther of proviaing a tomporry credit

to be soployed in facilit.Ainc the liquidation or thr,t Portin or the
crop which can be marketed, by enabling bunk to extend or renew the ioans
th43 have already been made, and thereby uszist in finanoing the surplus

'ihich may not be promptly maricated.

This. may be describod as a prooess

of clearing or Shifting loans rather than as a process of creating now

credits.

As to the second point, namely, the price, it is, of course,

evident that with cotton sollinz at 612 cents, those bfInks uhi01 loan
on cotton could car7-y two bales this year against one bale, at twelve

cents, last year.
In order to facilitate the :pr'ooeB. of liquidation,

iisich comp.

templates that 10,000900 bales will be .old and B4O00,000 bales will be

carried, a credit is in cour

of 'ening arranged, amountinz to

AZ5,000,000, to be hAngled by the follooing plan:

4100,0,A,000 of the

advance i. to be:cured by a first lien upon cotton pledged at net
exceeding six opiate a pound, middlih- grad. ;05,000,000 i to be

secured hy a second lion on the pIedgettootton, thi6 portion of the loan
to be provided by the banks of the cotIom growing .t.ates, to %Thom, or
throw% Thom, the loans will be made.

A

fund mon tini; to three

per cant. 0: the amount of the leam made is to be sot astle to oovor
the exi)onses of mana,jino the transaction, ana to igly uni losses incurred.

The fund is to be administered under the direction of a Issenittec
oonsisting of members of the Federal Reserve board, the business,
however, to be condnetea by an operating oommittoo, and, under its




,15

411..

cualheau,at, bi local committees, the machinery for the aopointmet

of uhich bus alreadybui oviso4

This Committee belioves that the

c4,ton loar, fund will be inadoluste to restore normal conditions in
tho market for raw cotton, or In th,, cotton manufacturine industry,
unlemN it ix Nu 40m ntod by energetio measures to bring about better

facilities, both in the United Vtatoe unil abroad, for ark*ting,
flnanoine, and ran2ufooturinf4 cotton.

144t year, malen of cotton

to urole furnibed V..le country with .514,00,04 of exchange.
Amptning which retards t14 froo imIzlhazo or the froo male of cotton,

or the rector:Aim of stable prioos for rev cotton, mi1l. also retard
tho restoration of 'normal eonUltion4 in the intorno:Clonal ennWaces,

la the
or in4ury both ih Limaand. und In tho United Anites
opinicn of this Commit'ose, It seams desirable that the following neasuree
be adopted:

rirots

ThA the fund of 41Zb,000,000 bo completed and

its adminictration undertaken st onoo.
AIWA:

That the 2ew York 424/ Ltserpool cotton exch-should be opened.

PL4ts for openin the Now "tom

Cotton 'izonzintsv have roadbed c point 'r,have it may bo

roesomably oxpectal th-it tne axchztoge on Open ut

carly Unto provided necessary co-oporati- n is ar-

farad 'by Ube Aserpool cotton ittohares und by the
banks.

A run: hes been pledged which. mia

:. 21s the mlbrs of the Now York Cotton .xchango,

are oommittad for the purchase or oottr. at high

priose, to mrgih their antrlotz down to 7-2/2 contf




gottr.in Lean i'41)43

Witl; this re:Lief, coatficLoce is crpressed tiat
'they'

opon the excharose with a reasorabie

expectation or boir4:

to root the zlariceZ co:41,N.

tions ::hich wiA1 arise,

Coeoptratien by the

.1,Alrerpool Cotten Tatabango c

i4 r lines is neo,

essory borer° it will be feasible tc., open the
New York ,'..!cotton Tachnnge.
,

it 10 also es.47.0ntia1 that no ,ineoticm a6 to

contrWbael be pormittod to arise in reflard to
eLport eotton.

The Committee notes with great

satisfaction tb.::t klart MICA 04;mer2msM has

already recognized this situation.
Amy rootraint whieh nny havo been imposed upon
Shelieh moraMmtg, or tpJ.unor in the purc.baoo af
cotton. Should be romori-.4.

Reference hoe been

zatai:le to soon agreexa.nt or Uliderist.aiditir, wbiab we

h44 been 4:4viaoci =late in -.:421awl in this rehpset.

it ie not undorotood that the British Govoromnt
hes broullt about sn,y such undereVsiding* nor, in

fact, is it unilerotood that n1iu3 Inirehasors of
GOtt ca hare

is -this regard.

dofinite &grown/it

therasolvou

AfiViaOR /WM reached this eountr7t

Imitate to the effect that soznoo tfbe ;wash

*mks have ex.erted a straw: influonoo in reetrfAninc

the free purJrhase of cotton by .,zglieb cotton
siorc,,hg:.,nts and spinner', and it is hoped tiv1t ti30

Ihtz




Watch barax, sacc9 be 1ndue4 to el 43"Nge the
purauvee

c ott on wi thin reasonable 1trtt.

Thtt tho wraal IOW:air of f I nArte 14: purckAses of
ootton by :lig/10h corobeNtr; and. spilibart; olio-414
be reonen.z4 through O.tiltainell 4,1. loot Gott caa

bille through tht.. tileoount

and

dtriots

aecorvo inFes:LorAl locz,tod cOrrespautimille

of account for payments.
City rork

now

mn




vir

to required are Saaks

the which to extent the upon Sorowhat

(31

York, Mee

of City teo in provailincl interest of to
twik; the by oetablishee discount of

vill

the

rtto the

Upon

Upon

(1)
(1)

beaks member the to allowed disoounts of casounts the us

traseactlono, initial tho from reaultInu Tork

New

of ince Reserve ted4ral

the of condition tho fOreoast to time, this impossible,,at therefore

is It radiscount. to

banks member the allow may banks the whioh paper

ommemial of proceeds the of out

mado be

mwiy.

deposits reserve

initial

the of exceeding:4e% not that provides Act lieeerve fedora. The
more. much pos4;147 =id :Auto, York
3anita

Zow

of

National the of rPiworves to of OD0,0Q04014) least at deposit
will ac. gold, in eteek oapital 410,000,0)O over

on received have

for

pegmcmt

(and months

recoived

have)

will moat/lei throe of

six of period a within York,

Uow

and.

tbe at possibly

of Skak Resorvo Vederal

the concluded, successfully is operation the If 16th. 3ovembor
theletunics, to deposits reserve of tmasfor the for

with

aoa,:ponol.ng

prOV1 announced

plan

2nd. 2ovelgler on

Thu

of stook capital the for paid be to

1r;

TJank

inattalmont

Reserve Poderal the

firet

The

:172A: ;LIT

(4) The cectcnt to which they moy dopozit 5/18 of thetir

rocervos, tbc .tepocit of which is options).
Ole Fedora Ficeorise 3anks of the United i.,;tatos are in the
047'41410 of eetabliehmut.

al eatly been

Calls for paynt on the capital stook him°

as ability of this iA1.134 to furnish geld is

amator

for future oonaidor tion, anti chould not* at this time, be mde the
baci 3 of any trraea,7tion or proposal.




31

Agigas
Ou0
Mom*

YOUr Committee has been informed that about a csonth

whsn the visit of Ar Georo$ Faiah and

i1

14mot, RIK. IRS

first proposed, OM cy,' the subjects to bo considered at the confor..
woos would be a possible credit whioh would, in offoct, affor0 M4U128
for 4r:tension of the ob)..igations duo In :-'11,gl4mi by beakers and mer-

ohmte in the United tatos.

If it had been possible to arrvage melt

s credit by e=hs:n67e of cables at that time, your committee would
trtve slIproved of the transaction.

It would &Lye supplied exchange

at a moment when tho , omond was uruent; and it would him° insuro41 tv,

any serious arain on gold roaervoi7 for to time boine, and

given this country a period for roadjustmnt during which local conditions could have boon brought to :10(1't tho aztraordinftry situation,

:ince the date whon the sureation of s. credit was made
oxchango In larLm quantities has boon supplied to the market, and

eonfidelco hue been 7.oatly routorod by the knowledge that the
New To

City dyndicate ank1 the Gold Pool CommitteeW operations have

been effective. Fran ihforuation which your Oommittdo bore gathered,

it Ia ltrongly of the opinion that a continually incroasing supply of

ennew is in ,I-ospect.

The export of food products and raw and

m.nureotured materials that 'guroyo needs in tho present crieis not
to mentim munitions of war) must continue; mills anAiseomfacturine




11,141% of g0.000 ciutlabut,

cemeenies are workin overtime on ordere for goods whioh, inari.ny

case's, will not bo ready for ohipment for on mcmths, and which
will nnae a corrospanding *upply of exchange.

The opmaine of the

3ow York and Liverpool Cotton sPIlohungoce, doineidont with the come

pletion of the Cotton Lona Pool, if accompanied by aseur&noes to tee

merhsta and spinners of 3sigland of the willingness of the-:Ziaglioh
eankin6 00agesnity to :inane. reasonableprAtosoo of cotton from the
United 5tateu will aloo mda to the supply of eicabeage.

For this, and other reasons that it is not necessary
Globe/et:to here, your Oemnittee le clInvinood that the adoption und

employmont of uny extraordinary or unusual meanures at this time

are uaneoessary, as soeh station miM, Ln fact, be interproted as

impression of the bsUlef of this Ccamittoe that tbo proent situation
requires aueh measures, and beoause unusual measures are likrAy to

bring about unexpooted and possibly unassisted Malta.

It vill be noted tha% the foregoing relates astiro/y to the
oommercial sitUation.

No account has boon taken of th=. poseible

opening of the Lew York Jtook 71zobango, und the additional demc,mds

that nii;tt arise if any ooze:Adorable amount of Isglizt owned 4morloan

soourition wore resold in this country.

Your Cormitteo is firmly

Of she opinion thwt it is promture to di mos the opmling of the

New York 3tock ;;xehango until the adjustment of the comearcial situation
bum been decvnetratod.

to thl
took

In the meantime, howevor, and, with a view

t4p, it is roomeedWied that a Committoe from the Ilew york

1r,to be appOiated, whieh lommittee should visit London for

conferanoe with ulico Committee, from the London tock i..inabange and




Credit of L20.000,000

for a oareful study of the situation there. A tentative arrangement
for a large sterling credit, predioated on the understanding that its
repayment will not be made in gold, but in commodities and manufactured
goods, would

ilke it possible to consiaer the opening of the.took

2xehange sooner than it would otherwise be safe to do, Should other.
conditions -permit.

As this step Is recognised to be a desirable one

from the point of view of both countries, a present discussion of the

fore of such a. credit and a tentative agreement as to its terms, at
this time, would be beneficial.

A memorandum supplemental hereto,

outlining a plan discussed with Sir George :i'aish and Basil P.
Blackett, 7..7.sq., is attached.




Gh

s

Conditioned upon the understanding suggested in memorandum

widehth." and with a view to ussistanue in meeting conditions which

may ariso through excessive sales of American securities bald in
Lurope, the following has been tentatively discussed with Iir George
Faish and. Basil P. Blackett,

That s. revolving sterling credit of, wlys i20,000,000,
shall be Granted by or throng t the Bank of rneland, or other British
bankers, on the following plan:




The credit to be available as a supplement to and only
after the $100,000,000 Gold Fund has been shipped, in order

to avoid further gold shipment.
Drafts at 90 days, with one agreed renewal, on an acceptor,

or acceptors, to be designated by the Grantors.

Drafts to be 'orwarded direct to agland. for discount under
an agreed arrangement, and demand or cables to be sold against
them.

Drafts to be drawn by the Gold Fund. Committee, or a new

committee representing guarantors, consisting of banks, trust
companies and banking firms in the United States acceptable

to grantor.
eroceeds of sales of exohange to be loaned upon security of

approved bonds and stooks as collateral, with the obligations

of borrowers, who are satisfactory to the guarantors, to main-

tain a margin of not less than twenty per cent. (20%) of the
face vLaue of the loan.

dy,

tth japa43nt )




Draftc to be drawn only az required to supply amehause

to take the place of gold relaittances
7,,rafte to be covorei attilatiari t,sr in the usual my if exObarige can be purchased at or bolo, the cost of oxPOrtillf:
gold,
(e)

U exehaso cannot be purchased .z.:3 ;,lbove, an.1 pk;,.yreont of

the bills would require the export of gold, furt'r.or 90 da,7
renewal() to be gmutrid, provided that, in the op1non of
the Fedora rte-erve :Jeanie a further loss of i;old would be

detrimental to our fluailcial ei-uustion.
(9)

ho graitoro of the credit to tt). entitled, after the first
to require paw:lout, in whole or in part, in Now 'fork
exchange.

Such dollar balances, however, to be teed only

in the purchase of .merican prottac 5.




Verember 4, 1914.

Honorable aeries
Honorable vaA,

Hamlin, Governor,

.rbur;,

?edema 4eserve
-shington, Ds O.

Gentlemen:-

On Friday, October 2Frd*t a oonferenoe gulled by the
lecretary of the Treasury* at wkAch were rrosent the .jeoretary of
the Treasure* the z:eembers of the !cder4 Reserve aourd* tho
troller of af the Ourrenoy* 7,12, George ?Mesh* Baeil

Blaokett*

and a oewittee of bane:Ors, the underniened were appointed a committee

to prore a report and memoranda covering the V4r1onA eubjeots discussed t the oonference.

After careftl consideration, yaar coma tee =balite herewith

its report In he form of a proposed letter to tr cleorGe '2aish and
Basil P. law:Mott, eq., representing the 'aveloollor of the..
&xchecuer.

At tachee to thin letter 1.1,4) the vf,X1OU:s memo rand a meek:. I one,

U1 of which aro S;Ubmittef for your information ane ae the best judg-

ment of the etnin ttee an the mubjects dIoowod1 ti enumerated in the

proposed letter.
The plan forming supple et to memorandum "41eht40 herewith*
wo believe briefly expresrems whet TeAm disoussed at our last conferenee
in ' '':aohington, whieh was attended lay 31r George Paieh z,eld Mr.31ackett.

It embodies the best jcigment of the members or the sub-oonedttee, but

ha been preperec without conference with New York like0 hose
co-operation and approval are eenerelal to the ouccoes of mnym.edh




lion. J. 3. Hamlin.

Nov.4,1924.

Ilidortring. The members 9f the eommitteo thorofore respectfully

gmliost that it would be harmful to the suocess of the plan were it
to becmw, public before theno who would be intorented in Row ?oft

(ed equally those is London) have boon given opportunity to oonsider

it.

We

it a further expression of your views in this

before taking any stoIs to uncertain the attitude of the bank:,rs of
New York.

Isompettully yours,

($0.)

9trones Jr.
for the Ccomittee.




November 2, 1914.

Sir George ?aish,
Basil ?* Blaokott, %sq.,
lepresentatives of the aanoollor of the Vitish :Aledhequer
acered1te0 to the Ronoraiae the 3eoretery of the Treasury
of the United Autos.
Gentlomen4-

At a Conference in 7ash1ngton, convened by the Fonerable

William G. LicAdoo, lecretary of the Treasury of the United States,
'WW1 yea attended by the numbers of the Poderal Reserve Board of the

United States, und representativos of banking interests of this country,
the undereissed were appointed a Committee, representing the banking

interests, to oonfer with yln in order that, after exChungine "TIONS as

to fiwzolul conditions in 41g1ovi and the Unitee States precipitated
by the ear in -,ftrope, they could submVS to you. memoranda outlinging the

conditions diecusso6, and, possibly coneider an, submit to you, for

tr,nemassion to 4ng1an1, such proposals az, In our jmdtent, 'meld be

to the artual advents of the Wetness Interoets of boTh ocuntrion.
Based npon the interchange of views at the recent conference,
and upon facts that have developed in recent cont,rences in Now York
and eleothore, and upon our general knowletlge of the local situation,

combine yith information in onr possession reeArding the situation in
?;nland., we submit the follwing explanatory asmerunda. Because of

the iahorent economic differenvis between nland's position and that
of the Unitee ltats, and the differencos between bankini:; system, ant
bankinc lethods in your country a& ours. thls rarArandtun is necoesarily

elaborate, but it will, we trust, afford y'ln a fall comprehension of the

situation.




PlItus

A statement of the position of the new York: banks on

August let, and thereafter, of the reasons why It was
doomed desirablo for the banks to issue (nearing House

oartifhcatos, and to anly for Aldrioh-Yrealsal currency;

ineluding a statossat, as of August let or the members of
tho ClearIng H01180 Aosoolation.

A statomnt of gold shipments male prier to the month
of An

t in payment of obligations, an estimate of the

probable additional Indobtedwis of Amertoan merchants,
banks. en e corporations to

111"OPO On or

bout :;,eptember

12th Last, And a statement of the oountry's export balances
for 4ugunt, 'eptomber, and Ootober (e8tlilate0) 1914.

etatomeut explaining the reasons why the settlement of

international balances neoeesarily falls upon the banYs of
New York City am0 not of the country at Lam% and why a

wakening of the Now York City banks, through depletion of

gold reserves, is serious, and is reflootod at once In U,ok
of confidence And curtailment of oredit throughout the
country.
F17717:

A $tat

nt respeating the syndicate formed to Luarantos

the .1"yment of about ;40,000,000. of gold to moot the debt
of New YorX City, due in London (and Paris) up to january
1, 1915*

nzg,

A statement Of the neotteeity fure and the creation of the

se-oalled 'Gold, Fund," the diffloultiee under whien it was
oomvlet

its method of operation, the ,,xponses thereof,.,1td

the risk of lose inourre4 by the partioipants1 incidentally




Goore .Paiah

a ronorandurn with mord to the price paifa b, the

ni{ of

England for Amorican .%ssies delivered at Ottawa, and certain

questiales on which the 'Gold ?and Genaittee, dealre6 information,
1n171 to do with 'WW1 price allesnd by the Banii; of Nitiaami

for f;o1.0. dellytwed In
i'l.411;

tte....

.)

A statement of the objot, mitt tho term and °millions of

the ao-oAllod 'Cotton in Pool" of436,000,04. and Of the
nothodb,r which the cotton crop and Lt A moverint to market is

finatkood, v7ith cort4in sumestions.
.V7VTlik A statorient in respoot of the Fiodoral Yiewervo pa*

Tom now In colvvo Of orlentleatiOn, and ttp bearing at the
mntter under discussion.
:3111,1

A stterent in respect of a poseible credit of t20,000,000,

the Committees opinion in mgard thereto, und a sweeted
plan whioh night be adapted at a later aato,

These statomolte are pubitted for consideration ailidisousAo
and are put forward for the info nation of the- cOnforence ark an exrree-

sion of the belief and opinion of the ouvlitteS.
.4* the eleneral conference botween the Honorable the flesrotary

of the Treasury, and the Nderal . .leserve hoard, and the full Ommlitteo
Amenting the bta34ore of the "United 9thtes, at whioh this Committee

01hted, with the inforrwt;,on cen at ;ulna, it UN Opeoted that
this Cortaittec, after conference with you, and a. caroful 4OnVass of the

financial situalons in England and in the United states, .ould have
acme specific proposale to submit for the consi&ration of the Ynaliah
Government, or of the financial intorstote in Hngland.
With the "APW York City Cold Qyndiante and the Gold Pool CoraAttou

ix aeqtre




-4-

funds aexTedating 4100.000,000 (only a small amount of whioh as ar yot

1;*oor availed of), ad with the aompletior of the Cotton

Viool Loan

Isrtiliorto, all in this country, and with the expected early conclusion
of .arranipments to rotopen the Now York. Cott on Exchange, with fuu pro-

tection to its members as to (misting contracts, and with the eraniosments
.1.0 by the iMelish Government to discount toreraorat or Ito SOW:
1Io

r)ce

awes of

iict SOCEptille houses, and to oostpone preeilaratoriont liabili-

ties to post-moratcriuM businees, and the resultant facilitios offered
for new aseeptanoe businessin7..onilon, this Committre is of the opinion
that the only additional step neaossary at the present time to adjust
the international commeraial situation end enable bankers, oorporatione,

and business elms of tho United Itates to -eot obi ations ea they mature
at normal rates of exman6o, is an understanding that the new free purchase
of American ootton

rAiglish spinners and imsrehants shall be ormolu-aced

by the 'Walkers and ilaVOrntrKillt authorit i,es of Faglawl, and that ar;arwenents

clad be 7romptly 5.1ftde to open the lama channels for advances e.gainat

..,on or :or the discount of cotton scow/Amoco bills
The Cotton Loan Pool is estivetted to rrovide funds to ennble the
banks (Lid ralr01121138 of the south to °navy ovor four million bales of

cotton until February 1, Vie.

The best export opinion° estimate the

COex,oe over the ,:torissuptielsM not ever five TM:Ulm bales, Vile Con:tattoo

is of the opinion that the ..resent low rioe, being conelderIbly undo.r the
oost of prodluation, sslil tend to induce Gotten satrohants and. spinners of

Amerioaand tirope to buy eomewhat in excoss of their neols, aW that this
inducement "Nill result in the absorption of zonsidembly more cotton than
the unount generally ostimate

go separate statement has been made in regard to the international




.5seaurlty markets, or to tho opening of the aew York or Doodon took
btohanges.

The meaAnres above ontwrAted we btAievs are 4dequate find

will eventuejly -lorrsat the internattoml

giLuntion, but would

be ertirely insdequate should any oonsi:derable volume of seourltise be
throz-n 111,021 thib Me-1M to the Opening of the New York ..tonk ,r4X011nneti

Until, thbrefre, the flomerothl citation hAs been o4jmtet, and the
eitathanges have turned ix our favor, figy. ilseqwton bearing on the opening

of the Nor York '3o Ix L'xikange to a free ei,d umretktrioted market for
Aulart

rtOrfariti.e irrned abroad lt:ouL43. VAO rmutture.

Resi,setridly yours,
(sod. ) Jarsee.

heaj. Strong', Jr.04
A.

First.




.1f4renel of ilia* York btackers

impedlstely prior

aso/srotion of IFir by 10.41and, opinions !,gero unnnirous that the

Seeltion In this country Ykonld shortly develop alonk;,

lines

similar to theme experlomeed lo the fell of 1907. Up to the time of
these tonfermeeee sold to Ole :omit of %tut 413c#000,000. had been
exported from the OOMMtry .:nd It ens fe,red that, in sekiltio

coutrao'ion of credit restWin. from this large loss of eeld reserves,
further .:(111 Laver contrsolon would be istrosed upon thip New York b4mxs
by

on of tbe withdrawal of funds by balms throkhout the sour4r7

.i4b0 miipt be inspired thron01 fivAr to strongthenir posillon
by Vlore...sing their reserves. It 1907, after the origin of :he
(omit) had passed (on DeomIg4fr and), the reports of tNa 44tioat2 44ske to

the C.omptroller of the Ourrenoy Inditvteet that (oven ,t thvt tize, Mabry

banks, as listinctashed fro

'e At

,aid Uentra

ve

Banks, still hold esoefts* o,sh rsonrrs of A.15,C00,000g
i it most'Ve ,WrilIt in rind thAt this )ewres out of coonidoriOn

Ion uf reserve dtAbtless za:cia by about 16,00f: tv, to
b.

as

..ich fli-Aree Stive not been *emptied. In order to neet

strain imposed by this probMAle devnlooment, the oc York. 011K5ring.

AssootAion decided to Issue Olis,rinc

ion omrtif10.ter

for the eettlemen of e1ftrin6 bt5L,noteps betvesa members, te.nd the
-7 of tdle -re pary Announced hs Intention of leonine ldrioh+
.




lireelend notes, se oanhorixed b." existlat; Lavi,
offoried p.rot.t:,,o. ion

i-ot

t

IVM1

e the

. hese tae,-stmree

ty or

Ws York, 'ooth

:qetielTAM 3ttø,Knd enehled '_hen to retell* abest

d reeervee Aloh they held at the' time.

or t

lot, &mid reawn...;,?1,14, osopor.,,

pled,d for

via,-014

the psysest of the aebt of the 4:12.+4 of
*bout

&ad. of that kmount,

. ?-6',000.00 le et 111 to be to Ma eil4d leas sucth *count as In

rum/ Abed in outlaw

.-61re.tv pad., 416 ,f,r

n,best

by uhlenent f "AA

and 4,.?5,,1500.000, by ,7groosvisq of LCOSMO .

tThe ;(1:4100,000.!,(V,-, coctrroAted to the
p;ed,und by the b-.11.-

f

00

YorS

pool, :.45,00-0000,

City, or Ilth.ieh

411,-.41f.yX10. haf, ItaW

, has there forq 404, ta Ken t o dte, le. vin4

bwm m41104,

,.:050,000, still to 've tarnished cnt of preeent Neu York ..;ity tAik.
At the preeent tire the ClovInc Touss, imWe she%

reserves,

=411

olleeee eksh reserve. 'hen thee* oblitions vvere (Matured Into, the?
York hAvs were ream t15e00000r30. to 44000,000. naer t.heir le6A1

-bon

fie feder..I

4Vgwre

of :qv. York 1$ or ionised, it

Is estizmted that a total of about -."4:120#000.000, v411 bwithdrama from
York :.:2t7 Action4 Dnks to !cake espitni kuld ramorve payweate both

for their own accounts and for those of their out-of-t-ovst correspondents,
lultanor..)u.

t,he reserve r1roti71,Nts v4.11 bc

11K, and It in entirstei th.A, aft er

reibutec'g from 14f)

to

those vq.. 03t,E. of

Vie rlet:letion of retorve re uire:'.,ionts will le,:ee eseess
r:

Irfol4

itt the vaults of the

nef.)1)

T9rk Jitty.

int

The I'ositl




'

of tJe row York .1Iaule.

Abaft ;40,010,. If thls eCl.culltion 13 :;orrect, we must cider
the resat ot the completion of the three operations referred to,
ne.moly,.the withdrnr7e1 of the entire amount of eold whioh my be celled
for on secount of the City Of Vow York vat the Gold Pund, and the
payments end reserve reductions resulting! from the ormnisLotion of

the 70doral Reserve l*nk. The total pcynents te be made, ageref!lating
mbout

will be part1o117 offset by the 4t0,010,0004. nined

In reserves, due to red-action of reserverelArements, leavinp; the
Los York loetitutionejo1bIy;0.:5,000,000. to t40,000,000* below the

required legra reserve. The amount of deficiency In reserve muz, by
the torls of the 7odernl Rooerve Act, be rurtbor oTet if member becks
E,re r1,10/04. And &Vail of ttio p r vi logvof rodiso

i in coiutil

piper, wt the tine of openin of the rederal leaorve Bank.

Statement of the Members of the New York Clearing House Association
From Reports as required under Article III of the Constitution,

For Week ending Saturday. August 1, 1914.
COS,

'CAPITAL

MEMBERS.

Greenwich Bank

28

Pacific Bank

30 Chatham & Phenix Nat'l Bk
31 People's Bank
33 Hanover National Bank
36 Citizen's Central Nat. Bank
42 Market & Fulton Nat. Bank
44 Metropolitan Bank
45 Corn Exchange Bank
53 Importers & Traders' Nat. Bk

54 National Park Bank

59
63
65

East River National Bank
Second National Bank
First National Bank

67 Irving National Bank
70 Bowery Bank

N. Y. County Nat. Bank
72 German-American Bank
71

74 Chase National Bank
76 Fifth Avenue Bank
77 German Exchange Bank
78 Germania Bank
So Lincoln National Bank
81

Garfield National Bank

82 Fifth National Bank
83 Bank of the Metropolis
84 West Side Bank
85 Seaboard National Bank
91 Liberty National Bank
92 N. Y. Produce Exch. Bank
96 State Bank
97

Security Bank

99 Coal and Iron Nat'l Bank
100 Union Exch. National Bank
118 Nassau Nat'l Bk., Brooklyn
102 Brooklyn Trust Co

103 Bankers Trust Co
104 U. S. Mortgage & Trust Co
105 Astor Trust Co
106 Title Guarantee & Trust Co
107 Guaranty Trust Co
108 Fidelity Trust Co
110 Lawyers Title Ins. & T. Co
Columbia Trust Co
113 Peoples Trust Co
114 New York Trust Co
115 Franklin Trust Co
i ,E, Lincoln Trust Co
117 Metropolitan Trust Co
119 Broadway Trust Co

Average

On Deposit 1.1th

el...NO...0
Memberv
carrying

,,,,,,
,,w,c. R.,,,
1,

LEGAL
NET DEPOSITS

1,888,000
4,930,000

3
4
6

3,679,000
397,000
475,000
48,000

8
12

47,890,000
117,971,000
4,927,000
21,852,000
2,313,000

3,883,000
7,912,000

21
23
28

1,173,000

3C

2,582,000
611,000
984,000
312,000
3,269,000

88,412,000
21,819,000
9,257,000
11,595,000
75,814,000

50,000
1,531,000
56,000

33

3,759,000
19,503,000
452,000
3,102 000
25,158.000

2,387,000
2,571,000
107,000
123,000
2,159,000

24,077,000
91,241,000
1,766,000
12,625,000
106,457,000

50,000
3,497,000
49,000
669,000
4,936,000

53
54
55

9,082,000
786,000
1,536,000
979,000
23,462,000

3,063,000
71,000
768,000
212,000
5,460.000

48,208,000
3,403,000
9,127,000
4,180,000
115,201,000

1,579,000

6

4,901,000
15,027,000
9,293,000

2,610,000
509,000
1,137,000
2,963,000
2,332,000

1 062,000
367,000
253,000
1,169,000
142,000

14,425,000
3,481,000
5,582,000
15,522,000
9,586,000

505,000
2,089,900
759,700
2,598,500
2,844,800

3,998,000
12,968,000
3,761,000
25,099,000
24,400,000

779,000
2,120,000
706,000
5,950,000
5,218,000

244,000
926,000
520,000
1,752,000
1,433,000

4,241,000
12,784,000
4,752,000
29,267,000
26,680,000

928,300
1750,700
345,500
604,800

9,317,000
19,134,000
10,832,000
6,981,000
10,017,000
7,927,000

2,271,000
5,891,000
1,880,00o
1,083,000
2,145,000
1,430,000

666, 000

10,795,000
24,115,000
12,753,000
6,987,000
10,125,090
6,720,000

26,451,000
126,045,000
36,838,000
21,422,000
33,045,000

14,824,000
3,432,000
2,097,000

198,630,000
28,644,000
8,954,000
1,973,000
9,649,000

42 089,000
4,357,000
2,115,000
516,000
2,520,000

13,252,000
2,218,000
205,000
57,000
205,000

196,234,000
24,790,000

47,846,000
140,272,000
4,871,000
21,247,000
1,967,000

10,217,000
21,903,000
728,000
3,696,000
409,000

1,552,000
6,231,000
840,000
1,579,000
148,000

3,000,000
2,550,000
1,000,000
2,000,000
3,500,000

4,693,300
16,690,600
1,009,800
1,357,900
435,800
15,054,800
2,371,200
1,948,100
1,779,400
6,916,000

77,634,000
22,339,000
9,221,000
11,717,000
63,823,000

21,082,000
5,111,000
1,498,000
2,603,000
15,850,000

1,500,000
5,000,000
250,000
1,000,000
10,000,000

7,676,000
14,344,700
65,200
2,870,500
23,177,700

26,591,000
90,034,000
1,561,000
13,867,000
115 527,000

4,000,000
250,000
500,000
750,000
5,000,000

3,468,600
789,000
1,916,800
706,200
9,645,700

45,247,000
3,163,000
8,667,000

100,000
200,000
200,000
1,000,000
1,000,000

2,091,600
803,800
1.000,300
1,789,800
1,290,100

12,928,000

250,000
1,000,000
200,000
1,000,000
1,000,000
1,000,000
$1,500,000
1,000,000
1,000,000
1,000,000
1,000,000

1,500,000

25,000,000
3,000,000
1,000,000
300,000
500,000

32,916,900
7,755,000
761,800
111,100
1,070,100

5,000,000
25,000,000
500,000
2,250,000
200,000

4215,000
102,020,000

3,219000

1, oo8, 000

1,121,700

309,000
1,276,000
618,000
350,000
180,000

8,858, 000

2,171,000
10,822,000

.......

.

7C

197,000

71

446,000

72
74

7(
77
78

877,000
343,000

8c

245,000

82
83
84
85
91

346,000
495,000

92

9e

394,000
394,000
267,000

113

45,951,000
10,708,000
9,901,000
29,899,000
14,129,000

3,946.000
997,000
1,049,000
2,746,000
1,384,000

527,000
129,000
223,000
250,000
692,000

3,338,000
1,042,000
1,016,000
2,223,000
1,642,000

29,554,000
7,541,000
8,669,000
20,436,000
13,940,000

114
115
116
217
119

11,545,300
1,165,500
555,700
5,892,600
848,500

481,243,000

Totals, all members

175,300,000

296,930,800

2,056,190,000

363,380,000

81,054,000

61,095,000

1,935,821,000

Decrease

Decrease

2,286,000

Decrease

21,692,000

70,388,000

(15°4)

72,186,450
$435,830,950

Trust Companies' Reserves with Clearing House Members, $61,095,000

1,454,578,000

Decrease
3,677,000

451,000

Cash Reserve Required, (25%) $363,644,500

$444,434,000

Decrease
21,394,000

I06

IIC

III

41,578,000

41,578,000

Decrease
163,000

Excess, $10,401,500

Decrease, $13,430,250

Deficit,

Decrease,

1,798,450

Excess, $ 8,603,050

3,094,550

Decrease, $16,524,800

Decrease, $3,677,000

Trust Companies ...

1,423,407,000
635,348,000

272,752,000
60,137,000

71,646,000
7,045 000

1,422,749,000
488,790,000

41,737,000

56,547,000

Thuds, all members .. ......

2,058,755,000

332,889,000

78,691,000

56,547,000

1,911,539,000

41,737,000

Increase
1,182,000

Aggregate

53,065,000

(:5%) 73,318,500

$411,580,000

$429,005,750

Clearings this Day




July 25, 1914,
August 1, 1914,

$1,838,183,016 . 11

1,588,913,808 47
296,815,972.90

Decrease
10,692,000

3,234,000

Cash Reserve Required, (25°(,) $355,687,250

Trust Companies' Reserves with Clearing House Members, $56,547,000

"

Decrease

Decrease

67,182,000

Clearings for Week ending August I, 1914,

118

16, 360, 000

61,095,000

"

97
99
IOC

107
108

6,973,000

"

i51

141,517,000
5,900,000
11,883,000
38,688,000
15,156,000

74,081,000

Trust Co's: "

65

17,988,000
981,000
1,388,000
4,448,000
2,251,000

3,000,000
1,000,000
1,000,000
2,000,000
1,500,000

Banks : Cash Reserve in Vault, $344,398,000

6.3

1,140,000
46,000
613,000
280,000
376,000

187,702,000
7,534,000
15,877,000
48,628,000

63,415,000

"

42
44
45

18,729,000
842.000
1,218,000
5,501,000
1,839,000

21,222,100
1,307,900
5,388,900
7,348,300
1,566,800

Actual figures this morning.
Totals, Nat. and State Banks

3C

2,618,000

299,965,000

Aggregate

31

102
103
104
105

2,193,000

173,907,700
32,382,600 }I,425.700,000
90,640,500
630,490,000

Trust Co's:

13
15
17

20,788,000
102,559,000
28,179,000
15,590,000
20,843,000

10,000,000
1,000,000
4,000,000
2,000,000
1,000,000

Banks : Cash Reserve in Vault, $374,046,000

2

2,696,000
11,028,000
7,156,000
1,576,000
2,322,000

13,065,500
4,211,400
1,201,300
11,614,000

3, 7o6, 700

9,482, 00o

939,000
375,000
785,000
108,000
490,000

1,500,000
10,000,000
2,000,000
1,250,000
5,000,000

17 State, June 30. 1914
is Trust Co's, June 30, 1914.
As of July 18, 1914.

NOS

1

$4,224.000

112,600,000
16,450,000
46,250,000

14

Average
$772,000

$22,317,000
36,130,000
20,489,000
80,745,000
26,538,000

Totals,
National Banks
0
State Banks
"
Trust Companies
As per official reports
29 National lone .0, 1914

CIRCULATION

Average

4,254,000
15,416,000
5,052,000

8 National City Bank
12 Chemical National Bank
13 Merchants' Exch. Nat. Bank
15 Nat. Butchers & Drovers Bk
17

LEGAL
TENDERS

SPECIE

Average.

$4,346.800
4,719,900
2,097,700
8,874,600
6,186,60o

6, 000, 000

21 American Exch. Nat. Bank
23 National Bank of Commerce

Average.

$20,668,000
41,900,000
21,158,000
85,528,000
26,499,000

$2,000,000
2,050,000
2,000,000

6 Bank of America

LOANS AND
DISCOUNTS

$1,218,000
1,541,000
1,457,000
5,882,000
1,749,000

Bank of New York N. B. A
Bank of the Manhattan Co
3 Merchants' National Bank
4 Mech. & Metals Nat. Bank
I

2

RP
*NET POPPS

Deficit, $11,289,250

Decrease
46,776,030

Increase
3,000

6,136,500

Decrease, $35,004,250
Decrease,
8,595,250

Deficit, $17,425,750

Decrease, $43,599,5oo

Deficit,

Decrease, $10,692,000

Balances for Week ending August I, 1914,

"
Balances this Day

July 25, 1914,
August 1, 1914,

$Iog,ôoi,8 io. 65
95,095,253.82
23,383,391.37

Sa.U.1..;_411.1U'!3ro

"'

111` T 3

emT4ct tatemout of the shireents of gold during the first
-won months of 1914, and of its destination, would muire considere
able invoetige tion, whieh tte. dem not permit. In general, it may be
maid Wit in that period the hanks of the City. of New York erported, In
round figures, 0160,000,0016 of gold, largely in 77aglos, the principal
Mount having be

take' by the SIM Of Peewee and, indirectly, by

the Aeichsbank. The inducements Offered by those inetitutions to

attract gold in Rattle-mut of international balances were understood
in this country to have deprived the 'Sank of rhglend of the opportenity
orded at tkekt time to strengthen Ito gold holdings, anet undonbtedly
we,3 owe:aimed by the willingness of the TligliSh morkot to continue to

Aga accommodation to its mstAIIIISIS in the United States in the
memilitmed volume.

It Is possible that tbe eeellirrenoes of

ON

past

few months in Internetional exehaapi NW be 1111.111ine4 by the fact t.ki.st

aw e and, Gemeany did not nom current merle.* indebtetinese as freely

as the Fatiglish wiriest did.. Me stigetion conducted by a special com-

'ttee srpreinted at the request of the Yederul Beeerve ioard in tic letter
part of September .disclosed the fact that, Ns of ..;eptember 12th, the total
.soortainoble current internstional debt maturing between that este one
.rattukry I, 1916, mounted to about f460,000,000. The item investiented

included bank bfaances, maturing securities, interest end dividend

Obligations, commercial credits, fitenee bills, and indebtedneee for
ellsourit is sold. As to some of th.ose n.000tette, eatims.tes were neceseary,




It is rismehised that informtion of this charazter is inecourate




and liable to be misleading.

he oftsot accounts were shown to 4/ about

':150,000,000. leaving the net indebtsimoss as of that date mturinK

before Jannally 1st, in round figures, ',$2100,000,000. due to naclond,Yraidi

Gormany, Canaan, and, to sons extent, other Pnropean countries, The
amounts mvtnilindrwo,-e about Ognolly proportioned over the fall priod

of the year. It should be understood that a considerable/ portion of the
Aneriflm indebtedness to the Loudon averket, maturing in tale perio,.betwelq

Oatober let and JenuAry 1st, was emoted in antiolp.tion of the purchase
of cotton bills, which have always been eonat ere* °ash in the tonion
Met.

No further data h

b', obtained in connection with the provost

amount of the current interhativan1 Indebtednase, but opinions asked of

bankers coavarsant with this matter would irobbLy justify the belief
th,*t over on/64W of the not indebtedness kaill boon paid at the prevent
time,

:ale foin to, exclusive of gold And oUrer ehicnte, was
420,000,000,adverse to the United States in Anepot417000,000, in its
favor in SoptoMber, and willprobably' im 480,000000i in ite favor for

Ooteber. Last year, and in 1912, for the,* months, the balanees in

favor of the United tats were;
1912

1918

44000,000.

50,000,000.

Urptembe

64,000,000.

47,000000.

Oetobe,

77,000,000.

139000,000.

August

ftty

n

F

int-guationnt ningintge* inflininiA tour* *X the *Moot fat
tibo outtrwilt

Itare,

ot Jay.

time Inior

ard time eiteraopo4 in Amr.to&

Med

o.o.nri before AtIgnot

truflotmt (tergma for

*ten& to 4tot

oloturtne obtioNtlene t4JAtrttp** Tho doolArotten 4mt Ono

ottopseolon Of sitipptog :ttetTitlev,

the

we :MO% 4.01 Intentrtion el the
reale* ti-ao inkl,plwc4 ozobarce

=railtritral aspect troulom oe to Otwotrty

tpolo 3111104 in over that the

The felletalti 0116011wimtt

imelittion tztion br tole tie* Tom woke oith anktoot to gold ocKArto mity
bo bot.tor
Mooin

of tho foreciol oceviors0Ot tho

It it the lAmeet eimafratortne

throvets the ?oe, a new Yo
Th&bv.rildne oomm*mr

croak:Mos

t*

**aboard..

7110t*** Pekl lo- the iivolet *en the

tandas innelne to :,:sodet men ohne. towel

bine

atutelgod for remittent* to ALMS fOr 0013,00tial Or disocult Max* to
otiv 11,n tin ::atod Pintos mitidsera onn ir;le

sithout a qtactition fro to Vow raft.

1.1w

',uothtlett

onntime*,

1,'1,amiten Wand tvqn

noinient

Si the b.44:14* of NOW YOWX. fthen the Bola movoilonS is nixotroo in both tie

1101.41n c,,ha ctomootto egoonnuou, how 4t UMW Under our ate totIttna vain,
plemirod t,o be 1.zoo boor, tVir On banks to epanm IMMO employtorocrilenlif

nate Aohonweikifl3,907 the catz web emonelam twaiV4ble vitom to Iowa
ologArine, boos* tom etertino-Aoh Vor oottniTC11,41wgxwe beRvom ;10,*61-44




es relict to the root of AIN
Toro

ra 190? our

1,10(1

frog

darrontri

evoodento foct tko itrodisto Aiotitt wItro

aortlika imOrratti

27;

botUi emus!"isaplegia
tee JIM 11616
ntxrenaz

oso

of Us 04:santn,.

AtMin

atelle

6 ZOW

"brolm

usro tiblo to freak; sups,ily that Itoorselloniieute vsath

tiat rims
%Ms




wren..

pro,dos ss sit!

wit &Ate Ir4 hose boso

oomtrz, wv.wo in Volt, Mc rots 'fork esontave in otherprti

t imis 6bizito o ti4)

the mammy loAtorAiett tristruot
'

uo

Ttfer. 'Nat& to

Prot;t10t their otaitotiorsT to taloir oarreloinioutoo

gurrenazi

not being trov4.2,4*lo .;!orr the bottloveat Olt tui rastionza bulkoass and it

ring lossu tspesibls for the b?,.4fma to WO (tad to T'',::kraive, Lon(tais
mediantla reimohed t1proKittra oloivaent to

wit sitositi

ctol44.

1061V TAX31.14ercibie Prultun on

t our ttlwestia asoluuvos. distrust

X

of tills atkilit. of tile goo York bolo to 7.net thol,r .00-rxitvots tat; the

Ofrmalso tbsir tiOrnsitore

bora arisen

flt. violoot rise to a

lanticz orgahtore atile M

4ollars for o*Ilie

with aeri.ous ouncor-

grAtopalwy roosted. until A faiiiir

prtos wvos fla Iblishod, in the mtehbortiood or five (Vattwot

With flustuations within
norl1 noes auohnies
tisrf

PAP

thA) :1'1)01:1104

zlbo* five coots eititor wag. to

this level weld riellte OgAfed

161ro onyrt of

bunion of w14ob "4.tould have fallen not 4.047 van the

City. but irikool qt.en the novani, -km
dirie IMISAwses or *lob olvrzsr the. milsounte

Eic sit tbovellise

NagaIroyis
few Lam Ng,40.21

priivito Sir.* N-Fzhiolt (trio

clairroa.

k;11,




cutnt f Tntssykkon).4.

eta.

1111111eation of tho 140.eral Teserve Board, a co4aittoo of baate3re formiatod

A plan for aoca*line t100,000,000 of Mid for (t%7rert, in order to ral.lm

elsohango and to thereby dietributo ti3e bark= wrong inetitatione all over
the thilted "sitetioe instead of irvoeing it lime a few of the beWce of New
York City.

The banlet of1.71ra York City pledge& it,45,000,000 of tao avant*

Thin C100,000,000 =a in ailditim to the ' ;80,000,000 plecicoci by the books of

tho City of :Art,o York for tae rxweent of New !or% City oblitioas niaturinc

-Lo balance of this year The necooeity for pamaine

F44.rope bu1

this oonroo, inetead

el free ;t1ovo;-.1ont ofCrpki. ttriMps

)s Froa tbe fact that the mid Mattrvos of the United. 9testee
are mattered

on

about t-flatIty-five tkmoon4 nationo]

etate bariLIng .thettitilttione;

MOND:. Frera the feet thee
olti

no banlis In Nil York ibis:3h cibrit ffhiP

bo ailable to roomy their cold roservoa by waling

loano; azd,
21121.

roi the l'aot that it i- irvo. Ible for a bank widen parte
wi.th Ito cold for avort to r000aL) itself throu6h the elcohaniNe

fraa other b xii, =I baronet) the pr0000do Offillies of wohanco,
as Tx31.1 am of loam paid, -are payable in New Yolit :;vincle throudi

the Clearing Romeo and. hare Agee uwt let been eettLed

either In Clearinc

notoe

lora sertificateo or ..,1drich-Vrooland




Tho Olky Of 4ow York h,A, for nany yeare been authorised, by

the ter*, of its Charter, to borrow one in anticipation of the payment or taxon. 'Ath the errwth of the our, and the onormon4 inoroaao
X n the tax levy, the amounts of those borrowing* have Increased to

each an extent that et 'Woes. the City is ihdebted to the. market on
short loon* to the extent of 4300000,000v v4hio4 looms are ordinarily

liquidAtod at the tile-taxes are paid in the fall, and, in recent -years,
in

both the sprint; ant fall, 48 the tax levy is no divided into semi-

Milleal payment*.

The reovemont of the cotton crop in the foil of the

year ordinarily raraiahos pooh a Largo volume of exibango .at that
acme= that borrowers havo been able to count with roasarable certainty

upoll lower rate, in the fall than in the spring, and advantage has beet
taken of that fact not only by the City of Now Ibrk, but by other runl,
olpalitiee Which maks stellar loans to borrow large =as or on in the
Loolon, maret. On ixeuct rd the City of ;7ew York had so borrowed a

total of W1,000000, a mnall portion payable in, .ftrbs, bit thg; groator
part in. Ionlion. 930 breeAdoen of international axonargetnvosed upon
the Zity of Row or the necessity of

otine this largo obliGation hy

the export of eold. The City oarriea its a000unts in a large number of
institutions, both national amd state, looatod in the City of liew York,
40i, under ordinary oirommotanoeN WoU14 have had no diffipulty




The Vow York City

.
-2-

in obtaining cold in large amounts from those institutions. The conditions existing early in Aucust, however, made It impossible for the

City's bankers to furnish the amounts of lAld required, and, bad the City
been obliged to purchase exchange at the rater recently prevailing,
the loss would have Loon enormous. It was therefore determined by the

bankers who undertook the volution of this problem to ask all the banks

in the City to oontribute to e fixed of gold amounting to about

$00,000,000, in proportion to the ariount of their respective gold
holdings. The oontracta entered into between the City, the oontri...

buting banks, and the

gors of the transaction (az. NorE2D & Company,

und maan, Loeb 8, Company) provided for the sale of 4100,000,000 of

obligations of the City maturing in one, two and three years. The
banks which underwrote the iseuee undertook to furnish the !tanagers,

if required te do so, eighty per amt. of the amounts of their subs
soriptions to the syndicate in gold, having the option, however, of
furnishing eter144,0 exohance in place of gold at the rote of 44.90
a pound. The practically unonimout response of the banks of the City

to the call made upon than, au well 17z the universal approval of the
tronsection indicates that the bankers were oorrect in their belief

that a postponevent or default in the pnyment of this indobtadness of
the City could not be contemplated, and that the oonsequences would be

so serious as to justify the plaice of gold. involved. Wile it is
now recognized that the City could have extended a large pert of this

indebtednees in London by the offer of an iiize of new notes payable In

London in sterling, the City authorities noverthelees felt, no doubt

Lam Y,,g4g, CS2ty.:




.45011.

influenood by the Dreesare of yublio opinion, that It wee to the

Olty.a ndvantalge to extInznieh th3 debt at owe, ail woid. the

posvibl/ity of lore vt 4 Inter matarity, rather tlwalto udrizoo it
position is to tvale the ohnnec o oIng able to uot gal six zoo:the
or a year latort

The oontrnot co made by the bDnImi of 7Tew York

plcoed ona-Mrd of their entire cold holdInce undor contract lOr

orrort

lowitt to the oxtont that orazinco could not be fuvniebea.

fttention ir here czllod to tho f'not that the privilege of fJunichtkr
embark.") In plate of Gold porAte Any contributor tlo VAIN

to &Nola

the love of cold by pnrchteina, (=chance audi tt4reforc, ,3critributore,

to thi, rand are, to rovx) mtent, octrotitors in 111,74 Aarot for the
purOhuso

of eterLing oxohance,

PIFTAs




3taterent "third!' largely explains the necessity for providing a
fund, of gold b7 he method adopted, and it is the belief of the Cermittee
that tho auccess of the plan affordo evidence of the willineness and

intention of the banks of the United "tato° to furnieh the means to their
eustaIrre for paying foreign indebtedness which the banks of Now York

alone, without endangering the situation, were unable to provide.
Voluntary contributions were obtained from national and atclts

banks In all control reserve and reserve cities (52 in number), those
citiem, under the law, being required to hold 2V;7!) and 12?1% cash reserves,

respectively, se ngainst 6 in other cite. Contributions of gold to
the fund wev'e received from 1,494 different banks, located in ell parts
of the Uited 5taton. An &repent in excess of 400,000,000. was promptly
Pledged threu#h the co-oporation of the jecrotery of the Treavery and the
Pederal eserve liomrd, lending the payment of the first call of

45.000,000., nine Nov 'fork Institutions advtnoed 310,00000. In

!7eld

for shipment to Ottawa. This enabled the Committee to prorTtly root
the urgent demrind for exchanqe, which wro selling at about 4Z4.02N

The Committee desires to call tAtontion to the fact that the

gold fund was not created for the purpose ofvmskinr a profit, but rather
to nmot an emergency and thereby exert an influence In brincing about

decline in the rote of exchange. The policy of the Committee hae not been
to sell exchaneo freely. This would certainly have resu/ted in the
acennulution of exchan4Te by debtors who doe 'trod to Insure the proteotion

of future maturing oblilations, and, unfortunatoly, miPht also

hGve

44MA 112,12911$4.2911.2NEA,

resulted in releasing orebeess to the contributors to the fund provided to
maet the obligations of the City of Dew York. it was rnther the policy
Of the Commdttoo to use the fund to prevent an undue advance In exchRare

rates, but, nevertholoss, to permit rates to follow fa1rl7 nermra fluctuations and thereby induce American oblirers to arraneo for renewals In

tho expectation that tho creation of exclAnge following a restoration of
export trade would &vold the necessity of exporting any considerable

portion Of 00 geld fund. This Comrittee# of which two merlbers are clso
m4r1bers of the 0014 'InmAl (emmittes,

is conVinced that the polic7 adopted

was a wise one, and that the perpoues of the Fold talui hvito alreloly boon

inrcely seecoplished.

talaving for certtin large pavmonts mule

for account Of the tbited 'States lovernmont, for which the Govern:vat
reimbursed the q.old ?und Comittee in 4:.7e1d, the totaizonouut of the

fund has boon reduced by not over one million l'eunds, and la Jubstan-

tally Intact.
j

liteunderetwading is lible to arise vith rer.Ird to the ultimte
profit and loaa ac,ecunt of the aold, ftnd .:.;omtittee, amd we 7. re Wormed that

the 4ttItude of the iank of 1;nr1snid later referred to who possibly due to

tho 'be lief that la.r.m3 iotts

JI CO Ina* to t he' Iola AIM contribut *re*

Conaideration of the f011owing will, we trust, rAke clear the Gold Arad
.0eordttents poottlons

Antjaa,




The lecul lizit of tolerance on American geld coin la ono-hulf
of one yer cont. ZazTliee .iturulshed by the JuL- muoury kt ;iew Tort will
rarely allow

abrasion exceeding ono-quarter of one por cent. -i;acles

shipped, from WIWern points, herever, 1,,her s eold coins circul:s.to much more

3

10

too uluat f

AvoLy.

for iibr 4ion

lotal of tints on14q.

of ti

is takon out of

t Iaam Yo*, gatt
of

fx

The 4111WitriAlien 4" *Ailed

biatiou

tzita of atili

to i

ot roold

The Myr* worm* of are In

or 441o1 40.0,1 011 vxda ks,Ivivood 'by oartrAn
Mae r1:110

w Toxic. br-mka

Vksilcorsalutod, 'tz.-4141 tbo ()Kongo or tr:nid%rrlog

0cW-6 40 to/10

tr11.0 fund fm AUFirto of tho oaarity7 Witit PAU out of tho toPtimTiOretor

to arrhe Ott tho 000t of incohAjo It la taao nosoascry to natal allomou
tor tLwi Intoroot 4aring trlousolva.V4,
to'Auld

kst)Izep In :Am Yoic,

as 11011

eor

*RUA"

siam

Tht

o-nd sold to t

t

tho pt'rioa -41fm t149 03111.

U tic) expirpturfoot 140awnt to Atom,
old bbtng meellood b

Moilitton at its

of itot1m4 4-4 its bullion v-1.3no

It in

tiO oottlopto th41itH3t coat involvoa In tgAztynte Obi* hoar
not ,:ro. Won -AV, but a oalto4atiozt nzio Wen ton& 4u; t0 trtx

LIMA alli'mrit.

with allowiloo of tiatoreet toliowcbor 33the ma It Ls 0)uncl that Wilcox
imiais of this okaAno.ttim )00. the oontributore &lout
_Low 40, km
46),:-=-4/46

Zoo pgiers4o prioe roaltzoil for ozohiogo alo14 to 4.atotU

taigallair 4111111111114 4. S, ionclo 4littcr twidrig 4.4.10-azoo for 4 intoroat ulloted
b IOW :nallion woks,

proem* titto

It

La prcibablo

that If tbo woou t wuo oloto4 tit Igo

oo),1,143 ozotikao .1.0),Inot 'orj:kirt000 row lii Lofton, tho

rosult vaul4 be a logo to all tiv inntbributora to tan for*4.
0044-014034 b:7 tx do03140titioniNSION nano'
lima) mado, faul borom




on.tIxo batatto

Ow lirot trul

t'Isita

to ?Atom.

ox,Aatated

Als tbo tbm the tuna wt,sti omatod tho Oorntttoe do; trexl the

The :A00,0)0,000 Gold Fund

- 4 co-operation of the Bank of England on two points only, pending a discussion
of other matters of importance which could not be then taken up by cable.
t:

A better understanding of the basis on which the Bank was
purchasing gold shipped to Ottawa:

Jecond:

An arrangement for advances, without interest, upon advice
and guaranty of shipment from New York to Ottawa.

AS TO THE PRICE 2.111)




Faa

AIL,2ICAN GOLD:

The value of the

of gold in the English sovereign in

American currency is

.4.66656

One ounce of American gold coin contains fine gold of the
value of
A8.6046, at the rate of ;;4.06656, ec.,uals

;l8.6046
... 76sh.

which is the value, expressed in sterling, of one ounce of American
gold coin.

This is the exact price which the Bank of England was paying
Zor American Eagles just prior to the outbreak of the war.
aeductions were made to a net price of

76sh.

3d. being further deducted for American Eagles shipped to
3d.

Ottawa

miring the net price for Eagles delivered in Ottawa

76sh.

It has been stated to us that the reduction of 3d. was made
in order to cover the following items:

An allowance for the cost of melting and minting:
An allowance for the cost of transferring Eagles from
Ottawa to London.
As to the first item, inquiry arises as to whether the price
which the Bank of England is recuired by law to pay for 1),...rs

(77sh. 9d.)

does not make allowance for the cost of coining bars into sovereigns, and
required to make this
that, therefore, a .shipper of Eagles should not be

.6611

additional ellawuncse which to a1ros4y covered in ftguring the eluivalent

of tte bullion vklus of the (Told ContAnod In AmerictIn lagles
Ad to the second item, the question arloos no to vther the ank
of.Angland ehould not, if the eltoLmgat turn Wort the cold is shipped to

tn the price et which it resells the gold to New York
a rebate of the oharge which it has collected for U4e converelan of %ries

London, then

Into sovereigns. The Ogrie quelAton wtll arise as to 3d. de6ucted from the

price allowed for standkrd tars.
The Gold .Pool Committee feels tLat tha deduction of 64. on Naclee and
3d,

on barn le not ustifisa

under

the circumstances, but a

cletor understAnding of the rernons for the




deductions mv. *Lance the

jVI CCM

Colunitt
.A4i

to an r,;,rri,rpNtmont for advances

without Interest, the renest

whiet was me.de or this acconmodLtion at the time 4. t143 first shipment

out Of an emergency. &change was soiling above five dollars a
Potlad

end the committee deslrod to be in s position to amp exchunto

at

once before the gold stippe could to resolved and we7who4 at Ottawa and
Credits confirmed. ne necessity for Accomodation on that socoqnt Is
now passed,

nth exchnsge spprouching the point where gold exorts 14)come
unprofitable tad wit/but a bettor understanding vith the Bnnk of gucland

SA to the rute which they will make on Beelon oxportod to or from Ottawt
the GAO Pad Comittoe vill find it tspossible to make any considerable
shipment of gold at one time without risk Of loss on a portion of suCh
Shipments.

The Committee destros to be in A plvdttn %hero it m.ty furnish

exchwe ao long se it mAy .rofitsbly cover witti erlid, tut not to run tho

2b1,..211.1..._.1.0 (.2911,LiaL....agla




risk of o raptd de31tne in the axe/vine,* market.




It has boon genera1:7 estirate4, und this Committee believes

with resonale noeurveri, that this 7esee Asserimn oottsr cro7:, will
somewhat ezeeed 16,000,00U b,,Aco, a7:141 that the world's redviced comsrartien

Of eetton will Itv,ipie an unused balance of the ,,,merlean product of about
5,000,000 baloe. At tho conforenne fr

A.01112:igtOinip it Wall wrested

the maximum credit to finr,nee the notton crop would bo re(13ired
tito wheit the alelnum of the crop bad been picked, ,-,nd the minimum

mvaiceted, that is to mv,r, about ;:licomter let, Kt which tine It was sue-

geeted that a credit of 300,000,000 might os re nixed.
tW0 into ''.,000unt

?his does not

fciStors in the sitwAion.
cl'he method of flummang The

owig A

oothering of the crops
-7ho differeinee in price between this :rear

Itat
AO to i2ito nethod of rimming the crop, It may be 7eneral1y stated. that

IBMs' sdimnoes are male Wore the crop lo

The7 are

1r l7 mnde to the farmo-o by merchtinto ana 2IPPPI7 heralsoo :Lnd are

increased. as the wort or the crop adenncee, the rtwohstU takine a lien
on ti7e iiTowinf, crop and torrominq menry from their barks.

By the 'OA,

ne vett= is gothe/40 the Lot adwnse Is mtde. The morltetine of the
erop throust the gitning znd catrese imposts, and the cotton flueors

The ootton Loan oo1.




1

is a prooess of liquidation, and 'Wu) problem confrooting the 3outh at

this season to not that of arranging new credits with which to finance
the cotton crop as a whole, but rather of proolding a temporary credit

to be employed in facilitating the liquidation of that portion of the
°row, which can be marketed, by enabling banks to extend or renew the loons

that have oireado. been made, and thereby aosist in financing the surplus
which oay net be promptly marreted.

his may be described as a orocess

of clearing or eifting loafts rather than as a prooess of croating n
credits. As to The second point, namely, the price, it io,Of course,
ideot thot with cotton selling at six cents, those banks which loan
on cotton could carry two bales th:s year aBsinst one bolo, at tweive

oeots, loot year..
In order to facilitate the oroceoq of liquidation, which conLenrilates that 10,000,000 bales will be sold and 5,000,000 b les will be

carried, c credit iu in course of beim,- arranood, amounting to
-O,000,000, to be handled bo the following plan

100,000,000 of the

Wvance is to be secured by a first lien unon cotton pledged at not
exceeding six cents a'poond, middling oracle.

3.t:,000,000 is to be

oeoured by a second liken on the pledoed cotton, this °ortion of the loan

o be provided by the haaks of the cotton ?Towing states, to whom, or
through whom, the loans will be =Ade. A fund mounting to three

oer cent. of the amount of the loons olo4ie is to be set aside to covor
ho imoenses of managing the transaction, snd to nay any /oesos ineurred.

ad is to be administered under the directior of a Oommittoe

car lstingof oembers of t e federal eserve Bard, the business,
however, to be condacted bo an overating cemoittes, and , uruier its




Qottor

Loan Pool.

management, by local committees, the

machinery

of which has already been devised.

This Committee believes that the

cotton loan fund will

be

inadequate

for the appointment

to restore normal conditions in

the market for raw cotton, or in the cotton manufacturing industry,

unless it is supplemented by energetic measures to bring about better
facitities, both in the United States and abroad, for marketing,

financing, and

manufacturing cotton.

Last year, sales of cotton

to Europe furnished this country with 4534,000,000. of exchange.
Anything which retards the free purchase or the free sale of cotton,

or the restoration of stable prices for raw cotton, will also retard
the restoration of normal conditions in the international exchanges,
and work injury both in England and in the United States.

In the

opinion of this Committee, it seems desirable that the following measures
be adopted:
First:.

That the fund of 4135,000,000 be completed and
its administration undertaken at once.

Second:

That the New York and Liverpool cotton exchanges
should be

opened.

Plans for opening the New York

Cotton Exchange have reached a point where it may be

reasonably expected that the exchange can open at an

early date provided necessary cooperation is afforded by the Liverpool Cotton Exchange and by the
English banks-.

A fund has been pledged which will

enable the members of the New York Cotton Exchange.

who Are committed for the purchase of cotton at high
prices, to margin their contracts down to

74

cents.

7h

Cotton




set* this relief, confidence is expressed that
the:, nay safely open %he VIWAnfT ilith a reasonable

expecta;ion *f beinG able to rset %he mete% co'd1to ne which will arise.

4c..operaIlor by the

Liverpool Cotton Rs:change On similar lines is nec-

essary before it will be feasible to open %he
new York cotton Twohollyt.

SEM

It le also efeential thrkt no qutiofl as to
coalrebnmd be permitted-to arise tr reTjard

export cotton.

The -:om.,littee notes with great

oAtiefset1031 that the British lovernmen%

already reoftrised thie situation.
Any restraint which rjac have bees Imposed upon

Tnglish merchants or spinnere in the parchase of
cotton should be- reroved.

Referenee hap been

*sae to eons at;resment or landerstain which %,41

had beeo advised exists it ni1t

tr this respect.

It is not unaerstemA MAA the British Govertrfult

am broupht about any sneh understandinr, nor. in
is it nwierctood %as% nelish purchasers of

cotton hove any 4.finitf= agrewsert amonF thfrotIves

in this versr.J.

Advises have riche this country,

Weyer, to the effect that germ of tbe
bamtv have exerted a trono Influence in restraining

the free p'rt o

otton by 1b1=1ish cot4n

-erehaats and srisrs, an4 it 1v hoped thn% the




'e

tzttar, LG.= 1op

'ash IMAM! nay be induced to encourmge ths

purcilace o7 cotton. Iithin rer*sonebl linite
net the aelai mealls of financtng. purchasee of
cotton by Ileg1is4 laere4Ante and spinners should
be reopened throurh adITInoca acainet cotton

bills throw* the disooant swirkst




The first installment it to Le oald for the capital stook of
the ?edema Bosom° Bank OD November Itni. The ?Ian announced provides

for the tranefer of reserve deposits to those banks, commencinr with

If the otration is sucoessfUlly conollied, the

November 16th.

,Ideral Reserve 13

of Now York, wi hin a period of six months (and

poesibly ot the and of three months) will have rocolved p4,7ment for

over t10,000,000 capital stock in gold, and will have reoeived on
deposit at loamt 1100,000,000 of the reservet of tho National Banks
of New York 3tate, aud possibly much more.

The federal Reserve Act provides that notexceeding 59; Of the

initial reeerve deposits may be made out or tAe prooeods of comercial
per Walsh the banks may allow the ember banks to rediscomt.

It is

therefore impossible, at thin time, to foremast the conlition of the
Poderal Reserve Liank of Faw York resulting from the initial transactions,
'i.e the amounts of disoonnte slimed to the vstiber Lanka will domed,
Upon the rte of digtOolInt established bZ, the banks

Upon the rate of taterest prevailinc in the City of
row York.
(Z)

3olgeghat upon the extent to whiCh the rag york City

Banks are required to make mmento for aamnit of
their correspondents boated In ?ederal iteoorvo Districto aL,L.

Pederal

FMTO gank

(4)

Tbe extent to whioh they ma7 depOsit 0/16 of their

reerven, tho aopoolt or-whichts optional*,
jib Moral aeserve Bank* of the United $taten aro In the
ourso of establitariont. Jails for payment on the oupital stook have

already boon =do. Tho ability of this bank to farnish re/d in a =,tter
ror future aonntaaration, an4 mould not, at thie tine, be node the
'ualtio or any traneaotion or oropenni*







21GETI1'.

CICTIT OF fap,000,000

famarc.

Your Commdttee has been inforned that about a month aeo,

when the visit of Slr George Petah ard. Bail p. Bladrett, :wee was

first prpposed, one of the subjects to be corsiderrd et the oonferences would be a pomeible credit which would, in effect, afford means

for extension of the obligations due in Nnglend by bearers &rd mer-

chants in the United states. If it he been possible to arrenge such
oredit by exchange of oableo at that tine, your Committee would

have epproved of the transaction. It would how supplied exchante
at a moment when the derand was urgent; mrd it would heve ineured us

eanst avy serious dralt on gold reserves for the time beine, and
given this country a period for reafjustmort during which local conditions could ht.ve been brought to meet the extraordinary eituetion.
Since the date when the suggestion of a credit was eade,
exchange in large teiartitiee ilLa been supplied to the market, end
confidence has been greatly restored by the knowledge that the
New York City Liyudieete and the Gold Pool Committees' operations have

been effective. From information WhiCh your Coacdttee has gathered,

it is strongly of the opinion that a continually incrousieg supply of
excherge is in proepeot. The export of food products and raw and

manufactured materiels that Euxore neede in the present oriels (not
to mention

nitions of war) must continue; mills end menufacturing




Credit of 1120,000,000 Sterlinj.
-2e
ooppanies

are

working overtime on orders for goods which, in mepy

oases, will not he ready for shipment fOr some menthe, 4nd which

Will rake a corresponding supply of exchenge. The opening of the
New York and Livereool Cotton

oheneo, eincident with the owe-

pletion of the Cotton Loan Pool, if a000mpenied by assurances to the
merchants und spinners of 1i:belie:Id of the willinenese of the Anglia/1

banking oommunity to finuece reaeonabie purohasee of cotton from the

United Stetes will Ellen udd to the supply of exchange.

For this, and other reason that it is5 not neceesary to
elaborate here, your Cormittee is oonvieced that the adoption and
employment of apy extreordiPary or unueuel measures ut thio time

are unnecessarv, es such /setter might, in fact, be interpreted as an
expreeeion of the belief of this Conmittee that the present eituation
required such meagures, end beoense unusual measures are likely to

brine about unexpeeted and possibly uneeftired results.

It will bo noted that the foregoing reluteu entirely to the
conmerciel situation. No account has been taker of the possible
opening of the Yew' York Stook exchange, god the additional demende

that might arise if any considerable amount of 'awash owned Amerioan

securities were resold

in

this ocuntny. Your Covnittee is firmly

of the opinion that it is premature to discuss the opening of the
New York Stock 7xollange until the adjustment of the coumeroial oituation
has been demonstrated..

In the meantime, however, and, with u view

to this step, it is reooemerded that a Committee from the New

York

should. visit London for
Stock Bxehange be appointed, which Committee
oonference with a like Coanittee from the London Stock *change, and




Credit of fi20,000,000 Sterl

-3-

for a careful study of the situation there. A tentative arrangement
for a large sterling credit, predicated on the understanding that Its
repayment will not be made in gold, but in oommodities and manufbetared

goods, would mrke it possible to consider the opening of the $tock
Asehange sooner than it would otherwise be stfe to do, should other

conditions permdt. As this step iF rocotmizsd to be a desirable one
from the point of view of both countries, a presort discussion of the

form of such a credit and a tentative Agreement as to its terms, at
this time, would be beneficial. A memorandum 'supplemental hereto,

outlining t plan ditcussod with Sir George Paish and Basil P.

31kwkett, nati., is attached.




Oomditioned upon the understanding suggootod in memorandum

"Eighth", and it a view to assistance in meting conditions *hid%

soy ariae thro1i$1ox00 sive sales of Arairioan soeurities bold in
Europe, the following hus boon tentatively discummed with Sir George

Paish pad 3asi1 P. Illnahott* Esq.
Th. at & rovolotag sterling soodit of, Way, 420,000,000.
sh&U be crantod by or through the Fienk of igland, or other tiritish

beakers, on the following plrets

The orodit to be twollobt, s a supplement to and only
after the U00,000.000 Gold Fund has been shipped, ta order
to avoid farther gold shipment.

Dimfts at 90 days* with one agreed real, on an aemptor#
or aseoptorei to be defile:USW by the irrentorlis

Drafte to be forwarded direat to Fag laid for disoomitt under

(2)

en agreed a:mon/cat, aawd denial or cables to be mild &Animist

thou

Drafts to be dn b

the Gold Fund Committee., or a new

%tee reprozonting guarantors* consisting of Umks, trust
companies and 'banking firms in the United States acceptable

to granter,
Prooseds of sales oX: exehomes to be loaned upon seouritf of

arproved bonds and *teas as collateral* with the obligations
of borrowers, who are setisfestory to the ensrentors, to min,.
tuts a margin of not loos than twlgt7 pr cont. (20'14 of the

fees Tau' of the )oon.




a.

.....12,sroleraopt)

(6)

V

Drafts to be drgwn /nly as required to supply exchancp

to ta'al the plaoe of gold remittances.
(1)

Drafts to be covered at maturity in the Ilsual 0%7 if exohnnb, can be purchnse4 at or below the cost of ex?orting

cold.
(0)

If exchance cannot be Durchaled

70, and parant of

the bins "'Mad require the ex,ort of cold, further 90 day
renewals to be orrmted provided that, in Vte opinion of
he Peaeral licserve 30La1tL, a further loss of gold would be

:7)

detrt motel to our financial nitration.
The grantors of the credit to he entitled, after the first
renewal, to require pavraent, in whole or In pszt, in ram yarx
exchange.

rinel dollar balances hammer, to be used only

the purchase of Ppierican prodnots.




l'ArTnit

11,Aate.

70 Tr

'

'

CITY.

It suet be borne in w5n4 that there le no oertetnty los to the
amount of gold whichwill be Feld, into the Yederel Aeserve Unk et the
comeeMOMP0Set of ite operatics.

The, capital payment, which most be

not within e period of fromnimety dap to mix seethe, ie gold, total
about $10,000,000. The payment of reserve*, tegrogating #100,000,000,

be medo in rbited eteites notes rind 'diver cortifloctes. While
It le hoped that the beide Se the WV Yerk Distriot will mks

Womble portion *fiber MOM* ra711111ts in Fold, it is nevertheless
quite possible thst u Urge proportion will be Aude in legal tender
.. Jotes, and the ability of the Pederal Peeorve Bent to 4,ecenelute cold

freeiether sources them the Vetted Stetee Treseur7 will therefore demnd
Apont

44

The degree of confidence which the bank on***
Crsin Ito .;13ember bulka, whit*. nap tele. the principal.

itad rescreens
(1)

chance in the rresent currency less, reedatesting
the variouv forms of geld oertilloeto0 &nd level
tender metes so ao to force the withdrawal of small

derosdrottens gold oertiflostes Prop circulation.
ofA trEnstctios involving the present pledve of the credit of
th 1sdsm1Amearve Bonk to furnieb geld would be jaxtirted wertil the

Federal Resorve Berk (Supplemental Nemo)

-2-

bank has beer In operation t sufficient length of tine to demonstrate

It ability to Accumulate sufficient eo10 reserve to juetify such a
transaction.










Leeeeeele ekeeeeee 4. e
fl,eevernee,
Honorable Paul le. Warbueee

Federal Reserve Board,
Washington, D. C.

Gentlemen:

On Priday, October 23rd, at a conferenee called by the

3ecretery of the Treasury, et which were present the Secretery of
the Treasury, the nembers of the Federal Reserve Board, the Comp-

troller of the Currency, 3ir George Paieh, Basil P. Blackett, .esq.,
and a cannittee of bankers, the undereiened were appointee a committee
to prepare a report and memoranda covering

various subjects die-

cussed at the conference.
After careful consideration, your committee submits herewith

its report in the form of a proposed letter to lir George ?sash and

Basil P. Blackett, esq., representine the Chancellor of the Iritish
Fa-chequer.

Attached to this letter are the various memoranda mentioned,

all of Which are submitted for your information end as the best Judemertt of the eoemittee an the subjects discussed, as enumerated in the

proposed letter.
The plan forming supplement to memorandum "Sighthe herewith,

we believe briefly expresses what vas discussed at our last conference
in Washington, which was attended by nir Georg* Paish and Mi. Blackett.

It embodies the beet judgment of the members of the sub-committee, but
has been prepared without conference with Yew York bankers, 'hose

oo-operation and approval are essential to the success of any such

Hon.0.3./larain.
undertaking.

-2

Eov.4,1'

The members of the committee therefore respectfully

suggest that it would be harmful to the BUO0888 of the plan were it
to become public before those who would be interested in New York

(and ariaally those in London) have been given opportunity to consider

it.

We await a further expression Of your views in this regard

before taking:,.ny stens to ascertain the attitude of the bankers of
New York.




Respectfully yours,

(s?4,)

49'.
for the Committee.




Ncmimber 4, 1914.

Honorable jharles S. Hamlin, Governor
Henorable

;41. Warburg,

Fee4ere1 Heeerve Beard,
Waohington,

Geetlevens-

Un nsiday, October Mrd, at a conference called by The

eicrotary of the 4:reasury, at whieh were present the leeretury of
the Treasury, the members of the Modena Aererve lioard, the Cop-

troller of the Jurrency, 3ir George ?sash, Beet' P. Blackett, Si.,
ane.a oommittee of bankers, the undersigned were appointed 4 corrattoo

to prepare a report unit memoranda coverine the various eubjeets dis-

cussed at the cenference.
After careful oonsideration, your oommitteo submits herewith

its report in the form of a propoeed- letter to 3ir Goon+) faish and
Basil

Blackett, 3eq., representing the h11 or of the Britieb

3xchequer. Attached to thie letter aro the various

mort4.114a mentioned,

all of Whieh are Submitted for yonr information anti. as the best judge
moot or tb oommitt ) on the subjects discussed, a* mum Aed In the

proposed letter.
The plan forming supplement to Iremoraodum "nighth" herewith,

we believe briefly expresses what was dist:weed at our lart conference

inehington, *doh was attended by Sir George ?Mph and

',- )..111ackett.

It embodiee the best judgment of the members of the subecommittse, but
has been preparcw without eonference with Aew York bunMwrs, whose

oo-operation and eppro '1 c e oseenttal to the suceess of any suCh




-2-

Hon. C. S. Hamlin.

Nov.4, 1914.

undertaking. The members of the comiittee therefore respectfully

sugost that it wou31 be harmful to the suocess of the plan were it
to become public before those who would be interested in New York
(11.41 equally theme in London) have been even opportunity to oonsider

it.

o await a further expression of your views in the recArd

before takinc any steps to asoertain the attitude or the bankers of
Sew York.
i

spectfully yours,
(Sgd..) Benj. :Aronc, Jr.
for the Committee.




November 2, 1914.

.ir George Paish,

Basil ?. Blackett,
nepreoentatives of the Chnncellor of the British fteheener
aooredited to the Honorable the 3ecrotary of the Treasury
of the United nate'.
Centlement-

it a conference in ',n1shington, oonvoree by the Honorable

William G. Y4a400, 3eeretary of the Troneury of the United Antes,
whioh vms attended by the members of the Federal lesenve Board of the

United :Antes, and representatives of banking interests of this country,
the undersigned were appointee a Committee, representiav the banking

interests, to confer with you in order that, after exchanging views as
to financial conditions in .':zIglani an0 the United States o'ecipitated
by the war in Vrope, they could submit to you memoranda outlining the

conditions dismissed, and possibly consleor and submit to you, for
transmission to :nleand, such proposals as, in our judgment, mould be

to the mutual advantage of tho business interests of both countries.
Lased upon the interohwe of views at the reoent conferenoe,
3 upon feats that have develened in recent conferences In New 'fork

and elsewhere, and upon or general knewledge of the local situation,
combined with information In our possession regarding the situation in
I:lug/an:0, we submit the following explanatory memorenda.

Because of

the inherent economic differenoos between '4ngland's position an0 that

or the United nate*, and the differences between banking systems and
banking methods In your country v.n0 ours, tbls memorandum Is neoessarily

elaborate, but it, will, we trust, afford you 4 full comprehension of the

situation.




L George Paish
FIg4Ts

-2A statement of the position of the Vow York banks on

August 1st, and thereafter, of the rousons why it wan
dowse(' desirable for the Winks to issue Clearing NOM
oertificates, and to apply for :=Lldrich-Vreoland ourroncy;

including a statement, as of Ragnet let, of the members of
the Cloaring Houso Association.
A statemont of gold shipments mado Astor to the month

of August in payment of obligations,

estim).to of the

proluble additional indebtedness or American morehants,

banks, and corporations to Atrope on or about lopternber

12th Lot, and a statement of the oountry's export balances
for =gust, September, and October (estimatod) 1914.

Iglaas

statement explaining the reasons why the settlement of

International balances necessarily fal/e upon tho bunks of
New York City unti not of the country at largo, and uhy a
weakening of the New York City- banks, through depletion of

gold roserves, Is serious, and is reflootea at once in lack
of confidenee and curtailment .of ore it throughout the
country..
)

A statosont respeoting the syndicate formed to guarantee
the papcient of about ' 00,000,000. of gold to meet te debt

of Nef York City, due in London (and Pule) up to 4anuary
1, 1915.

lam=

L statomont of the necessity for and the creation of the
so-oalle( "Gold ?undo" the difficulties undor which it wan
oompleted, Its method of operation, the expenses thereof, ane

the risk of loss incurred by the partio5pants; inoidentally,




..)eoreeal sh
a memorendoot pith remord to the pries paid by the Bank of

7fte1and, for American eagles delivered at Ottawa, and certain
questions on ehioh the ',Gold TPund Oon-ittee' deeiree information,

ligwing to do with the price alleeed by the Bank of lngleed.

for mid delivered -La Otteea.

Atetement of the objects end the terms and conditions of
the so-called "Cottle. Leen Pool" of $135,00,000, and of the
method. by which the cot 'on crop and ite molOnOnt to market is

finanoed, with certain gumeetlinos
A etetement in rempeet of the 1,edera/ Alserve enne of gew

Terk now in lourse of organleation, and its bearing an the
nnttor under aiseueeion.

A statement to reepeot of a poseible Irodit of U0,000,000,
the Committoeos opinion in reeard thereto, and a ougoeeted

plan etich mieht to adopted at a Later date.
Teem, statements are P bmitted for coneideration and discessiz

and are put forward for the information of the oonferene0 as An =prossion of the belief and opinion of the Oommittee.
At th0 general eonference between the Honorable the 5e0rtAary

of the Treasury, and the ?edersi Reeerve Bonrd, add the Pull CommitIlm

representing the benkere of the United States, at which thi

Oommittee

.s appointed, with the information then at need, it was expected that
his Oonitittee, after oonference with you, and a 3areful eanvase of the
financial eituations in Ragland and in the United 7,tetes5 would here
90006 speolfic proposels to eubmit for the eonsideration of the Yeiglieh

Government, or or tee fineeeini interests in Rnerlanda
-1th the Am York City Gold 4yndioate and the Gold Fund Goolatt

-4-

U-r GeorePLALA




funds aggrogat tag .190,000,000 (only t*trysail amount of which haa as yet

been availed. of), and with tho comolet lOn of the tIotton ?ool Loan

Syndioate, ail in this country, and with the ek,00ted oarly nom 1UE ion
of arranoomento to reopen the New Tort Cotton ftehange, with tall protection to its membore as to WO. etir.,i 2ontraotv, trd with the arrarr,,,.:.nts
,atle by the 7i-'1"217/ith Government to discount pre -moratorium aueeptanooe of

lish banks and accepting housev, find to postpone pre-moratorium liabili-

ties to post-moratorium business, and the resultant facilities offered
for nee acoeptance usiis In raondon, this Corotttee ia Of the opinion
that the on1;4 additional step neoessary at the prellorst time to odjust

the Internist tonal =more ial taunt Ire lad enable bankers, corpor iOne,
krxt businoss time of the Unitod Ittritev to meet oblioatlone as they nature
at normal retro of oschstrim, Is an understending that the free purohase
Of !porton/I oolvon by Znelish tpinners and merohantr hall be enaouragea

by the bank.,erv and ovornmont authoritiee of Meland, and that arrengotszte
should be zi rotoptl.y made to open the taeuel chtuntels for advances tvainst

-e,stton or for the dismount of cotton s000ptanso
The Cotton 1,0ati :Roo 1 is estimated to provide fogad* to enable the

banks and morohanto of the -7outh to carry over four million bales of

'otten until rebraa,z7 le 1916.

'11.

best expert opinions estimate tho

excess over the oonsumption at not over five million bales. Thin alleriittee

in of the opinion that

VA3

!Import low 7,1rioe, being considors.bly under the

cost of production, will torsi to induce cotton r.V1 rchsnts and spinners of

itnerion and Europe to buy somewhat in wcen of their needs, ana that this
indutsoment rill result in the absorption of oone (1.orably more cotton than
the amount generally ont Imatod.

aorparato statohient has teen .rtkda in record Co the international




Arr cAeorgo =salsa

- 5-.
socurity markets, or to the openinc of the 5ew York or London Stook
iiktohAnges

The measures above enumerated we believe z:re adequnto and

will eventually oorroot the international commeroial situation, but
would be entirely inadequate should any oonsiderablo volume of

socurItios be thrown upon thls market on the opening of the Few
York Stook ,cohance.

Jnti1, thorofore, the commercial situation

has boon adjustAi,

the oxohatges have turner in our favor,

any discussion

an

boarinc on the opening of the New York ';Aock

liohange to a free and unrestricted market for Amerioan soourittos
cwnod abroad would be premature.

lespeotfully yonre,
(gd.) James Brown,
Benj..

ftrong,

H. Wiggins




7117.,. lk,,,;

02'7- 2 tic

At confersnco of 2,woct York bo2kore held innediii

.ri r

to the declaration of vsr ui %ngland, Opinions vire unnaimous that the
banking position la this country would rhortly develop Ao y. lines

similar to those ex!-,erionoid in the fall or 1907. Up to the tire or

thece g'ig:1711g: rid,t° ga Ann ittgrihkirtelo0a4ob
oontrlion of cre4it rosuiting from this l*rgo leer or gold reserves,

v.,.

rarther aad 1A^ger controw,ion would bo imposed upon the Nev York bunks
by mison of the vithdrnma of funds by Winks throughout the country
who mitiht bo inspired throu6h foor to strentfthen their pomition
by Inoreheing their ronerver. In 1907, uftor the crisis of 010

:,ational &Inks to
panic bad pvJescd (an Deoember !.nd), the reports of the
the Gurreney lodio,4toci th.,t even 4t that time, country

the jorptroller of

banks, as diwincuished from the neserve oity and C!entrvil
Reserve

tty bAni,s, still held OX10088

ch reserves of

01116,000,00;

and it mast be borne in mind that this loqvge out of coasiderstion
the nommuleelou of reserves loubtless node by 6bout 10,000 tits

balks, 4s to whisb floras h&ve not been compiled. ill Orqer to meet
the XIV York ae ring
strola Imposed by this prob. ble dovqlopment,
eertlfio:Aqa
Ioare ssooittion decided to tome 01erlug 170uso on
of oievtn b91Aness betresl.n oembtme, ,nd the
tbs

for to ewtlement

of issuing 1drich'e,serotary of 141 7reAsAry annonnood his intention

The i'ostIU11.2.LINLEI-Ie Bailkeg




-2Vreeland notes, aft authorized by existing law. These meanures

afforded protootion to the Banks of the City of Xew raft., both
National. and. itete, emei enabled them to retain about U40,000,000.

eold reserves which they held at that time.
Of these gold reserves, :',.60,000,000 was shortly ploq, e for

the payment of the debt of the Oity of 'flew 'fork, and, of that amount,

about 160,000,000 le atill to bo Parniehed, leer seoh amount an is
furnlebed in esohange. Of about 20,000,000 a1reat4 paid, n5,000,000
ha e been by shipment of gold an4 5,000,000 by purchaee of exchange.

Of the ::j00,000,000 contribeted.. to the gold pool, $46,00e,000
was ple6epd by the banks of New York City, of *Moll 01,250,000 has nor
been walled. U4.250,000 hal therefore boon taken to date, leaving,:

*93,750,000 still to be furnished at of the present Now York City bank
reserves. At the preeent time the ;Ilearing ROU10 banks show a email
excene eaeh reserve. When thee oblisations -mare entered. Into, the
Now Trk Welke Iwo from 45,000,000 to ' 740,000,000 under their legal

reserve.
When the Pederal Reserve Bank of New York is orbeniee01, it

is entlieeted that a total of about 026,000,000 will be withernem 'from
New York .Ity National Banks to make capital and reeerve payments both

for their own accounts ana for thnee of ttedr eat-of-town correspondents.
Simultaneously, the reserve requirements will be redueed from 2.S% to

1, and it It ettlmatee that, after makine these payments of
12ag000,000, the reduction of reserve reeeirenewee will leave OXOOSS

renervee in the vault

f the Nationea Banks of now 'or"It' Aty augreeating

The iesit7e




f the New Tort

ebout 440,000,000. If this eiculation is correct, we muet

:ler

the result of the completion Of the throe operttione referred to,
. aimely, the withdrawal of the entire amount of goad which mey be called
for on accommt of the City of New York and the Gold Puede and the

paymente and reserve redeetions resulting from the areanization of
the Irederal Reeerve Bank. The total payments to be made, agpTeeating

about 493,750,000, will be partially offset by the 460,000,000. enined
In reserves, due to reduction of rosorve requiromonts, loavinF the
;40g York inetitutions possibly 435,000,000. to 40,000,000. below the

required legal renerve. The amount of deficiency In reuerve mey, by

the term of the ?ederal Roaorve 4,ot, be rurthor offset If member banks

are elloced and avail of the privilege of rediacennting commercial
paper, tit the time of opening of the PederaiReserve

Bank.

Statement of the Members of the New York Clearing House Association
From Reports as required under Article III of the Constitution.

For Week ending Saturday. August 1, 1914.
JOS.

'"CAPITAL

MEMBERS.

$2,000,000
2,050,000
2,000,000
6,000,000
1,500.000

Bank of New York N. B. A
Bank of the Manhattan Co
3 Merchants' National Bank
4 Mech. & Metals Nat. Bank
i

2

6 Bank of America
8 National City Bank
12 Chemical National Bank
13 Merchants' Exch. Nat. Bank
15 Nat. Butchers & Drovers Bk
17 Greenwich Bank
21 American Exch. Nat. Bank
23 National Bank of Commerce
28

Average.
$22,317,000
36,130,000
20,489,000
80,745,000
26,538,000

LEGAL
TENDERS

SPECIE

Average.

Average

On Depont with

C1.11114....,
Member,/
carrying

.% ca.th Re.e,rve

LEGAL
NET DEPOSITS

Average

$20,668,000
41,900,000
21,158,000
85,528,000
26,499,000

11,218,000
1,541,000
1,457,000
5,882,000
1,749,000

$4,224.000
9,482,000
4,254,000
15,416,000
5,052,000

$772,o0o
1,888,00o
4,930,000

300,000
500,000

42 089,000
4,357,000
2,115,000
516,000
2,520,000

13,252,000
2,218,000
205,000
57,000
205,000

196,234,000
24,790,000
8,858,000
2,171,000
10,822,000

5,000,000
25,000,000
500,000
2,250,000
200,000

4,693,300
16,690,600
1,009,800
1,357,900
435,800

47,846,000
140,272,000
4,871,000
21,247,000
1,967,000

10,217,000
21,903,000
728,000
3,696,000
409,000

1,552,000
6,231,000
840,000
1,579,000
148,000

47,890,000
117,971,000
4,927,000
21,852,000
2,313,000

3,883,000
7,912,000

28

1,173,000

3c
31

2,582,000
611,000
984,000
312,000
3,269,000

88,412,000
21,819,000
9,257,000
11,595,000
75,814,000

1,500,000
5,000,000
250,000
1,000,000
10,000,000

7,676,000
14,344,700
65,200
2,870,500
23,177,700

26,591,000
90,034,000
1,561,000
13,867,000
115 527,000

3,759,000
19,503,000
452.000
3,102 000
25,158,000

2,387,000
2,572,000
107,000
123,000
2,159,000

24,077,000
91,241,000
1,766,000
12,625,000
106,457,000

50,000
3,497,000
49,000
669,000
4,936,000

53
54
55
63
65

4,000,000
250,000
500,000
750,000
5,000,000

3,468,600
789,000
1,916,800
706,200
9,645,700

45,247,000
3,163,000
8,667,000
4 215,000
102,020,000

9,082,000
786,000
1,536,000
979,000
23,462,000

3,063,000
71,000
768,000
212,000
5,460.000

48,208,000
3,403,000
9,127,000
4,180,000
115,201,000

1,579,000

6;

33

3f
42

44
45

7c

197,000

446,000

71
72
74

1,000,000

1,789,800
1,290,100

12,928,000
3,219 000
4,901,000
15,027,000
9,293,000

2,610,000
309,000
1,137,000
2,963,000
2,332,000

I 062,000
367,000
253,000
1,169,000
142,000

14,425,000
3,481,000
5,582,000
15,522,000
9,586,000

250,000
1,000,000
200,000
1,000,000
1,000,000

505,000
2,089,900
759,700
2,598,500
2,844,800

3,998,000
12,968,000
3,761,000
25,099,000
24.400,000

779,000
2,120,000
706,000
5,950,000
5,218,000

244,000
926,000
520,000
1,752,000
1,433,000

4,241,000
12,784,000
4,752,000
29,267,000
26,680,000

2,271,000
5,891,000
1,88o,000
1,083,000
2,145,000
1,430,000

666, 000

309,000
1,276,000
618,00o
350,000
180,00o

10,795,000
24,115,000
12,753,000
6,987,000
10,125,000
6,720,00o

2,193,000
14,824,000
3,432,000
2,097,000
2,618,00o

939,000
375,000
785,000
io8,000
490,000

2,696,000
11,028,000
7,156,000
1,576,000
2,322,000

20,788,000
102,559,000
28,179,000
15,590,000
20,843,000

102
103
104
105

4140,000

17,988,000
981,000
1,388,000
4,448,000
2,251,000

141,517,000
5,900,000

107

3,338,000
1,042,000
1,016,000
2,223,000
1,642,000

29,554,000
7,541,000
8,669,000
20,436,000
13,940,000

100,000
200,000
200.000

2,091,600
803,800

f , 000, 000

1.000, 3::>

1,000,000

928,300

9,317,000

:1,500,000

$ 75o, 7o0

19, 134,000

1,000,000
1,000,000
1,000,000
1,000,000

345,500
6o4,800

10,832,000
6,981,000
10,017,000
7,927,000

i,008,000
1,121,700

....... ....

18,729,000
842.000
1,218,000

1,839,000

613,000
280,000
376,000

3,000,000
1,000,000
1 000 000
2,000,000
1,500,000

11,545,300
1,165,500
555,700
5,892,600
848,500

45,951,000
10,708,000
9,901,000
29,899,000
14,129,000

3,946.000
997,000
1,049,000
2,746,000
1,384,000

527,coo
129,000
223,00o
250,000
692,000

Totals, National Banks
"
State Banks
Trust Companies
"

112,600,000
16,450,000
46,250,000

173,907,700

32,382,600
90,640,500

1,425, 700,000

299,965,000

74,081,000

630,490,000

63,415,000

6,973,000

61.095,000

1181,243,00o

Totals, all members

175,300,000

296,930,800

2,056,190,000

363,380,000

81,054,000

61,095,000

1,935,821,000

Decrease

Decrease

,,

17 State, June 30, 1914
15 Trust Co's, June 30,1914.
As of July IS, 1914.

36, 838, 000

21,422,000
33,045,000

2,286,000

Banks : Cash Reserve in Vault, $374,046,000
4.
Trust Co's : "
70,388,000

46, 000

5,5oi,000

Decrease

21,692,000

(i5.4)

$444,434,000

Decrease

Excess, Po, 4.0
Deficit,

72,186,450
$435,830,950

7

877,000
343,000

Sc
61

245,000

82
83
84
85
91

346,000
495,000

92

9(

394,000
394,000
267,000

'of
io8
113

III

114
115

ii6
117
115

41,578,000

41,578,000

Decrease
163,000

Decrease, $13,430,250

Decrease,

1,798,450

Excess, $ 8,603,050

3,094,550

Decrease, $16,524,800

Decrease, $3,677,000

Actual figures this morning
Totals, Nat. and State Banks
"
Trust Companies ...

1,423,407,000
635,348,000

272,752,000
60,137,000

71,646,000
7,045 000

1,422,749,000
488,790,000

41,737,000

56,547,000

Totals, all members

2,058,755,000

332,889,000

,78,691,000

56,547,000

1,911,539,000

41,737,000

Increase
1,182,000

Banks : Cash Reserve in Vault, $344,398,000
67,182,000

53,065,000

f11

(I5) 73,318,500
$429,005,750

Trust Companies' Reserves with Clearing House Members, $56,547,000

July 25, 1914,
August I, 1914,

3,234,000

Cash Reserve Required, (25'1() $355,687,250

$41i,58o,00o

Clearings for Week ending August 1, 1914,

Decrease

Decrease

$1,838,183,016.11
1,588,913,808 47
296,815,972.90

Decrease

Decrease
46,776,000

10, 692, 000

Deficit, $ L1,289,250

Deficit,

Deficit, $17,425,750

Increase
3,000

Decrease, $35,004,250
8,595,250
Decrease,

6,136,500

Decrease,

$43,599,500

Decrease, $10,692,000

Balances for Week ending August
July 25, I!
"
Balances this Day
August

ioc
iiE

'IC

21,394,000

, 500

97
95

38,688,000
15,156,000

Decrease

3,677,000

76
77

,. 1 ,883,000

1,454,578,000

451,000

Cash Reserve Required, (25.4) $363,644,500

Trust Companies' Reserves with Clearing House Members, $610395,000




21
23

13
15
17

21,082,000
5,111,000
1,498,000
2,603,000
15,850,00o

187,702,000
7,534,000
15,877,000
48,628,000
16,360,000

Clearings this Day

8
12

77,634,000
22,339,000
9,221,000
11,717,000
63,823,000

21,222,100
1,307,900
5,388,900
7,348,300
1,566,800

"

6

15,054,800
2,371,200
1,948,100
1,779,400
6,916,000

10,000,000
1,000,000
4,000,000
2,000,000
1,000,000

Aggregate

1

2
3
4

3,000,000
2,550,000
1,000,000
2,000,000
3,500,000

26,451,000
126,045,000

Trust Co's:

NOS.

50,000
1,531,000
56,00o

3,706,700
13,065,500
4,211,400
1,201,300
11,614,000

Aggregate

Average

198,630,000
28,644,000
8,954,000
1,973,000
9,649,000

1,500,000
10,000,000
2,000,000
1,250,000
5,000,000

As per official reports
29 National tune .o, 1914

CIRCULATION

32,916,900
7,755,000
761,800
111,100
1,070,100

/ ,000, 000

Pacific Bank

$4,346,800
4,719,900
2,097,700
8,874,600
6,186,60o

LOANS AND
DISCOUNTS

3,679,000
397,000
475,000
48,000

25,000,000
3,000,000

30 Chatham & Phenix Nat'l Bk
31 People's Bank
33 Hanover National Bank
36 Citizen's Central Nat. Bank
42 Market & Fulton Nat. Bank
44 Metropolitan Bank
45 Corn Exchange Bank
53 Importers & Traders' Nat. Bk
54 National Park Bank
59 East River National Bank
63 Second National Bank
65 First National Bank
67 Irving National Bank
70 Bowery Bank
71 N. Y. County Nat. Bank
72 German-American Bank
74 Chase National Bank
76 Fifth Avenue Bank
77 German Exchange Bank
78 Germania Bank
80 Lincoln National Bank
81 Garfield National Bank
82 Fifth National Bank
83 Bank of the Metropolis
84 West Side Bank
85 Seaboard National Bank
91 Liberty National Bank
92 N. Y. Produce Exch. Bank
96 State Bank
97 Security Bank
99 Coal and Iron Nat'l Bank
100 Union Exch. National Bank
118 Nassau Nat'l Bk., Brooklyn
102 Brooklyn Trust Co
103 Bankers Trust Co
104 U. S. Mortgage & Trust Co
los Astor Trust Co
io6 Title Guarantee & Trust Co
107 Guaranty Trust Co
108 Fidelity Trust Co
110 Lawyers Title Ins. & T. Co
II i Columbia Trust Co
113 Peoples Trust Co
114 New York Trust Co
115 Franklin Trust Co
116 Lincoln Trust Co
117 Metropolitan Trust Co
119 Broadway Trust Co
____

*NET PROFITS

$109,601,810.65
95,095,253.82
23,383,391.37

OLLOIPMFAV,i FRIWITO AUGUin 3rd.

An exact statement of the shipments of gold daring the first
Wen months of 1914, and of its destination, would require consider..

able investigation, whieh time does not prat. In general, it may be
said that in tbet period the banks of the City of New York exported, in

meek figures, 4130,0i.14000. of gold, leately in Eagles, the principel
mneent berieg beat teken by the Bank of France, end, indirectly, by
the lalohebanke The inducements. offered be those institutions to

attract gold in settlement of international belences were understood
in this oountry to have deprived tee eenk of Fngland of the opportunity
afforded at that time to strengthen its gold holdings, and mmoloubtedly
wa

occaelomed be the willingness of the English market to continue to

exteme aellemmodation to its customers in the United States in the
aecestemed volteel. It is possible that the occurrences of the past

dew menthe in international exchange may be explained by the fact that
France anti Germany did not renew aureent American indebtednese as fueely

tbe nnglish mart did. Investigation conducted by a wpeolal epee
:Atte* appointed at the request of the Federal eserve eeard in tin latter
pert of September disclosed the fact that, as of SepteMber 12th, the total
ascertainable current international debt meturing between that date ani
January 1. 1915, amounted to about 460,000,000. The Items investigated

included bank bolances, maturing securities, interest end dividend
obligations, commercial omedits, finance bills, and indebtedness for

aecuritieo sold. As to sems of these eceounte, oetimates were necessary,
and it is recognii,eel thet information of this chereoter is inaccurate







and liable to be misleoaing. Its offset or:mounts were anown to be about
:150,000,000.1eaving the net inaebtedneso as of that date maturing

before January /et, in round tiger'', W0,000,000. due to Fagland,Frenoe,
Germany, Canada, and, to some extent, other niropear countries. Me
amounts maturing were :about equally proportioned over the fall period

of the yeam. It sbould be understood that s considerable portion of the
American indebtodnose to the Iondon market, Maturing in the period, between

October lot and Jormegy let, wa created in anticipation of the purchose
Of cotton bills, whieh have always been considered Gash in the UnTlon
IX:, asst,

ao further data hao been obtalmd in connection with the present
amount of the, current international indebtedness" but opinions asked ct*

bankers convorsant with thin matter would probably juntif the belief

that over one-half of the net indebtedness has bean paid at the vivant
tine
he foreim trade, OX41,1411i10 of gold and silver shipmate, was

P0,000,000. adverse to the United Otatee in Autuot, 441,00000.04, in its
favor

in

October.

SeptMOMM, OMR All probably be ;60,000,000. in 110 fewer for

Lest year, and in /912, for these months, the balkacoo in

favor of the United States were:.
13,000 000.

50,000,000.

,inglinober B4,000,000.

47,000,000.

77000,000.

139,000,000,

Aucuet

October

THI1704




Gruzr;,44.,sNcr7.....11.11,11E
The internotional exchanges reflootod foam of the el'foct of

the outbrealz ol war, by the latterpnxt of July, and even bofore Aagust
3rd there developed in America an insistent dennwi for exchancs to most

maturing obligations toEuropo.

Tho declaration of war, and the

auspetelon of ehioping facilities, *mood each AD interruption of the
American o7port trade na to dangerously redueo the supply of ozahange.

The follaiiing statoment is made at ewe length In order that the
position talten by the New York banks with respect to gold evorts
be better understood.
About 80% of the foreign commeree of the Atlantisseabord
passee through the Port of Lew York.

It le the largoot mannfacturing

and banking °enter in the .Slated litotes, and is the market ';riliere the
quotation for forgim exchange is made, moiLibere oreign bills are
smeeMbled for realttimme to Europe for oollection or die-count. There iv

no eity in

he

United States whiCh can maYs a qvotation for oxchange,

without a quotation from New York. The bunion imposed von the roservee

of the banko Of Ass York, when the gOld movempit is adverse In both the

foroign and domestio exohancee, hag at ti mos uader oor old bnnling eystem,
proved tobe too heavy for the banks to carry without aMPloYinG elergelloY

relief moasaren. In 1907 the only such measure nvalable was to IMMO

olearing house loan oortificntea for eettling balances betwoaa menbers,.




t of Inter,aittip.
annee

C,Opc.eAt.

whtch, however, afforded no relief to the rest of the ooaltry.

The now

York Igatal 1,n 1907 suspended free shiponut or ourrosioyto tt.e.'r o,oiro.,spondouto, and the itaneW,ate result weat a maximum pro:du:4 of

5....1/,.;

_both ourronoy alt. grade

Thi- ye- the ;, ,Iiiri-Treold, Cu,rrenoy lot perztittoa the
vroyag;:; 'oils of, om erlarmnoi eurreney w/xioh

aeoeptable to thin people

of the country. ".;ithin ;,.=. few daya attor Auistxt art, the New York hanloi
hietr1ycstrlyly tloir eorreadondont& 7tith ournoj, avid. at no
'e'e
time eime th.it date hq,i,s here boon

prentkra ou either 6o10. Or currency

in '7,his oAratry nor, in rtiat, hao POO TOT% 03-0.1.1antp IX other AN.rte of

theeoontry indioatod diernet of the ability of the NMI York bvirm to
promptly 7119-4.71; their obligh;titrot to their oorrelipondento.

noi b ix

Min cm:Ma

oAlablo for the o tA;lezlent of international bclorinen, sod it

havinc been imos*ible for the bltalc,.., to tthir iple. to zUropos Lo;.40r,
nthalk,D.0 ireaahed zprertwa equivaloot, to a very' ooneidemblo pretaiwa on
Told.

Rad this oituatio

urred in our dementio exoharoio, distrust

Of VP, ability of the Nu m York hanIto to met thelr coAnitileutp and tillt
dviands of tIvir-depoeitoreeight2UVVO arivozi anil with elorloas ogr,seT101100E4

Londol) 07ohav.0, aftor the first vi1

rise tb a ):4a;c1rnyl of

seam donarr for oito,lo troaufors, vadually r000to4 until a f.id,rly
price loaP,' eottlbliehod., in the noi,,,:lihorhotid of five dollars to the pound,

with fluctoatiou3 within a ranae of alxiut five (mute either nay. In
normal tin.les earehense at _this level would have caused a large ex2ort Of

fro-fi, the burden of vidoh woulk have fallen not only twon the benko of
Mrs York City, /nit indeed :VOA the covaratively row large 101113CEIoh
awohantr

or wizieh earri the tw000unts of privato i'irns which circa

0=1=09, bat lIteh do not thelselves owl, gold re/servos.

A tio

AM9-211:4PAP

..91jAtiotaiiilort4

LI,':,,zeetion a the Ataertia. 7.1000roes NIWAN'ist oosrdAtioe of barflare forzilz4ed

plan for iimscrfaixe e1Nis0000000 ot gaol for owport, 5aa orlor to tdo.121
exelguve and to thortiag a1e'44roi60 t47k4^1 'intrdou 4;aokel latitititionct all over

thsJiituci tateo iauteaa of i.voataisItIx.:5on.

York Oitr The VON of
'714.0 4.1%.(m).000 ese iz

of roe

fiSU of the

York Cit7 pleKided 4445.00(4000 isf tieaAcittat.

iü.tLo

0 the coo,04.4aipoo aekkod,bU

eaaice of

tbe Catzi Oliers 'iortAiz ear tpckplant of IloO York GitvLae:M.02w
durille the baittatco of tate 'you,. The aewseditia for oars:41c
tide coarse' 0111111064 of iflioving




rof3 Amu:lent of aolet, 44'4.0001

nuts rran the goat UM tim cola Amoroso of MAO U.
are oaattered aelong

;Aolf

tutartq-Zive i*outfanol natiow1

etato baniclna inetitieliews
,trimcwi Prom the etv3t that thos* bloke in too Yoxit sozitiob. akeht ship

aola moul4 bo unable to mow their rola

Merv**bj

loane$ tzti
7,41;21,

rfro-.4 the tact that it la irn[com&ibic Ar a boak 71141.Cil parte

with Ito aold for wArt to r000to

threac:n Usti ozoiuziaos

troll or b, $bfAatioly the prooklodA of .sales of asolisncio.
Mf) of lotoe .pai.a. aro pzgalo in 7:kW or

11.14.1/13 throuat

trot) Gloarizic Foul* 5o Aria ;'*ii:Ato alive Avozat it -booll 6-ottlo(t

eitior i3tcaoaring Armee lean oartilio4tee or atirloh-ifroolieti
botoo.

J.:(11-lit. CITY ,IMI3T.

Ate City of New York has for many years boon authorized, by

the terms of its Charter, to borrow money in anticipation of the pay-

. ont of taxes. With the growth of the City, and the enormous increase
in the tax loyy, the meant' of these borrowing's have Increased to

.1/ an extent that at times the City is indebted

the market on

it loans to the extant of 1100,0009000, which lovas are ordinarily

liquidated at the time taxes ore paid in the f:al, aW, in recent yours,
Ln both. the sprino and fall, as the tax lavy is now divided into semi-

xmonts. The movamolt of the cotton crop in the fall of the
.1* ordinarily furoihes such a large volume of exohance at that
moason that borrower3 have boon =able to count with reasonable certainty
upon

lower rate in the fall than in the oprIag, and advantage has

been taken of that t7aot not only Iv the City of New York, but by other
icipalities which make similar loans to borrow large sums of money in
the London markot.

On )1,,ust 3rd the City of 4w York had so borrowed a

total of 62,000,00P, a small portion payable in Pario, but the creator
Part in London. The breakdown of internationsa exchange laposed upon

the City of rev- York tho necessity of Y000ting this large oblimtion by

the export of gold. The City carries its accounts in u large number of

institationo, both national and state, located In the City of Vow
York, and, nnZer ordinary oiroumotanoes, would have had no difficulty







Ypktitui ei tu
-2-

in obtaining gold In large amounta from those institutions. The con-

ditions existing early in tkoast however, made it impossible for the
City's bankers to furnish the amounts of gpld required, and, had the City
been ob1ige6. to ,Iirchase exchane at the rates recently prev:Mingo

the lose would have been enormous.

It was therefore dotormined by the

bankers who undertook the solution of this problem to ask all the tanks
in

the Oily to contribute to a fund of gold amcuntine to about

4,0,000,000, in proportion to the amount of their respective gold
holdings.

The contracts entered into between the City, the contri-

buting banks and the Xangers of the transaction (J.Pollicroln a Company,
and J1Uhn, Loeb & Company) provided for the sale of 410040009000 of

Obligations or the city maturing in one, two and three years.

The

banks which underwrote the issues undertook to furnish the Manacers,

if required to do so, eighty per cent. of the amounte of their aubscriptions to the.eyndicate in cold, having the option, however of
furnishing sterline exChanee 14 place of gold at the rate of 04.90
a pound.

The practically un=inaus reolfonse of the bmke of the City-

to the call Aade upon them, as well as the universal approval of the

transaction, indicates that the bankers were correct in their bolter
that a postponement or default in the payAent of this indebtedness of
the City could 11()t be contemplated, and that the consequences wculd

so serious un to :notify the 'ijedge of cold involved. VAhile it is
now recognized that the City could have extended a large part of this
indebtedness in london by the offer of an issue of new notes payable in
London in sterling, the City authorities nevertheless fait, no doubt




imanenoed by the prersure of public opinion, thst it wan to the

eites advantAce to outinguiSh ths debt 44 woo, Id twoid tho

possibility of loss at A later mtterity, rather thanto advance its
position ant f4e talm the ohonoe of boiea Mae to get gold oig =raw

or a year 16terf

The oontraot so mode by the ban;is of New York

10004 WO-third of tneir entire dold holdires mde

root

=port, at least to the ea-tont, that edam& oould not be i'r4rnialled.

Attention is here oalled to the faot that the privilege oftarnishing
030114mCP in place of gold peraits amv eoatribator to this fnd to 4moi1
the loss of gold by plIrehs.siOg erohance, ezd therefore, oomtailbotors

to this Avid are, to sons extent, oewetitoro in the market for tho
purolv4o 04: sterling exehaneo.

lIgLA1al4222,222iii_1292.

Statement 'third" lareely explains the necessity for ereviding a
fund. of geld by the method

topted, nd it is the belief of the Committee

that the succees of the plan affords evidence of the wi1l1wi.ens end
intention of the banks of the Uhited States to farnieh the means to their
eustmeIrs for paylnr foreign indebtedness which the barks of New York
alone without endangering the attention, were unablo to provide.
Voluntary contributions were obtained from national and stete

banks in til central reserve and rsservo cities (52 in number), those
cities, under the law, being required to hold 25;:, end 12

cash reserves,

reepectively, as egulnet 6 in other citIoe. Oontributions of eold to
the fund wore received troc 1,494 different banks, located in C11 parte

Of the United litats. An amount In excess of 400,00,000. waa promptly
pledged through the co-operation of the jecrottry of the 2reascry tnd the
rederal 4serve Boerde lending the payment of the limit call of
46,000,000., nine,New 'fork Institutions edvunced a0,000,090. in (old
for shipmont to Ottawa. This enobled the Committee to promptly reet
the urgent demand for exchtnee, which was 'selling at about

0*411

The Committee deliirea to call ettention to the fact that the
eold fund we not created for the purpose of mekin a profit, hut rather
to meet an emergency and thereby exert an influence in brining ubout a
decline in the rate of exckange. The policy of the Co mittee ho riot been
to 64511 exchange, freely. This would certainly have resulted in the

aecumuletion of (melt:nee by debtors who desired to insure the protection

of future maturing eblttttoa, end, unfortunately, mLeht also hew,



The 4100,000.000. Gold Puede

-2"

resulted In releavieg excbange to the contributore to the rued provided to
meet the oblieatione of the eity of Now York.

It wet rather the policy

of the Committee to use the fund to prevent au undue advance in exchange

rates, but, neverthelese, to permit rates to follew fairly normal rluctee
ations and thereby Wee° American obligors to arranee for renewals in

the expectation that the creatlee or exchange following e restoration of
export trade. would avoid the neceseity of exporting ane considerable

portion of the gold Pend. Vele Uomeettee, of which two members ere else
members of the Gold ?end Committee, ia convinced that the policy adopted

was a wiee one, end that the purieses or the cold fund have already been
largely accorelimeed. After elle/dee for certain leree payments made
for account of the United etates Government, for which the Government
reimbursed the old eend Committee in gold, the total amount of the

fund has been reduced by not over Int+ million pounds, amd le smbetene

tielly intact.
ee0VITe AeD

Oeeee OF Zee GOU

lelqe

eiseederstandiee is A:able to ariee with regard to the ultierete
profit and lees aCcount of the (old rend Committee, end wo are latormed that

the attitude of the Bank of Zeeland later referred to was possibly duo to
the belief that large profits will accrue to the Gold TNcld contributors.
Consideration of the followlegwill, we trust, meeee clear the.Gold Fund.
Committee's eesition:
ABU:3'M




he leeal limit of tolerance on Amerlean gold coin is ono-half
of one per ent. eagles Pareleted by the eeb-Treewury at Now York will

rare"?' thew an abraelon exceedine one-quarter of one per cent. Loeles
shipped from Western points, hovever, where eold coins oireulete much more

JILIO

frooly,

larger peramatisp at oloiraii.a.

o).ovr

The

Calm/Ate.", mot, fivare ou

s l000 cot tram 011110witsetrtt,r t throsionislifts per o4:tot. for 1)7orowion.

Thu Old frzusulohoa for thit pur,00sa of this fund to t.ken oat of
bank xv

Nos 41241 4314 trk otafo4ø.rit in Sin York, NId. IP not hold MI a

kart 1)4, tho ri., 3,4-1.4roli or tho litro 'fork bc.nks.

The contributors va'e
`31,0 firot ramant of P,5514,ii

ro,42e rgvuonti In inot.,1,:aent) of ZOfp.

filen

ovrtrAz rooiv 'fork bank*,

sot to ipnt ion or lohloh 410,014,0".1 vvs sillitoectd

vivo omraploted i4nd tho eXp4.1100 Of trmsferrint

tbs

Na4o as solo

this fu :4 from al twatt: of tha col:ratty vcsla pead oat of Um fund. In **lir
rTj

t tho oo

Lt to 40uo3 moo oniv.r7

o

to111110011' allarzmnekt

:Or VW intert)st durinc trmantorton,durin:; the ported-OM the it
the myrcumeot sUlront to Ottem,
k, for
n *mov*1
La i2
fa veil ao for ut raja looi

Vas

row ?taw, ome. mad to Vie

ld ixdut; moo tvo4 tty. tho Comitttwo at it
5)f 4104474 4vit its tgallon -cam,*

initoosiblo t4.0 ti214410 13#4 /Atoroipt 000t tooDlvo.d.

Vat a otplool4tIon

lityest beim
with aollorsaloc:
NiMpon
44.4to*.

tzgA

041xonto

tc the firet shiptrzuts

=Ala

f into-root to 4io1uoloor .Xth, =4. tt is raw* thk,t lanai=

on the -wits of this 44101111uttlit oopts tho contributors sbout

The ;Aconwprto retaittod 'tor sys454,0ip s:olea to41:43c win

14114Atis ox4 443, diosi,

mitina 44,1Q SW471043 rO r

tritOre $4 #:411 mood

.Ora :Loudon banks, it is psobAlik OM U trov, 44cooaat c
p3ce,6rAt

tire kif

moult

Atli/ad be

'avow/toned Ivt

4rolgolirt

410ov

10,0o4;', a

V*

row to l'oollon, thp

a 114,s to ;kat tht, owtribittors to ttw fog.

This la

iodeinV IOtatthato, ci"447. OP first taAssair to Mom

,Ato mut. IfstIO...




It th

At trio tit* Us ftrad w

bz-.:1.17zooe- wau ox:Irsoitttodo

cerAcio. illsegrod taw

Tho 410)




)0000 Gold mud

-4co-operion of the Bank of England on two points only, pending a dieouesion
of other matters of importance WhiCh could not be then taken up hy sable.
Viretg

A better understanding of the basis on which the Dank VW
parohasing gold shipped to Ottawa:

An arrannement for advanoos, without interest, upon advice

a CO

and guaranty of Shipment from liew York to Ottawa.
g

TO

44-10,4d'T23

The value of the grains of cpld in the English sovereign in
Amorionn Gurreney is

-A.66656

One ounce of American gold coin contains fine gold of the
value of

)211.6046

A0.6046, at the rate of A.06656, Kuala

Ush. 3id,

Whioh Is the value, oxpross-d in aterling, of one ounce of American
7o1d 001114

This Is the exact price Which the innIk of Inaglana was paying

for American Eagles Just prior to the outbreak of the war.
Reduotions mere made to a not prioe

76104 444

544 boing farther deducted for Amorican 7:.agles Shipped to
3d.

Ottawa

making the not price for naglos delivered in Ottime

766h.

It has been stated to us that the reduction of 30. was made
in order to cover the following items:
(a)

AA allowance for the coot of molting and minting:

(e)

AA allonnnco- for the cost of trnnoforring Nugies from
Ottawa to London.

AO to the first item, inkiniry arises as to nhether the price
whioh the Bank of England is required by law to pay fOr bris (77th. 9d.)
does Dot make allowance for the cost of coining bars into sovemigns, and

that, therefore, a :shipper of

t:les should not be rsquirod to mrato this

Tho ::.100.000.000.

additional allowance, which in already covored in flouring the equivolent
of the bullion value of the gold contained In American ?Arles.
As to the second item, the question arises NS to Whether the Bank.

of O/lgland obould not, If the cizoNam:es turn before the gold Is shipped to
London, the allow in the price at vhich it resells the gold to row York,

late of the choroe which It has collected for the conversion of Nales
;itOsovorolons. The same quottioo will arioe as to 3d. deducted from the
price llowed for stondard bars.
The Gold Pool Committee feels that the deduotion of M. on

ogles and 3d. on hors Is not juatified under the circumstances, but
cloorer uncle

tootling of the reasons for theco deduotiono moy chonge the

Committee's views.

Al to all arrongemont for tdvonceo without loterert, the re000et
which was made :for this 0000mmo4ot1-rt ot the tic or the Olret shiptant
grow out If An omorootooy.

XChtitl4111 uos3oiltngotovo five dollaro

oound, end the Cotooitten deslrod to he in n position to drm fIrthanros at
once before the gold s74pped could be received and welohod at Ottawa and

credits confirmed. The necessity for ;,olcoomiodotion on that roOonnt is
now punee4A

With exohance upprotichinv the point where gold exports heoome

unowofitoble and without a better landerstundthr with the lInnk of
7

gland

to the rote which they will make on Bogies exported to or from Ottawa

the Cold rand Committee will find it imporvible to mks any considerable

shipment of gold at one time without the risk of loss on a postion of such
shiomonts.

The Coznittoo desires to be in a. position whoro it moy furnish
echango so long os it may profitably cover with gold, but not to run tbo



la2-11211J22kaLlIJaalL2e1




risk of a rapid decline in the exchange =arket.

SIXTH

TM COTTON LaA/T

001a.

It has been generally estimated, and this Committee believes

with reasonable accuracp, that this years American cotton crop will
alomewhat exceed 15,000,000 bales, and that the world's reduced consamttion

Of cotton will leave an unused balance of the american product of aboat

5,000,000 bales. At the conference in washington, it was suggested
that the maximum credit to finance the cotton crop would be required at
the time when the maximum of the crop has been picked, and the minimum

marketed, that is to say, about December let, at which time it was sug-

gested that a credit of A0,000,000 might be required. This does not
taao into account two factors intthe situation.

First:

The method of financing the growing and

gathering of the crop;
Second:

The difference in price between this year

and last year.
as to the method of financing the crop, it may be generally stated that

the ititial advances arc made before the crop is planted. They are
largely made to the farmers by merehants and supply houses, and are

increased as the work on the crop advances, the merchants taking a lien
on the growing crop and borrowing money from their banks. By the ti'e

the cotton is aathered, the last advance is made. The maraeting of tae
crap throua4 the ginning and oomçres3 comaanies and the cotton factors







The Cotten ...tosn R

**NC,.

le a nrooeso of li.uldation, &nd the problem oenfreetlar the SeAth at
this soason in not that of arranging new orallto'with -which *0 finerce
the cottage Tnp as a whole, but rather of providing a tanrerary credit
to be empl-ved in faellitatinFT the liquVetion of that poetion of the
erer which or benvIt.-eted, by chablin:: baa,ts tr pttenet or renew the loans

that have already been.veas, and thereby assist
which may not be promptly marlteeet. This

in financing the

rplus

ybc described as a process

of elearing or 1411fting loans rarer than as a presses of creating new
or-edits.

A4 to the eeee*d point, namely, the rricc it in, of eourec,

evident that volV cotton selling et six cents, those batiks Whicb loan

en cotton otrld oarr7 two bales thie year against on bale, at tmelta

eeets, it year.
In order to PRollitte the pro ess of liquidation, which contemplates that 10 000,g00 bales will be sold and 5,04)0,000 boles will

be carried, a credit is in course of beitc aragei,amounting to
nzsooDioaxl to be andled

Vs following

:,W0,000,000 of the

advance ia to be secured b7 a first lien upon cottanItemed at not

ocein

ix Wats

pettrd, middling grads. 05,0000000 ia to be

seeared bv a MINNA her on te pletirvd co

Oiart
thispertion of
to be provided lir the banks of the cotton growihe states, to whoa, or

throughlOhom, the loans will be nade.

%.,Dend ameunting to three

r cent. or the amount of the loans made is to be wet aside to onvor
the ex,vmses of managing the transaction, and to pmy any lotlsoseincurred.
The fund lo to be adminiztered unaur the direction or a Committee

cnsioting of members of the 7cdeal Eesorve boardai the business,

however, to be conducted by en operstInt esmittss, and, nae Its




-3-

,rent, by local co itte, thMehinery for the appointment
oh hoe alreakix been vie. This Cotttee aeliewe that the
cotton l 4r1 fund. will be late to restore normal 00-niAtiOns in
the market for raw cotton, or 1,11 the cotto

anufcturtn iuetry,

unless it is supplemented. by enereetic meaeures to briar about better

lacillties, both in the United States and abroaq for marketing,
Leek year,

flnancine4 mlmgnufactarinc cotton*

Alrope furnished this country with 3534 GOO
Anything which Iftarii

0.0e of cotton

;_-) of exchanew.

the free intrchase or the free sAle of cotton,

the restorntion of stable pr1cos for rma cott.on,will lso retard
tonal exchamree,

the restoration of normal conJitions in the in
and work injury both in linFland and in the 1.1nited

opinion of thie Corrlittee, it se

desirable

e*

in the

-5.: The fol

be adopted:

Firit:

That the rand of 1135,000,000

completed and

its adt.ainistration undertaken st one.

"lag:

That the Few York and .Livfrkpool cotton OVIlifineell

e -ould be opened,
'Cotton Nach.ange

inane for opqralle the New York

iie renehed a point where it rev be

reasonably expected that the exellinge Can open at an

early date provided necer,eary co-operation is afforded by the Liverpool CA)ttori Sxchafte nvl by the

nglish banks,

A fund bar been pledeed which rill

enable the members of the Vew York Cotton rxchance,
who ar

ornitttd for the purchase of cot ,on at MO

prices, to margin their entractr dam; to 7.. ceits.

he

Cotton Loan Pool.




-4.-

with this relief, confidence is expressed that
they may safely open the exchange with e reasonable

execotation of being able to meet the warket oondi-

time which will arise. Co-operation by the
Liverpool Cotton exchange on similar lines is nec-

essary before it will be feasible to onen the
New York Cotton ECtchange.
TRIED

It is also essential that no question as to
contraband be eermitted to arise inregard to
exnort cot on. Ate Comnittee notes with great
satisfaction that the British Government has

already recognized this situation.
POUETH

eny restraint which may have been imposed upon

Xnglish merchants or spinners in the purchase of

cotton shoeld be reeovel. Reference hes been
elade to some agreement or undenetanding which we

had been advised eeiste in ngland in this respect.
It is not understood that the British Government
has brought about any such uncle standing, nor, in

fact, is it understood that zInglish purchasers of
cotton have any definite agreement among themselves

in this regard. Advices have reached this country
however, to the effect that some of the 3nglieh
banks have exerted a strong influence in restraining
the free purchase of cotton by Snglish cotton

merchants and spinners, and it is hoped that the




vs13.

Anglish banks may be induced te =courses , ho

purchase of eottor within reasonable Unite.
That the usnal 7eans of financing -urethanes of
cotton by ringlish merer7ont9 and arinners eltooId

be reopened thruogh advances atr,sinst cotton

bills through the discount molkot-




...Lanr11

.v.7.,D261.1AIL

The first instelment is to be paid for the capital stook of
the ?Oderal Reserve Bank on novomber 2nd.

The plan announced provides

for the transfer of reserve aepoeits to thew banks, corencing with
November 1604

If the operation Is successfully concluded, the

1?ederal Reserve Bank of NOW York, within a period or six months (and

possibly at tile and or three rLonthe) will have received payment for

over $10,000,000 Capital stook in gold, and will have receivod on

deposit at least t100,000,004 of the reserves or tho National Banks
of New York State, and possibly muoh more.

The :No,deral Reserve Act provides that not exceeding 545 of the

initial resenre deposits may be made out of the proceeds of commercial
paper which the banks may allow the member banks to rediscount.

It in

tbereforo impossible, at this time, to forecast the oondition of the
Irederal Aserve Bank of New York resulting from the initial transactions,
as the amounte of discounts allowed to the member banks will depond,--.
(1)

Upon the ratio of discount established by the bank;

Upon the rate of interest prevailing in the City of
VMW York,

(3)

lomewhat ,ipon the cictect to which the New York City

Banks are rrlouired to make payments for account of

their correspondents located in ?edema Besorve Distriete and




Fiera1

serve Bank

(4) The extent to which they may deposit 08 of their

reserves, Cae deposit of whioh is optional.
The Ooderal Reserve Banks of the United States are In the

course of establishment. Calls for payment on the capital stock have
alreadv been made. The ability of this bank to furnish gold is a matter

for future consideration, and Should not, at this tine, be made the
Sasiscf any transaction or proposal.

ORNDIT or h20,000,000 FTrRLIVG.

Your Committee has been informed that about a month ago,

when the visit of Sir George Puish erd Basil T. Bleckett, Nisci. was

first proposed, one of the subjects to be considered at the conferences would be a poesible credit which would, in effeet, afford means
for extension of the obligatione due in Englerd by barkers and mere

chants In the United States. If it had beer possible to arrange such
a creUt by exchange of cables at that tire, your Committee would
have approved of the transaction. It would have supplied exchange
at a moment when the demerd wee urgent; ord it would have insured us

against any serious drain on gold reeervee for the tire being, and
given this country a period for readjustment during which local cone

ditions could have been brought to meet the extraordinary situation.
since the date when the suggestion of a credit was made,

exchange in large quebtlties has boon supplied to the market, and
confidence has been greatly restored by the knowledge that the
rew York City ayedieete and the Gold pool Committees' operations have

loon effective. From infermation which your Comeittee has gathered,
It is strongly of the opinion that a continually increasing supply of
exchange is in prospect. The export of rood products and raw and

manufactured materials that Europe needs in the present crisis (not
to mention munitions of war) must continuo;




mills and manufacuring

4

It.

Credit of h20,000,000 Sterling.
.2companies are working overtire on orders for goods which, in many
cases, will not be ready for shipment for some months, and which
will make a corresponding supply of exchange.

The opening of the

New York and Liverpool Cotton Exchanges, coincident with the completion of the Cotton Loan pool, if accompanied by assurances to the
merchants

and spinners of Fmgland of the willingness of the Itsglish

banking community to finance reasonable purchases of cotton from

the

United States will also add to the supply of exchange.
For this, and other reasons

that it is not necessary to

elaborate here, your Committee is convinced that the adoption and
employment of any extraordinary or unusual measures at this time
are unnecessary, as such action might, in
expression of the belief of

this

fact, be interpreted as an

Coralttee that the present situation

requires such measures, and because unusual measures are likely to
bring about unexpected and possibly undesired results.

It will be noted that the foregoing relates entirely to the
commercial situation. 'Io account has been taken of the possible
opening of the New York Stock Machange, and the additional demands
that might arise if any considerable amount of English owned American

securities were resold in this country. Your Committee is firmly
of the opinion that it is premature to discuss the opening of the

NIP York Stock Exchange until the adjustment of the commercial situation
has been demonstrated.

In thc meantime, however, and, with e view

to this step, it is recommended that a Committee from the New York
Stock Exchange be appointed, which Committee should visit London for
conference with e like Committee from the London Stock Exchange, and







Credit of b20,000,000 Sterling.

for a careful study of the situation there. A tentative arrangement

for a large sterling credit, predicated on the understanding that its
repayment will not be made in gold, but in commodities and manufactured

goods, would make it possible to consider the opening of the Stock
Exchange sooner than it would otherwise be safe to do, should other
conditions permit. As this step is recognized to be a. desirable one

from the point of view of both countries, a present discussion of the

form of such a credit and c tentative agreement as to its terms, at
this time, would be beneficial. A memorandum supplemental hereto,

outlining a plem discussed with Sir George Paish and Basil P.

Bladkett, nsq., is attached.




Jupplenent)

MIN

Drafts to be drawn only as requirea to supply exchazgle

to to:ze the place of gold remittances.
Drafts to be covered at maturity in the usual we If exchenee can he purchaeed at or below the cost of eroortinc
gold.
(0)

If exchanze cannot be purohaned as above, and payment of

the bills would require the ex2ort of cold., further 90 day
rcrewals to be grented provided that, in the opinion of
the Feral Reserve llokrd, a further loss of Gold would be

detri untal to our finencial situation.
(9)

The grantors of the credit to be entitled, after the first
renewal, to require payment, in whole or in .rt in flew York
exchange.

such dollar balanoes, however, to be used only

in the purchane of American produots,




Gond I t Ione e epee the and e re tending awry sted in memorandum

nichth," and elth a vie% to assistance in meeting conditions which
my arise thrame, excessive sales of Ameriean securities held in
rurope, the following has been tentatively diocunsee with eir GeOrge

Nish and Basil P. Blackett, rage,
That a revolving sterling credit of, say, is20,0W,000.
shall be gronted by or throueh the Bank Of

gland, or other British

bankers, on the following plans
(1)

The credit to be available aa a nupplement to anJ only
after the ,7100,000,0 el Gold Plead has been shipped, in order

to avoitt further cold shipment.
(n)

Drafts at ee days, with one acreed renewal, on an acceptor,
or Aoceptors, to be desigvated by the grantors.

Drafts to be foreerded direct to tnelend for diseount under
an agreed arraneseent, And demand or oables to be aold against
theme

s

Drafts to be drawn by the Geld eund Gommittee, or a new

committee representing euerenters, consiotine of bans, trent
companies end banking firms in the 'United etates acceptable

to granter.
Proceeds of sele of exchange to be loaned upon security of
approved bonds and stoeks an oollateral, with the oblieations

of borrawere, who are setisfectory to the guarentoro, to maintamn a remain of not less than twenty per cent. {.20:71 of the

fee° value of the loan.




SDITIZatrzta. /rloorttarptua
AS TO Trn ralePeL RaveRVE BAXR OF IITW YORK CITY.

It mast be borne in mind that there is no certainty as to
the amount of gold which will be paid into the Federal Reserve Bank
at the commencemert of its peeration. The capital ptyneets which
mast be met within a period of from ninety days to V37 mouths, in

gold, tote). about 40,000,000. The reyeent of reserves, eggregating

'United States notes td silver certifie
antes. While it Is hoped that the bulks of the Few York District
will mike a oonsiderable portion of their reserve peyeeets in gold,
$100,000,000. ety be made

in

it is nevertheless quite possible thnt a large proportion will be
made in

legal tender notes, old the ability of the Federal Reserve

Bank to accumulate gold from other sources than the United States
Treesury will therefore depend upon:
(A)

The degree of confidence which the bank enjoys
from its member banks, whieh now hold the principal

gold reserves.

00 A charge in the present currency laws, readjusting
the various forma of gold certificates and legal
tender notee oo as to force the withdrawal of &mall

derominatiens gold eertificetes from circulation.
To transaction involving the present pledge of the credit of
the Federal Reserve Bank to Tarnish gold would, be justified until the




Federa,

-2.
bank has boor in operation a sufficient length of time to domonstrate

It s ability to aocumulate sufficient gold revervo to justify such a
transaction.




jovember 2, 1914.

Ron. G. S. Hamlin, Governor,
Federal Reserve Board,
Naehinston, D. C.

Dear Sir:

The repoitts relative to the conferences with Sir Geor00# Paigh and
Ba411 B. Blackett, Esq., of which copy yes left for you viith N1N. Warburg,
requiredoorrection ia some nartiolllars and the lanoage had to be improved
after a little quiet study of SOME of the matters discussed.

Fresh copies have just been received from the stenographers, and
I am erclasing oae copy to jou herein bet)re I have had opportunity to rcad

it over.

I am enolosing one copy also to Mr. Warburg. Unfortunately our
stenogmy,hic arrangementa here .41./1 not permit maRing more than four copies,
one of which will be signed by lir.Wiggin, Mr. Brown and myself on Wednesday,

and fomarded to you formally, and the other, I am obli3ed to retain as a
record.

If, thereforetit is desirable to place one copy of the memorandm
In Sir Ce)rgv laishas hands on ednesday as wae discusf-ed, I trust that you
will explain $0J.hinfthat it was obliged to be a
tidgae copy in anticipation of
the signing of th3 mrmanent copy, which I hope to have done on Wednesday.

Very truly yours,

Eno-

UNION

VVESTE47PANI

Form 260

WESTERN UNION

eV

NEWCOMB CARLTON, PRESIDENT

ORGE W. E. ATKINS, VICE-PRESIDENT

BELVIDERE BROOKS, VICE-PRESIDENT

CHECK

TIME FILED

,ECEIVER'S No.

AM

um

SEND the following Telegram, subject to the terms

November 4s 1914.

on back hereof, which are hereby agreed to

Hon. O. S. Hanain,
Federal Reserve Board,
Washington, D. O.
Please refer my- letter Monday supplement second headed Gold Shipments

Co
last paragrajh page 2 foreiLn trade balance October shorld be thirty
gee*-millions. Kindly make corpection.

Benjamin Strong, Jr.

(Charge Fedetal Reserve Bank)
(Government rate)




ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TE.
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for co
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRA....
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty t
the sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; Ri
errors in cipher or obscure telegrams.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this
gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, u
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paidor agreed to be paid b
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary
reach its destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in othe
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his
expense, endeavor to, contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to
such office by one of the Company's messengers, he acts for that purpose as the agent of the sender.
,6. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is Sled with the Company for transmission.

THE WESTERN UNION TELEGRAPH COMPANY

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

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT TELEGRAMS
Accepted up to 2.00 AM, at reduced rates to be sent during the

night and delivered not earlier than the morning of the next ensuing
business day.
DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard night letter

rate for the transmission of 50 words or less and one-fifth of the

initial rate for each additional 10 words or less. Subordinate

to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.




Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that sufficient
time remains for such transmission and delivery during regular office
hours, subject to priority of the transmission of regular telegrams.

NIGHT LETTERS
Accepted up to midnight for delivery on the morning of the next

ensuing business day, at rates still lower than standard night telegram
rates, as follows: The standard day rate for 10 words shall be charged
for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or
less.

Must be written in plain English. Code language not perMail delivery, postage prepaid, permissible.

missible.

kWESTE.

4,AEN

UNION

WESTERN UNION

AM

GE W. E. ATKINS, VICE-PRESIDENT
CEIVER'S No.

NEWCOMB CARLTON, PRESIDENT

BELVIDERE BROOKS, VICE-PRESIDENT

SEND the following Telegram, subject to the terms




November 6, 1914.

Hon. C. S. Hamlin, Governor,
Federal Reserve Board,
washington, D. G.

Copiee report being prepared Hive to mail tomorro
Benjamin Strong, Jr.
(Charge Federal Reserve Bank)

21

ocki,

TIME FILED

on back hereof, which are hereby agreed to

Form

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWINC
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating offi,
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TL,
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegrm
_amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, bey°,
the sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lid
errors in cipher or obscure telegrams.
In any event the Company shall not be liable Jor damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of
.gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paidor agreed to be paiCi
.D. such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessat.
reach its destination.
4. Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in otI
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at l,
expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent
such office by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the tcl,
gram is filed with the Company for transmission.

'
,

li"
.
.

1

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

THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS

TELEGRAMS
01 NIGHT
Accepted up to 2.00 A.M. at reduced rates to be sent during the

Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that sufficient
time remains for such transmission and delivery during regular office
hours, subject to priority of the transmission of regular telegramE

day.
10 business
DAY LETTERS

NIGHT LETTERS
Accepted up to midnight for delivery on the morning of the next

,

A full-rate expedited service.

.:

night and delivered not earlier than the morning of the next ensuing

.

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

to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.




ensuing business day, at rates still lower than standard night telegram
rates, as follows: The standard day rate for 10 words shall be charged
for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or

less. Must be written in plain English. Code language not permissible. Mail delivery, nostdge prepaid, permissible.

:AN

8-

191S

,diAL RESERVE BAN(

January 7th,1915.

Ly dear Governor Hamlin:-

You asked me to write you in regard to the influence

of the New York rate in other district*, and While there has not yet

been sufficient experience to justify any very definite conclusions, yet
so far as our experience goes, gathered largely from conversations with
officero of large banks in New York, I am convinced that the result

has been as I stated to you.

The great bulk of bank borrowing through-

out the country is effected at New York.

Correseondents of the

member banks of this district in all the sections of the country are,
et times, borrowers from their New York reserve agents.

The effect of

a reduction of our discount rate, while only directly affecting the
relations between the New York banks and their correspondents throughout

New York State, indirectly, I believe, has the effect of reducing the
cost of borrowings to their correspondents in other sections of the
country.

Two of the largest banks in New York have stated to

me that they have felt obliged to make some reductions in rates on ac-

count of our rate.

If a bank in Georgia or Texas is able to borrow

money from its New York reserve agent at 4, which is our rate for short
paper, they naturally will make use of that accommodation rather than




-2Hon.C. S. Hamlin.

January 7,1915.

at a higher rate.
discount short paper with the i'ederal Reserve Bank of their own district'

On the whole, this is not a bad result with conditions as they are

at present.

The discount rate at New York ought to be lower than it is

at Georgia or Texas, and the member banks of those districts out to be
able to borrow the cheapest money available.

Later QM as banking relations art gradually re-adjusted to

the no; system, the whole rate situation may take a different aspect,

but at the present tine, with the great bulk of the surplus bank reserves
In New York, it may be just as viell to have the member banks of other

districts deal directly with the Cheapest market without Impairing the
lending power of the Reserve Bank system 'which I am confident will come

into play later on and perform a useful service to the country.
Yours very truly,

Governor.

Honorable C. S. Hamlin,
Governor, Federal Reserve Board,
V4shington, D. C.

BSJr/4VH-1




March 24th* 19115.

My dear Governor Hamlin:

Your note of the 22nd 1 received and

indices that you are about well again. Please

accept congratulations from your friends In this
bank.

I hope you will follOw the course I
hav9 decided to adopt nod get away for a olinge.
I am leaving to-day for Hot Springs,
Va., to recuperate from a somewhat similar attack
which started the last time I was in Washington.

vith kindest regards, believe me*
Very truly yours*

Bon. C. S., Hanidgujsq,,
Governor, rigial Reserve Board,
a.s"lingten, D. C.




Mir

nr
Aug. 9, 1915.

Dear Governor Hamlin:

Your note of the 5th instant is on my desk this morning and I am
sorry that my absence practically all of last week has made it impossible for
me to write you until to-day.
1:41 remarks at our meeting last week were based largely upon the

belief that there is, in fact, a possibility of our becoming involved in the
European War even though that possibility is quite remote, and that a certain
amount of study should now be given to the problems which would likely arise
should that unfortunate event occur and how they should be dealt with.
No one will deny that the terms of the 'Federal Reserve Act as

finally passed by Congress were not and could not have been prepared with the
view of the possible outbreak of a war of such proportions as the present one.

We must, therefore, somewhat readjust our ideas to meet the possibilities of
the present Situation and some of the matters that should be dealt with, I
think, are the following:
1.

FEDERAL RESERVE NOTE ISSUES.

The present machinery, although cumbersome,for issuing Fed-

.

eral reserve notes against the security of gold certificates should be further
developed by arranging with the Secretary of the Treasury that the issue of
all gold. certificates of ten and twenty dollar denominations be discontinued.

This need not be given publicity.

The mere discontinuance of their issue will

enable us to judge of the results and, if any harm results, the Treasury can
resume their issue without arousing any comment.



Hon. C. S. Hamlin,

2

2.

8/9/15.

ACCEPTANCES.

This matter has been so thoroughly discussed that it is hardly
necessary to review the suggestions already made.

I think the regulations of

the Reserve Board and the whole method of dealing with this matter should be
liberalized.
FISCAL AGENCY.

3.

It would be well to study and develop plans by which the

available general fund of the United States Treasury might on short
notice be turned over in whole or in part to the Federal reserve
banks.

As our Government might find it necessary to make an issue,
or issues, of bonds, a preliminary plan by which such bond issues

could be made and distributed with the least disturbance to financial conditions should bd developed in advance of the need arising.
ATMTrufPUTS TO THE FEDERAL RESERVE ACT.

4.

There are a number of possible amendments to the Federal Reserve Act

which,

it seems to me, should be studied in connection with the

circumstances which we discussed in Washington.

The principal ones which now

occur to me are the following:




A simpler process should be provided by which Federal reserve banks can issue Federal reserve notes directly against deposits
of gold.

Any possible doubt or ambiguity as to the measing of Section
13 in regard to the power of national banks to accept drafts and the
power of the Federal reserve banks to discount accepted drafts (as well
as to purchase under Section 14) should be removed.
give clearer recognition to finance drafts.

The Statute might

3

(c).

Hon. C. S. Hamlin,

8/9/15.

Some consideration should be given to the possible neces-

sary or wisdom (as an emergency measure only) of giving power to
Federal reserve banks to lend money upon collateral security.
(d)

Also as an emergency measure, at any rate for the present,

consideration should be given to some plan by which Federal reserve
notes might serve as cash reserves for member banks.

Cuggestions "c" and "d", it seems to me, could be dealt with by having a study made of the language of proposed amendments so that a general agree-

ment would exist in advance as to the terms of any amendment which it might be
thought wise to recommend to Congress.

Please do not understand that I recommend the adoption at once of
the various matters suggested.

I do think they should be carefully studied now

and an understanding arrived at in case action along these lines or any other
should later prove necessary.

I hope you will be good enough to give me an expression of your views
on these points, and beg to remain,
Very truly yours,

Governor.

Honorable C. S. Hamlin,
Governor, Federal Reserve Board,
Washington, D. C.

B5Jr/PE




Aug. 9, 1915,

Dear Governor Hamlin:

Your note of the 5th instant is on my desk this morning and I am
sorry that my absence practically all of last week has made it impossible for
ne to write you until to-day,

remarks at our meeting last week were based largely upon the
belief that there is, in fact, a eossibility of our becoming involved in the
European War even though that possibility is quite remote, and that a certain
amount of study should now be given

to the problems which would likely arise

should that unfortunate event occur and how they Should be dealt with.
No one will deny that the terms of the Federal Reserve Act as

finally passed by Congress were not and could not have been prepared with the
view of the possible outbreak of a war of such proportions as the present one.

must, therefore, somewhat readjust our ideas to meet the possibilities of
the present situation and some of the matters that should be dealt with, I

think, are

the following:
1.

FEDE4AL RESRVE NOTE ISSUES.
The present machinery, Although cumbersome, for issuing Fed,

era reserve notes against the security of gold certificates should be further
developed by arranging with the Secretary of the Treasury that the issue of
all gold certificates of ten and twenty dollar denominations be discontinued.
This need not be given publicity.

The mere discontinuance of their issue will

enable us to judge of the results end, if any harm results, the Treasury can
resume their issue without arousing any comment.




1111111r:
2.

8/9/15.

Hon. C. S. Hamlin,

Accual4vm.
This matter has been so thoroughly

discussed that it is hardly

necessary to review the suggestions already made. I think the regulations of
the Reserve Board and the whole method of dealing with this matter should be

liberalized.
FISCAL AGENCY.

It would be well to study and develop plans by

available general fund of the United

States Treasury

which the

Might on short

notice be turned over in whole or in part to the Federal reserve
banks.

As our Government might find it necessary to make an issue,

or issues, of bonds, a preliminary plan by which ouch bond issues

distributed with the least disturbance to financial conditions should be developed in advaree of the need arising.
could be made and

4.

AMEN=NTS TO THE FEDERAL RESERVE ACT.

There are a number of possible amendments to the Federal Re-

serve Act Which, it seers to me, should be stddied in connection with the
circumstances which we discussed in Washington. The principal ones which now

occur to me are the following:




A simpler process should be provided by which Federal re-

erve banks can issue Federal reserve notes directly against deposits
of gold.
Any possible doubt or ambiguity

as to the meaning of Section

13 in regard to the power of national banks to accept drafts

and the

power of the Federal reserve banks to discount accepted drafts (as well
as to purchase under Section 14) should be removed.

give clearer recognition to finance drafts.

The Statute might

--1/11111NrIgrTW'r-1Mlir
,susamww
A

3

(c)

- .Ammurrmwmr

8/9/15.

Hon. C. S. Hamlin,

Some consideration should be given to the possible neces-

sity or wisdom (as an emergency measure only) of giving power to

Federal reserve banks to lend money upon collateral security.
(d)

Also as an emergency measure, at any rate for the present,

1111111111111111-

consideration should be given to some plan by which Federal reserve
notes might serve as cash reserves for .member banks.

Suggestions "W! and "d", it aeons to me, could be dealt with by having a study made of the language of proposed amendments so that a general agree-

ment would exist in advance as to the terms of any amendment which it mi ht be
thought wise to recommend to Congress.

Please do not understand that I recammend the adoption at once of

the various matters suggested. I do think they should be carefully studied no

and an understanding arrived at in case action along these lines or any other
should later prove necessary.
T hope you will be good enough to give me an expression of your views

on these points, and beg to remain,
Very truly yours,

Governor.

Honorable C. S. Hamlin,
Governor, Federal Reserve Board,

ashington, D. C.

BSJr/IT







PERSONAL ----CONFIDENTIAL.

January 25th, 1916.
Dear Governor Hamlin:

Your favor of the 21st
I am indebted

inst. is just received and

to you for the confidential at',vice as to plans

of the *Federal Reserve Board which might be classed to some extent, as

preparation for

emergencies.

The enclosed suggestion for amendments are those

which have been consider:4 from time to

time by the officers

of this bank and, to some extent, discussed

with Governors of

other of the reserve banks at the various Conferenees
the past year.

during

I am not prepared to say tfrt in this form I

would finally recommend them, but they contain suggestions

idh may be of value in connection
by the

with work along this line

Federal Peserve Board.

A careful

study of the proceed:tires taken

by England,

Prince and Germany and by the central banks of those countries
in connection with
functions such

the

institutions as

called upon to perform
ity.

war, brings to light very

in

strongly what

the Federal reserve banks

will be

the event of any great national calam-

These have unmistakably proven

to be

First:

Almost unlimited extension
banking institutions,

of

Second:

Unlimited issues of notes to take the
place of gold in circulation which rapidly disappears.

cre'it to

To

Hon. C. " Hamlin.

To take care of the demands of the character first

mentioned, Federal reserve banks should be in a position to discount with freedom and without encountering technical obstacles,

all paper of every character offered for that purpose by solvent
members, within, of oourse, the limits of business prudence and
the limitation of the statute as to reserves.
To meet demands of the character described as second,
it is highly important that the peocess of accumulating gold
should be vigorously continued, giving note issues of the Federal

reserve banks a quality by reason of the large gold backing which
can be obtained by no other process than that which now preFails.
The use

of gold being

impounded by

the present process as a part

of the bank's reserves, will greatly assist in making the notes
acceptable for circulation and in justifying their use,(possibly
only under emergency conditions), as reserve money.
One of the consequences of developments which would
lead to sudden expansion of the reserve banks, as above described,

might prove to be a demand for gold, and ability to eeet this de-

.

mend willeiepend leen the gold resources of the Federal reserve
banks.

It seems to me, therefore, that the steos now contemplated

by the Board in recommemiing various amendments are absolutely essential to the preparation of our banking system to meet eeergency
strains.

It had occurred to me that some of the legislation mentioned in your letter




might be favorably

received by Congress during

;

ut.11.1.

To

in,

Hon.

the present session where some other features, such as the re-

serve qualities of Federal reserve notes, might be dealt with
by having the necesery legislation prepared and ready for submis ion should occasion arise which would require it.
I very much appreciate you writing me so fully and

will hold your letter in confidence.
Very truly yours,

Hon. C. S. Hamlin,
Federal Reserve Board,

Yshington, L. C.

B2 Jr/VCM -5







Aug. 11, 1915.
y dear Governor Hamlin:

I enclose for your perusal a report of Labor's Loose In fil
National Peace Council and its work. Since this was pre-

pared, in fact only yesterday and this morn1nL7, statements

appeared in the papers to the effect that First Vice
President amellings is thoroughly disgusted with the whole

affair and is retiring. _1 regret the delay in furnishing
you with this report.
Very truly yours,

Governor.

harles S. Hamlin, Esq.,

ttapoisett,

BS.Tr/PE

Enc.

.Ref or r 0.1 ton letter

Ites4cre

or-6, \F4441- 5111 \ 1.K

%Witt Mo. 1

IL

LABOR'S NATIONAL PEACE COTTCIL AND ITL

rtoo''

ORK.

The organization known as Labor's National Peace
Council was formally launched at a meeting held in the Willard
Hotel in Washington on the evening of June 22, 1915.

The meeting'

lasted, according to the statement of one of the organizers, until
early in the morning of June 23.

Announcement of the organi-

zation and the meeting was made by sending to various newspaper
offices carbon copies of a statement giving the named of the officers chosen and Stating the purposes of the organization.

The

naMes of the officers were given as follows:
,

1

President:

FRANK BUCHANAN, Chicago, Ill, Bridge
and Structural Iron Workers' Union.

First Vice-President:

=TON SNELLINGS, Washington, D. C.
Stationary and Steam Operating Engineers' International Union.

_Second Vice-President:

WILLIAM F. KRA1.2113., Chicago, Ili.,

International Brotherhood of Blackamiths.
Third Vice-President:

RUDOLPH MODEST, New York City, Amalgamated Meat Cutters of America.

Fourth Vice-President:

JACOB C. TAYLOR, East Orange, N. J.,
Secretary-Treasurer of Central Federated Body of the States of New York
and New Jersey.

Secretary:

L. P. STAUBE, Chicago, Ill., Commercial
Portrait Artists' Union.

Treasurer:

ERNEST BOHN, New York City, Secretary
Central Federated Union.

Sergeant-at-Arms:

FRED LOHN, Chicago, Ili., Leather.
Workers' International Union.




1

-2-

Er-Congressman H. ROBERT FOWLER,
Harrisburg, Ill.

General Counsel:

PURPOSES OF THE ORGANIZATION AS DESCRIBED
IN STATEMENT
_
.

The purposes of the organization were given as
follows:

To get the U. S. Government to take over the

manufactUre of all munitions of war.
TO

ment of arms and

have a proclamation issued stopping the ship-

amunition to the belligerent nations of Europe.
International cooperation between the labor

uni:ons of all countries to compel the stoppage of the

zar.

To have the Government acquire the patent rights
to all munitions of war, so that there would be no desire for war
on the part of private manufacturing concerns by reason of their
ability to profit thereby.

Calling of an extra session of Congress "to
promote universal peao.e."

BUCHANAN GAVE THE FIRST HINT OF IT

Although this organization was not formally
launched until June 22, there is reason to believe that the period
of incubation began a month or two before that date.

Early in

June, several days before the resignation of William. J. Bryan as

Secretary of State, Buchanan appeared in Washington and gave the
Chicago Tribune representative an interview.



He talked about a

-3-

"labor peace movement" and hinted at the formation of an organization.
terested.

He indicated that he would see Bryan and get him inOne of the inferences drawn from Buchanan's talk at

the time was that the labor union men in the House of Representatives and the peace-at-any-price men would be gathered together
in a special organization for the purpose of embarrassing the Admini7tration and promoting the general peace propaganda.
New :fork Sun printed such a story with some display.

The

Buchanan

said he would see Bryan the next day and confer with him about
the peace movement.

At this time Bryan, probably unknown to

Buchanan, was mulling over the question of his resignation and refused to see Buchanan,

Buchanan went away and attended a meeting

of the executive committee of the American Federation of Labor at
Atlantic City.

It was reported that Buchanan tried to get that

committee interested in the peace propaganda but failed.
happened at that meeting is not known.
that the subject was not brought up.

That

Buchanan afterwards said
One of the questions that

he said was considered was the calling of a strike in the building
trades at Chicago.
called.

As press reports show, this was afterwards

Buchanan came to Washington again and once more de-

parted.

LEMING IN BEETHOVEN HALL, NEW YOIE CITY.
Nothing mdre was heard of the peace movement, so
called, until on the night of June 17 a meeting of 50 or more
labor leaders was held, according to New York newspaper reports,



-4-

at Beethoven Hall, 'crew York.

Buchanan was ciliated as saying that

Bryan would head a delegation of 50 labor leaders to the White
House in the interest of peace.
to have been June 22.

The date for this pilgrimage was

Bryan never seemed to fall in with this

plan, for it was not carried out, but on Saturday night, June 19,
he spoke at Carnegie Hall,. Yew York, and one of the leading spirits

at the meeting is said to have been Bohn, afterwards listed as
treasurer of the Peace Council.

Apparently, the scheme was -- Bryan had resigned at the time - to have the persons interested in the "peace"
movement come to Washington on June 22 and with Bryan go tq the
-

.White House and make known their views under circumstances favorable for much publicity.

perfected on top of this.
for publicity purposes.

Then the organization was to have been
Bryan had been selected, evidently,

This programme was carried out on June

22 in so far as the organization work was concerned.

The scheme

to go to the White House and call on the President was deferred
until June 23.

White House officials had a tip as to the nature

of the organization, for When a dozen men, headed by Buchanan and
Fowler, called there on June 23, they were told that the President
was "engaged".

As far as known, they never made any subsequent

effort to get an interview at the White House.

Bryan did not

accompany the delegation.

THE EELEqATON CALLS ON JOSEPHUS DAITIELS




On the afternoon of June 23 they showed up at

-5-

the Navy Department and were permitted to see Josephus Daniels a
few minutes.

It was surmised that they attempted to see other

members of the Cabinet, but this is not at all certain.
is a member of the House Committee on Naval affairs.

Buchanan

After the

delegation emerged from the Secretary's office none of the men
would say anything as to what was discussed, but Fowler after much
urging stated that they had discussed their proposition for government manufacture of arms and ammunition and that Daniels said he
was in favor of this.
to

Presumably nothing was said about the scheme

op the shipment of arms and aamunition to Europe.

Daniels of

course has been advocating government manufacture of munitions of
war for some time past and this subject touched a responsive chord.
Fowler's description of the conversation seemed plausible.

One of the men in the party whom Fowler seemed
anxious to advertise was H. P. Oehler of Washington, D. C., a labor
union man.

Fowler passed his card around and said he hoped the

newspapers would print something about Oehler.

Oehler, it appears,

is a binder in the Covrnment Printing Office and of very little
account.

ENTEI: PARTIN. AND SCHULTEIS OF TTTE ANTI ITMT LEAGUE.

The most interesting thing about this visit to
Daniels' office was the appearance of Herman J. Schulteis, otherwise known as the "3aron," and Henry 3. Martin, respectively counsel and secretary for the American Anti-Trust League.




Schulteis

-6-

and Martin have been hanging around Washington twenty years. They

have a keen scent for any proposition that has about it the aroma
Schulteis is or was a practicing lawyer and is still

of money.

Schulteis and Martin always work together.

a member of the bar.

They are frequently seen in the Capitol when Congress is in
session.

Their chief business for a long time has been to gather.

in strangers and make what they can out of

her by telling them

that they are "on the inside" and have secret understandings with
Senators and. Representatives.

Business men coming to Washington

for the purpose of opposing legislation, often fall into their
clutches.

One of Schulteis' favorite tricks, when having a

"prospect" in tow, is to enter a Representative's office in the
Capitol and use his telephone.

He leaves the "prospect" in the

corridor outside and the "prospect" is thus led to believe that
Schulteis is on intimate terms with the Congressman.

It is sur-

prising how many strangers are taken in by this game.

Martin's

part in this is to hold the "prospect" outside while Schulteis is
telephoning.

It is related that Martin and Schulteis were found

leading an ex-Governor of Pennsylvania around in this way when
friends came to the rescue.

SOMET:3ING ABOUT THE ANTI-TPUST LFAGUE

----

4

Several committees of Congress have tried to
find out something about the Anti-Trust League, but the only

-v/
tangible objects in it were Martin and Schusteis.
evidently trotted out before 1900.
 was to


The League was

One of its early achievements

protest against the nomination by Theodore Roosevelt of

of Philander C. Knox to be Attorney General.

Representative Hartin

The League pestered

Littleton, when a member of the steel

trust investigating committee in 1911, to such an extent that he
was compelled to denounce Martin and

Schleis

on the floor of the

House the opening day of the session of Congress in December, 1911.
At that time Hartin and Schulteis had fastened themselves to
Representative A. 0. Stanley of Kentucky, Chairman of the In-

vestigting Committee, and were really on the "inside" of the steel
investigation.

For Mattin and Schulteis those were evidently

halcyon days.

Littleton in his speech in the House December 4 he arose to a question of personal privilege - denounced Martin as
a blackmailer and called him the tool of David Lamar.

At that

time ;::ashington was not particularly interested in LaLlar.

Real

interest in Lamar was not aroused until two years later.
In his speech

La.

Littleton said:

"And let me

say right here and now to my Democratic brethren, with respect to
service on any committee in this House, that if in that service

my loyalty to my party requires me on the one hand, to be obedient
and do as I am bidden, either by a corrupt alliance such as that
represented by Henry B. Martin, Herman J. Schulteis, David Lamar
and the Anti-Trust League,

02, on the other hand, on the outside

and far away, by the intolerant attitude and influence represented
by the Commoner and its editor, or any other newspaper, or. the

.

combined influence of both, then I tell you I shall refuse to obey
the mandate of my party and forswear my allegiance to my committee

x x x".




-8-

Mr. Littleton said that Lamar's

"unclean

record

ells to heaven".
:Jot much was heard of Schulteis and Martin

the tariff revision of 1913.

until

They were apparently busy with

"pros-pects" who came to Washington regarding tariff revision.

Then caLe the Senate lobby investigation and the Lamar episode.
David Lamar when he was on the stand, testified
had been "a regular contributor to the Afierican AntiTrust League"
for

and that he had "a very strong personal friendship

.1-tin."

Whether Lamar and Martin were intimate before

they conceived the idea of having the steel trust investigated,
does not appear.

Martin, when he was called to the stand, testi
fied

hnt

June".

the league had been formed "fourteen years ago this
That would have made the date 1899, but he afterwards

said the date was 1901.

organers.

He named Schulteis as one of the original

As far back as that time Frank S. Mennetva forer

attorne:, general of Oki(); had been connected with the League.

EASY TO BECOTT A lar,a3aim OF THE LEAGUE.
The only real qualification for IJeL.ibership in

the League, Martin testified, was the ability to give "intellectual support" to its principles.

Martin wasn't certain how often

the League met or When it elected officers - he said he was
secretary - or who the members were.
held a convention in Chicago.

membership


on

thc

He said the League once

He declined to give a list of the

-round that the members would thereby be exposed

-9-

"to the vengeance of the trusts".

Martin read the names of the

officers of the League from a letterhead as follows:
M. L. Lockwood;
Bride;

secretary, H. B. Martin;

counel, H. J. Schulteis.

President,

treasurer, Cotter T.

Martin said the League was

responsible for the creation of the Bureau. of Corporations, for

the Department of Labor and many uther great reforms, and had

given the Department of Justice valuable inforation about the
Harvester Trust.

The League, he said, was also responsible for

the introduction of the resolution to

investigate

the steel trust,

but he swore he didn't know that Lamar had "hawked" it about New
York.

The word "hawked" was supplied by Senator Walsh who was

interrogating him

He declared he had no knowledge of that at all
The following is a sample

of Martin's testimony

on that occasion:
Senator Cummins. How long has your office been in the Munsey
Building?
. Martin. About two wears.
Senator Cummins. Where was it before that?
hr. Martin. In New York.
F.er Dow long?
Senator
Mr. Larti. For a brief time. We were at 1229 Pennsylvania
Avenue most of the time. Those are the two places.
Senator C=mins. Who kept the records of the league?
Yr. Martin. I did, mainly.
Senator Cu=lns. And whatever records there are will be found
in your office in the Munsey Building, will they?
I would not say that they could all be found
Mr. Martin. No;
there.
Where are the others?
Senator Cul-mins .
Martin. I could not tell you at the moment.
The Chairman. Who was the treasurer?
r. Bride.
Y.f. Martin.
The Chairman. Does hQ live in Washington?
Martin. Yes.
The Chairman. What were his duties?
hr. Martin. Those which are customary for an officer of that
kind.

TheChairman Did he pay you a salary?



-10-

1::artin.
No; I am not receiving a salary now.
The Chairman. Did he pay out the money?
hr. Lartin. Yes; he paid out a good portion of it
The Chairman. Have you received the money?
Mr. Martin. I have received most of the money. I was the
active officer- and attended to the gathering of the funds in sup-port of the organization and to the conduct of its general work.
I devoted a large portion of my time to that.
The Chairman. The treasurer's office was a purely nominal
office, was it?
hr. h'artin.
Largely; yes.
The Chairman. You have done the work - collected the money and
conducted the correspondence?
hr. hartin. Exactly.
The Chairman. And have been the legislative agent?
hartin. I have been one of them.
The Chairman. Almost the only one?
L'r. Martin. No; from time to time other members of the committee have been here, but I have done it probably a great deal
more than any one else.
The Chairman. Are you willing to produce for the inspection of
the* committee what papers and accounts you have, showing the collection of money, as well as the disbursement of money?
For the reason that I gave, I do not think that I
hart in.
ought to be asked to do that- I do not think we ought to jeopardize the interests and the safety of honest men who are endeavorin, ; to do something patriotic. for the good of the country.
Senator atiMirlS. I wish to submit to the committee for the
committee to determine whether these things ought to be made public or whether they ought to reain secret.
I do not think I would have a right to do that
. 1;,:artin.
without consultation with the men who -Senator Cunains., Very well; consult your counsel, and we will,
take it up again. Hovr much of the money that you have collected
has been paid to officers of the association for their compensa-

tion?

Martin. Only a small portion of it; probably 10 or 15 per
cent of it.
Senator Cummins. I do not know how much has been collected, so
I do not know how much 10 or15 per cent.,of it would be
Ir. Martin. That Would be only about 2,000 or 0,000, or
possibly '4,000 altogether.; not over 5,000, I should say, in the
Whole 10 or 12 years. The payments to officers were practically
nominal. What they were paid they turned right around and spent
in the work.
Senator Cummins. You pay your own expenses out of that fund
here, do you not?
hr. Martin. No; sometimes I pay traveling expenses, and sometimes I pay a portion of my local expenses, but largely not. The
funds are used principally for the maintenance of a headquarters,
the circulation of literature, and the conducting of correspondencework of that character.



Senator Cummins. I would like to know, though, how much of it
goes in that way and how much of it goes in the other?
Mr. Martin. The great bulk of it goes in that way, for the
maintenance of headquarters and the conduct of the work.
Senator Cummins. Do you maintain these headquarters and spend
this money for the purpose of influencing officers of the Government, either in their legislative duties or administrative duties?
1:r. Martin. By presenting the facts to them.
SenatorCUDJAJIS. Certainly, I aft not suggesting that you are
doing it in any corrupt way.
We do not do it in any
Pr. Martin. I assure you we do not.
but an open and public way, the :Tanner of which is simply to influence their judgment by presenting facts and arguments.
Senator Ctumins. You represent, however, in all your literature and in your approaches to Members of Congress that you are the
secretary of the Antu-trust League?
h. Martjeo. Yes, sir.
Senator Cummins. Do you tell the people how many men you
actually represent?
Pr. Martin. I do not think that a single Member of Congress
ever asked me that question - either a Senator or Member of the
Most of
House or any other executive officer of the Government.
the men I have talked with in Congress and the Government have
known me a great many years, and, I believe, have confidence in
my work.
Senator CIL11111S. But I simply ask you whether you do tell them.
You say now that you do not?
Martin. Not voluntarily, so far as I remember.
Is there anything upon your letterheads to
Senator C1.12:11ins.
indicate the extent of your league?
Mr. Martin. Nothing except the members of the national committee, who are from about eight or nine different States, I be-,
lieve.

Marin and Schulteis were evidently not displeased with the notoriety they got in the lobby investigation.
Evidently they liked to be in the limelight and considered it
would assist them in their business.

They were always on hand

at the hearings and seemed to enjoy themselves.

MARTIN AND SCHULTE'S FRIENDS OF FM,ILR.
Their acquaintance with Fowler dates back, apparently, to the time (about a year ago) when he introduced a
resolution



in Congress for an investigation by the Interstate

Commerce Commission of the Baltimore and Ohio Railroad's acquisi-

tion Of the Cincinnati, Hilton and Dayton road.

Previous to

this they had been active with Lamar in efforts to have the New
Haven Railroad investigated.

The investigation is not believed

to have been the result of any of these efforts, but they tried to
make it appear so in conformance with their usual -programme.

The

investigation of the Baltimore and Ohio which Fowler was seeking
through the introduction of his resolution, he was successful in
obtaining.

known.

Whether 7Zartin persuaded him to take this up is not

They were frequently seen together about this time
It should be noted that ever since the lobby in-

vestigation, persons at the Capitol have not taken either. Martin

or Schulteis seriously.

The average newspaperman, Congressman or

attache rerzards them as permanent nuisances who however are harmless.
Consequently, when 1;artin and Schulteis appeared

wlth "Labor's National Peace Council" in the office of the
Secretary of the Navy, the Peace Council immediately came under
suspicion.

Several New York newspapers published reports very

broadly intimating that this was a peculiar business, but the
Peace Council never replied to the insinuations.

Fowler has been

asked if the German were supporting the organization, but he always denied this and said "friends of peace are making small contributions."

Havin-, been defeated for re-election, Fowlef

left Washington about March 4, evidently not expecting to return
'nere.

long


When he did return in the interest of "peace" it was not

before he was seen on the streets Yith 1-ax'-bin and Schulteis,

-13-

but whether he sou:ht the]: our or whether they fastened themselves
to hin, cannot

e ascertained.

Where-er Fowler goes nowadays

about Washington, either Martin or Schulteis is seen with him constantly.

Fowler spends a few days in Washington, then goes west,

then returns.

He stops at the Willard Hotel and seems well sup-

plied with Mild:

.

BUCHArAN A REPRESENTATIVE OF ORGANIZED LABOR.
Buchanan is now serving his third term. in Conas.

He served in the sixty-second and sixty-third congresses

,nd was re-elected to the sixty-fourth congress (which will convene
in

beceJyer).

He is what might be described, as an organized

labor man in Conresb - nothing else.

Most members of Congress

seem to realize the diversities of their constituencies, and the

necessity for accoodating their political conduct to

:the

various

interests of their districts, viz: capital and laboir, employer.

and employe, different races, religions, political organizations,
etc.

Buchanan never4akes any secret of the fact that he has one

object, namely, to promote the interests of organized labor.
talks about trusts and corporations incessantly.

He

He 'seems obsessed

with the idea that life is just a stru:,;gle on the part of the mass

es to protect themselves against predatory corporations.
This is. true not only of his speeches but of his

private conversation.

His conversation the year around is 99 per

cent. the same line of stuff.

In every economic development he

sees the hand of the predatory corporation.
much aloncr this line that conversatio

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

In fact, he talks so

with him is a boresome

Very fen- of his colleagues care to associate with him.

WAS CUZSIDERED A POWER IN THE LAST HOUSE
He is nominally a Democrat, but he takes no real
interest in the party except to use it as a Vehicle

to get into

office and to promote his own whims respecting labor legislation.
influence of organized labor in the last Congress was so

strong

that Buchanan nearly always had his way.

He has frequent-

ly disarranged the plans of the Democratic leaders of the House
eca7Ise

ney

would -lot do his bidding in laor

tters.

Rep. John

J. Fitzgerald of He':: Yorl:, has freciuently had to bow to Buchanan

in the ,natter of appropriations when Buchanan souht larger ap-

ropriations for something labor desired - larger appropriaions
.ban

comAttee desired to give.
He is in no sense a party organization man.

sense he is a freak.

In a

He likes to tell his friends ,:fliat an in-

dependent sort of man he is and how various interests have at-

tempted to punish him for

his independence.

He has been sometimes

referred to as the personal representative of

the

American Feder-

ation of Labor in Con-es.
He possesses a fair amount of vanity as evidenced by hi

"C . ency to

requires vE:

tai 7- about himself and his family and

little effort

to

induce

it

to get out a scrap-book

and displag newspaper clippings about his record.
"WAR MATERIALS TRUST" HIS FAVORITE PIMASE
In his biographical sketch in the Congressional
directory he says he was born in 1862.

He is a large man of

great strength and formerly an iron worker.




Attempts made

to con-

-15-

nect him with the Los Angeles dynamite conspiracy in which the
iron workers' union was involved, have failed.
His district in Chicago contains many foreigners
and, of course, a large organized labor element.
conspicuous "Little Navy" man.

He has been a

He has freciuently made speeches

in the House about the "war materials trust".

He seers to be-

lieve that the Navy exists merely to provide business for the "war
materials trust".

The fact that the Navy might be used to defend

the country in the event of war, does not seen to enter into his
calculations.

This phrase "war materials trust" was used by
him lo

-

before the war broke out.

When the war came he fre-

eu-,ently said that it was the result of conspiracy on the part of

the international war materials trust.

This particular theory of

his seems to be in line with his general theory that trusts are
responsible for all the strife and trouble in the world.

It hasbeen suggested that if the German propaganda is really behind this Peace Council, Buchanan was an ex.

cellent choice for president - a labor man who has consistently
preached against the -war munitions trust both before and after
the war.

This descrirtion does not fit Fouler who himself in

congress last winter offered an amendment to the naval bill for a
bigger battle cruiser than any other member seemed to want.
Fg:ILER. JUST Ar ORDINARY DEUAGOGUE

 a lawyer,


Buchanan is, of course, not a lawyer..

Fowler is

and was born in 1861, and has served in both houses of

the Illinois legislature.

He is an excellent sample of the

middle western demagogue who frequently gets a seat in Congress.
Gossip atthe Capitol describes him as having been an ambulance
chaser- in former days and this seems to be borne out somewhat by

his own sketch in the Congressional directory.
directory of December, 1311, says:

The sketch in the

"Is a lawyer by profession_

and enjoys personal injury practice, never taking the side of a
corporation against labor, etc.
He.was a member of the House post office committee and during- the past Congress probably got more space in the

Congressional Record than any of the leaders.

His favorite pas-

time was to make speeches in favor of larger appropriations for
the Capitol scrub women.
ing in automobiles.
greedy corporations.

He denounced cabinet officers for rid-

He can fly into a fury inveighing against
He has the ability to make demagogic speech-

ed that are plausible enough to be printed in the newspapers.
He cultivated the acquaintance of reporters and gradually got to
be very skillful in advertising himself.
Withal, he was a hard ,Jorker,

In order to

hamper the work of the committee on appropriations, he would sit
up nights hunting for old statutes to serve as the basis of paints
of order or for reducing salaries or eliminating certain statutory
positions which he opposed.
While in Congress he was not regarded as a peace
advocate.

He has some detective ambitions.

He once told a re-

porter that if he could spare the time, he would obtain a job
 Under


an assumed name in a Chicago packing house and find out how

He is an excellent sample of the

the Illinois legislature.

middle western demagogue who frequently gets

a seat

in Congress.

Gossip atthe Capitol describes him as having been an ambulance

chaser

in former

days and this seems to be borne out somewhat by

his own sketch in the Coneressional directory.
directory of December, 1311, says:

The sketch in the

Is a lawyer by profession.

and enjoys personal injury practice, never- taking the

side

of a

corporation against labor, etc.
He.was a member of the House post office COD-

mittee and

during the past Congress probably got more space in the

Congressional Record than any of the leaders.
time was to make speeches
the

Capitol

in favor of

scrub women.

ing in automobiles.
greedr corporations.

His favorite pas-

larger appropriations for

He denounced cabinet officers for rid-

He can fly into a fury inveighing against

He has the ability to make demagogic speech-

ed that are plausible enough to be printed in the newspapers.
He

cultivated

the acquaintance of reporters and gradually got to

be very skillful in advertising himself.
In order t

Withal, he was a hard worker,

hamper the work of the committee on appropriations, he would sit
up nights hunting for old statutes to serve as the

basis

of

paints

of order or for reducing salaries or eliminating certain statutory
positions which he opposed.
While in Congress he was not regarded as
advocate.

He has some detective ambitions.

porter that if he

under




could spare

a peace

He once told a re-

the time, he would obtain

a

job

an assumed name in a Chicago packing house and find out how

-17-

After he had brought

the packers "doped" the meats they sold.

about this exposure, he would have it printed in the newspapers.
He said he believed all meat was "doped" by the packers so as to
preserve it.
Fowler was believed to be economical.

He never

went in for society, and it is therefore believed worthy of comment that he now stops at the Yillard.

When he was in Congress

he stopped in a Capitol Hill boarding house.
that he is a fair lawyer.,

but

It is believed

it is doubted if he ever had much

He was prosecuting attorney df his county in

court experience.

Southern Illinois once.

The press matter Which he is getting out

for the Peace Council shows sone traces of knowledge of international law, but it is probable that Fowler is the author of all
of it.

He is a close student and with a couple of months reading

would probably be able to give this matter the appearance of having

been prepared by an international lawyer.
He told a reporter that he has been travelling
about "on this business ever since I left here in the spring" meaning :arch 4 or thereabouts.
He has also stated that he is the "press agent"
for the Council.

Hilton Snelling, the first vice-president of the
Council, is an organizer for the American Federation of Labor,
His latest work has

been

to organize the brewery workers of

Washington and not long ago they went on strike.

His connection

with the Council is believed to be merely that of an inactive

officeholder.


He lives in a very poor part of Washington and is

-18-

not rearded as a very thrifty person.
GOITERS' ATTITUDE TOWARD THE COUUCIL.

Although all the labor men who are listed as

officers of the or:anization are members of oraniztions affiliated v:ith the ALlerican Federation of Labor, Samuel Gompers,

President of the Federation, has expressed his opposition to that
part of its doctrine which is aimed at preventing the exportation
of arms and ammunition to bellierents. This opposition was indicated as far back as June 19, the date of the Bryan meeting at
Carnegie Hall. Gompers was invited to address the meetin7.

He

sent a letter reretting his inability to do so, in which he expressed the view that while peace was much to be desired, there
mieht come a time 7fien it would be desirable for the United States

to,fiht to preserve its ri7hts.

In other Tiords, Gompers could

not approve of a peace-at-any-price policy. The meeting was
called obtensibly to consider peace and Gompers did not refer to
the subject of exporting-arm s- and aamunition. The letter was to
have been read at the meetin, but Gompers gave out copies of it
in Washington to the press. He evidently wanted to be sure of
publication.
Since that time (k)mpers has gone further. He
has declared that labor is not concerned with the question of
shipment of arms and &munition. He told a reporter in an interview 1Jonday, July 19, that labor is not concerned with the use
made of these arms and ammunition. He believes that American
manufacturers are making arms for any nation that wishes to buy



-19-

them, hence there is no discrimination.

They are delivered free

on board at the factory or at some port of entry.

at becomes of

them after their delivery is no concern of the laboring man.

He

expressed the opinion that the U. S. could not refrain from selling arms and ammunition, as if the U. S. were in war we would
also have to buy arms and aamunition.

It would be dangerous

policy, in his opinion, to close the door.
Asked if the Labor Peace Council had the support of the American Federation of Labon, he reTJlied that "they

are not only acting independently of us, but are repugnant to us."
Further asked to go into details, he refused to
He evidently has no authority to prevent the

say anything more.

Peace Council from continuing its propaganda and at the same time
he does not wish to stir up a fight within the ranks of the Federation itself.

The fact, however, that Gompers is opposed to

the Peace Council's doctrine will undoubtedly serve to take the
sting out of any activities the Council may push in Connress next
winter.

It is pretty safe to assume Buchanan will be unable to

make any progress in the Capitol with hisKropaganda because the
rank and file of Representatives and Senators will know that the
Federation is not behind the movement and will act accordingly.

PEACE COUNCIL HAS ACCO=ISHED NOTHING YET.
As far as is known in Washington, the Peace
Council has accomplished nothing except to commandeer some space
in the newspapers.

have been made by it.




Two noteworthy efforts to obtain publicity
One was in a statement charging lack of

-20-

neutrality on the part of the Federal Reserve Board and the ofler
was with respect to exportation of arms and ammunition from the
port of liew York.

The first named document was a petition to the
Federal Reserve Board alleging that a conspiracy was afoot to
have the Federal Reserve Banks discount notes for the bellir:erent

nations "and their aents".

This was a petition of 7,500 words

which was formally presented to the Federal Reserve Board.

The

prayer sought two forms of relief, namely, that no federal reserve bank be permitted to discount notes which were the result of
transactions in munitions of war and also that no nember bank discount any such notes, the Federal Reserve Board to admonish them
against such practice by circular.
This document contained earmarks of Henry B.

Martin's study of the report of the money trust investigating
committee-

The petition to the Reserve Board said an:mg
other things:
w:re, charge that through the medium of an extens-

ive conspiracy composed of certain bankers and officers and
directors of federal reserve banks and member banks embraced in
the federal reserve system, acting in conjunction with officers
and agents of the governments of Great Britain, France and Russia,.
the United. :tates has been involved in very grave and serious

breaches of neutralityxxxxxx. The persons chiefly responsible
for and the dominant factors in, this conspiracy are the members
of the firm of J. P. :I-organ




Co., and certain other persons now

-21-

serving as officers and directors of various federal reserve
banks and member banks, who secured these positions through the
,influence of the firm of J. P. ..oran

CO., or other business

allies of s'aid firm or who are subject to an under-control of its
influence.

The members of this firm as early as Au(4ust, 1914,

in furtheran cc of the conspiracy began making personal representations to officers of ihe

overnments of Great Britain, France and

Russia to the effect that in the event said governments would em-

ploy the firm of J. P. Lorgan

Co. as agents, said firm would pro-

vide facilities in the United States which would enable one or
more of these governments to obtain in the United States credits
to the amount of at least 500,000,000, said credits to be based
and
upon secured by obligations of one or more of said governments

^

or by securities of American federal state and municipal governments, or railroad and industrial corporations as might be best
available and procurable by or on behalf of the governments of

Great Britain, France and aussiaxxxxxxx"
The petition goes an to give the alleged details
of these transactions and concludes:
"Already the conspirators have drawn from the

banks in the Federal Reserve System some

220,000,000 and used

these moneys on contracting and paying for the erection of huge
factories in different parts of the United States for the manufacture of instruments of death and destruction on a scale hitherto undreamed of, so that even now by the use of these vast sums of

money secured from institttions, parts of a banking system only
recently



created by the representatives of the people in the hope

-22-

of breaking the grip of the :.:or.'-an group upon the finances and

money of the country, we have the awful spectacle of the members
Co. and their confederate conspir-

of the firm of J. P. ::organ

ators turning our reorle and our manufacturing

industries

into

ane tremendously [-Teat a7;re-ation of murder factories, sending

forth each day instrueients to kill countless human beings and
sending, to the battlefields of Europe from day to day

of poor dumb animals,

'here to he

manner and as we have said

slaughtered in a

before, all

thousands

:mast inhuman

this done by the use of the

machinery and resources of a banking system created by the people
and.sustained by the money and credit of the people.
"Once more speaking for the nillions of men em-

braced in the organizations represented by our body,we say to
your

honorable

board these things ou-ht to cease and cease now.

life say to you further

fin, of J. P. :organ

that if

the law against the members

of

the

Co. and their confederates, so as to pre-

vent further use o± the moneys of the banks embraced in the Federal
Reserve system for the purposes denounced here, your doing so
will avoid much trouble and confusion to our

country,

but as a

very last word and stating what we know to be the sentiment of
the laboring people of the U. S., we say to your honorable board
that end it shall, if not by your action, then by other means."
(The last paragraph is an exact copy of the
statement.

A word appears to have been

left

out in the first'

sentence.)


tion.


The Reserve

Board took no action on this peti-

-23-

The Peace Council also called to the attention

of the Secretary of State alleged violations of the neutrality
laws in permitting British "transports" to sail from the port of
:ork with arms and a=unition.
An article in the New York Herald of July 9
describes a petition that was presented to the Secretary on July 8,
but on which he took no action.

This .article is:
Herald Bureau,

1502 H. Street, Nal.,
,shington, D. C., Thursday.
Labor's National Peace Council, the organization which was launched on the heels of the resignation of
William J. Bryan from
the Cabinet, made public tonight a letter to iir. Robert Lansing,

Secretary of State, in which, after the citation of ten alleged
specific charges of violation of neutrality,
is asked
to obtain a publiC investigation of these chargesLansing
through the
Collectors of Ports. The letter is signed by
H. Robert Fowler
of Illinois, once 2-epresentative in Congress from thatate, and
1:r. Frank S. :fonnett, once Attorney General of Ohio.'
The'letter sets forth the ten specific charges
and then argues that under provisions of the Hague conference and
under general international law it is a violation of the neutrality
of the United States for transports in the service of the Allies
to load munitions in United States ports and it also is illegal to
ship submarines or aeroplanes in part or in whole to the Allies.

The charges indicate that the Council is keeping
well posted on the maritime business of the port of New York. How

the inforation has been obtained was not divulged, but it
believed here that the information is extremely accurate.
These are the ten allegations of violations of

neutrality as set forth in the letter:

The steamship City of Chicago, now at pier
69, Hudson Tliver, New York, is a transport in the service of the
British government and is about to sail for Swansea, Wales, with
a cargo of ammunition for the British government.
The steamship Lord Erne is now about to
sail from pier 84, Hudson 'Aiver, Yew York, with a cargo of ammtnition, automobiles and other war supplies, intended for the British
and French governments. This ship is a transport in the service
of the British and French governments .
The steamship 1:assurian, now at the Bush
for 1,500 horses, the same to be shipped from Newport News, Va.,
doc17s, port of New York, is being fitted up with accommodations



.

-24-

to France, for delivery to military lines of the British and French
This ship is a transport in the service of the French
governments.
and British governments.
The steamship Venicie has left New York for.
4,
This
Yorfolk, Va. to take on a shipment of horses for France.
vessel is a transport in the service Of the British and French
governments.
The steamship Virginia is now loading
This vessel is a transport
horses at Yonkers 7.Y. for France.
in the service 6.4the British and French :,7;overrrments.
The steamship Jethon now at piers _os.
36 and 37, Hudson River, :7.ew I'ork, is now aking on war supplies
This vessel is a transport in the service of
for Havre, France.
the British and French govelnydents.
59,
The steamship Pascal, now at pier
Hudson.;:iver., 1Tew York, is loading with ammunition and war supplies for the British government, and is a transport in the service of the British government.
The steamship Lapland, at pier 60, Hudson
iver,..;:ew York, is now taking on a cargo of gun carriages and
other war supplies intended for the British government, in violation of the federal statute as well as of international law.
The steamship Toronto, now at pier 54,
Hudson .J.ver, :Jew York, is taking on a loan of ammunition and
other war supplies intended for the British government. This ship
is a transport in the service o f the British government.
The British and French governments have
been using the docks of the White Star and.Fabre lines to store
and ship on their transports explosives, ammunition, submarines
and aeroplanes.
The principal argument made by the letter is
that the chartered British ships which are carrying arms and ammunition from American ports should, under the Council's interpretation of the Hague conventions and existing treaties, be prohibited from doing that. The Council asserts that in these cases
merchant ships may not leave United - tates ports without violating neutrality.
The letter in closing says:
"!e respectfully request that you direct that a
public inquiry be held at once by the collectors of the ports or
other Proper government_ officials at. which oral and documentary
evidence can be submitted and opportunity given to the citizens
to examine witnesses, to the end that your department be fully
informed as to the situation."







PERSONAL.

August 25th, 1915.

My dear Governor Hanlint

Then I wrote you in regard to the various subjects
which it seemed to me should be especially studied just now,

with a view to possible future developments, I omitted to mention the matter of credit information in regard to member banks.
If any emergency arose, the reserve banks should be in position
to meet it promptly.

One of the most essential requirements

would be complete knowledge of the affairs of member banks

n11

it not be possible for us to get the final conclusions of the
Federal Reserve Board =4 the Comptroller at an early date so

that we may begin the preparation of information if it is to be

made available or, if it is not to be available, we may take 0th-

or steps to obtain it.
Thanking you in anticipation, Ibeg to remain,
Very truly yours,

Governor.

Hon. C. S. Hamlin,
Governor, Peueral Reserva Board,
Washington, D. C.
BS Jr/VC!-5




PhESONAL

August 27th, 1915.

My dear Governor Hap
In reading through our correspondence file, I find
in my letter of February 8th addressed to Vice Governor Dela-

no on the subject of

trade in contraband

following expression is used:

articles, that

the

"Commerce of that character

is authorized by our own laws and by international law and
That expression may not accurately describe

convention."

the legal status

of the trade in

contraband of war, and in
what I now under-

Mr. Delano's absence I am writing to express
stand to

be the

present status of the commerce referred to.

Trade with

belligerents

in articles which are con-

traband of war and conducted by citizens of
I believe, considered by

act on the

neutral

nations is,

some authorities to be an

part of the individual, but it

ter which impose s u-)on the

ligation of restricting or

eutral

is not of a charac-

neutral government any duty or obinterfering with

the trade.

Trade in war munitions is "denounced" by various in-

ternational

agreements or conventions, the penalty of confisca-

tion is imposed and a neutral government

tion or

assistance to trade of

din

afford no protec-

that character.

The situation

Aug. 27, 1915.

To

Hon. O. S. Hamlin.

in this country in reseect of trade of t is Character now seems
to have been made clear by the folloeing:

The circular of the Department of State with
reference to neutrality issued October 15th last states:

"In

the first place, it should be understood that generally speaking, a citizen of the United States may sell to a belligerent
nation or its agent, any article of commerce which he pleases.
He is not prohibited from doing this by any rule of internation-

al law, by any treaty provisions or by any statute of the United
States.

It makes no difference

aether the articles sold are

exclusively for war purposes, such as fire arms, ex;losives, etc.,
or whether food stuffs,elothing, horses, etc., for the use of the
army or naval belligerent.

*****"For the government of the United

States itself to sell to a belligerent

tion would be an

unnautral

act, but for a private individual to sell to a belligerent any product of the United is neither unlawfulnor unneutral nor within the
power of an

executive to prevent or control."
The note addreseed by Secretary Lansing to the gov,

ernment of Austria-Hungary, under date of August 12th, also, contained the following

wAoch are

expression in regard

contrabend of war:

to trade in articles

""*" this government is reluctant

to fee/ that the imperial and royal government will ascribe to the
United States a lack of impartial neutrality in continuing its
leRitimate trade in oil kinds of supplies used to render the armed
forces of a belligerent efficient *****".







Aug. 27, 1915.
To

Hon. C. O. Hemline,
3

The above quotations supplement and amplify the

statement contained in the President's proclamation of neutrality dated August 4, 1914, from which the following is quoted:

'And I do hereby warn the citizens of the United States *****
that while all persons mey lawfully and without rostrictionsby

the aforesaid state of war, manufacture and sell within the
United 7tates arms and munitions of war and other articles ordi-

narily known as 'contraband of war' yet they cannot carry such

articles upon the high seas for the use or service of a belligerent, nor can they transport soldiers and officers of belligerents or attempt to break a blockade which may be lawfully established and maintained during the said war,without Aneurring the

rick of hostile capture and the nenalties denounced in the law of

nations in their behalf."
The question having been raised as to the accuracy of

my letter of February 8th, I take this first opportunity of submitting the basis of expression of views therein cont.ined.
beg to remain,

Very truly yours,

Governor.

Hon. C. O. Hamlin,
Governor, Federal Reserve Board,
Thshington, D. C.
BS Jr/VCM




?ERSOW,L.

-..i.eptember 2nd, 1915.

My dear Governor Hamlin:

Possibly, the beet reply to your favor of the
26th tit., in reeard to earnings and expenses of the Federal reserve banks, will be to send you the enclosed memoranda.

This was not intended originally to be forward-

ed in this form, but it will save &nay

and re-writing to

submit exactly the data as prepared in this office.
The views expressed by our auditor, :Ir. Jefferson,

regarding the policy which we have arrived at, were reached
after considerable discussion and we have submitted the whole
subject in detail to our Board of Directors and obtained their
approval.

I hope it may be of some service in connection
the matter about which you :rote.

Very truly yours,

Hon. C. S. Hamlin,
Federal Reserve Board,
'-ashington, D. C.
BS Jr/VCM -4

with




,.)eptember 10th, 1915.

y dear Governor Mani"

I have just received your telegram and am
very sorry not to be able to take advantage of the
opportunity to have a chat with you this evening.

I

have accepted an invitation from Br. Morgan to meet

the Committee of English and French bankers at dinner
and only on that account find it impossible to join you.
It was very good of you to wire me.

Very truly yours,

Governor.
Hon. C. S. livnalin,

University Club,
How York City.

BS JR/VCM
Dictated by Br. Strong but

signed in his absence.




October 11th, 1915.

Dear Governor Hanlin:

We are just harvesting a very satisfactory
crop of apples at the farm, notwithstanding the adverse

weather conditions, and I am taking the liberty of sending you a sample to show what sort of Ppples can be grown
in Connecticut.

I hope they reach you in good order.
Sincerely yours,

Hon. Charles O. H-mlin,
Federal Reserve Board,
Washington, D. C.

Bfl JrfiCM.

he above sent to the following:
A. Delano,
1 M. Warburg,
pJ. Harding,
4.

C. 111er,
.

J.

.

lton

A:\




PERSONAL -----CONFIDENTILL.

Januery 25th, 1916.
Dear Governor Hamlin:

Your fever of the 21st inst, is just received and
/ am indebted to you for the confidential advice as to plans
of the Pederel Reserve Board Which might be claesed to some ex-

tent, as preparation for emergencies.
The enclosed auggeetion for amendments are those

which have been considered from ttme to time by the officers

of this bank and, to some extent, discussed with Governors of

other of the reserve banks at the various Conferenees during

the pest year.

I am not prepared to say tht in this form I

would finally recommend them, but they contain suggestions

which may be of value in connection with work along this line
by the ?edema' Deserve Board.

A careful study of the proceedures taken by England,
France and Germany -and by the central banks of those countries

in connection with the war, brings to light very strongly what

functions such institutions as the Federal reserve banks will be
called upon to perform in the event of any great national calam-

ity.

These have unmistakably proven to be

First:

Almost unlimited extension of credit to
banking institutions,

Second:

Unlimited issues of notes to take the
place of sold in circulation which rapidly disappears.

-2-

Jan. 25, 1916.

Hon. C. 7. Hamlin.

To take care of the demands of the character first
mentioned, Federal reserve banks should be in a position to discount with freedom and without encountering technical obstacles,
all paper of every character offered for that pur9ose by solvent
members, within, of course, the limits of business prudence and
the limitation of the statute as to reserves,
r2o meet demands of the character described as second,

it is highly important that the process of accumulating gold
should be vigorously continued, giving note issues of the Federal

reserve banks a quality by reason of the lorga gold backing which
can be obtained by no other process than that which now prevails.
The use of gold being impounkied by the present process as a part
of the bank's reserves, will greatly ast,ist in making the notes

acceptable for circulation and in justifying their use,(possibly
only under emergency conditions), as reserve money.
One of the consequences of developments which would
lead to sudden expansion of the reserve banks, as above described,

might prove to be a demand for gold, and ability to meet this demand will deoend u on
banks.

the gold resources of the Pederal

reserve

It seems to me, therefore, that the steps now contemplated

by thr Board in recommen'iing various amendments are absolutely es-

sential to the preparation of our banking system to meet emergency
strains.

It had occurred to me that some of the legislation men-

tioned in your letter




might be favorably received by Congress during




-3To

Jan. 25, 1916.

Hon. C. S. Hamlin.

the present session where some other features, such as the re-

serve qualities of Federal reserve notes, might be dealt with
by having the neceszary legislation prepared and ready for submis.ion should occasion arise which would require it.
I very much appreciate you writing me so fully and

will hold your letter in confidence.
Very truly yours,

Hon. C. S. Hamlin,
Federal Reserve Board,

'shington, :D.
BS Jr/VCII -5

C.

Confidential.

ay 5th, 1916.

My dear Governor Hamlin:

r. Jay and I have obtained from Mr. J, P. Morgan, a
verbal statement of

J. P.

the financial condition of the firm of

: organ & Co. and

the

allied firms of Drexel, organ & Co.,

Morgan, Grenfell & Co. and Morgan, Harjes & Co., wnich conforms
to the plan authorized by the

Board of

Directors

of this uank and

which will justify placing that firm upon the list of those private bankers whose acceptances are eligible for

eral Reserve Banks.
office and the firn

purchase Uy Fed-

Letters have been exchanged between tnis
of J. P. 7organ t, Co. which comply with our

requirements for obtaining information respecing specific

The information furnished us includes:
The aggregate

capital of the four firms

The personal responsibility of the partners

outside of

the firms'

capital,

The liabilities of the firms,
The amount of their acceptance

A general statement of

engagements,

the character of the

firms' assets.

Our arrangement with Mr. ' organ includes an understand-

ing that any material change in the firms' affairs will be Lrought

to our attention.




May 5, 1916.
To

Hon. C. S. Hamlin,

It is undetstood with

Morgan that

is state-

ment is confidential and that no announcement in respect ther(to
will be made.

The knowledge of the eligibility of bills accepted.

by his firm will become current in the street as soon as we begin
to buy them.

It is importaat for various reasons that approval
of the form of statement as above outlined, be given az promptly
as possible and

.

Jay and I wouldeprreciate advice by t legraph

on Saturday, if possible, -tnat tne information as above outsined
is satisfactory to tne members of your Board.
Very truly yours,

GoNernor.

Hon. C. S. Hamlin,
Governor, Federal Reserve Board,
W ashington, D. C.
BS Jr/VCV




Confieential

ay 5th, 1916.

1 dear Governor Hamlin:
Re

-esers. Heidelbach, ickelheimer & Co.

35r8. Heidelbach, ickelneieler a: Co. have filed with
us an auditor's statement of the condition of their firm in the
form enclosed.

in addition to the figures submitted, a member of the
firm has made a statement to

Mr. Jay

and me in regerd to their af-

fairs and policy and we have now placed their name upon the list of

those firms whose bills are eligible for purchase by Federal Reserve
banks.

:Je will appreciate your approval

of theform enclosed.

This firm has likewise filed with us

tne

necessary letter

specific bills
if requested and r. ickelheimer has stated that he will inform us of
eederteking to furnish us

with information in regard to

any material change im the firm's affairs.

It is understood that the enclosed statement is confidenial and that no announcement is respect thereto will he made.
knowledge of the eligibility of bills accepted by
come

Governor.

Hon. C. S. Hamlin,
Governor, Federal Reserve Foard,
Washington, D. C.
ES Jr/VCM-4




thlb firm will be-

current in the street ae soon as we begin to buy
Very truly yours,

The

them.

,

May stn, 1916.

My dear Governor Hamlin:
Re

Meesers. E. Naumberg. & Co.

ilesurs. X. Haumberg (lk. Co. have filed with us an auditor's

statement of tee condition of their firm in the form enclosed.
In addition to the figures submitted, a member of the
firm has made a statement to Yr. Jay and me in regard to their affairs and policy and we have now placed their name ueon the list of
those firms whose bills are eligible for purchase by Federal Reserve
Banks.

44) will appreciate your aneroval of the form enclosed.

This firm has likewise filed with us the necessary letter
undertaking to furnish us with information in regard to specific bills
if requested and Mr. eaumberg has stated that he will inform us of any
material change in the firm's affairs.
It is, understood that the enclosed statement is con-

fidential and that no announcement in reseect thereto will be made.
The khoadedge of the eligibility of bills accepted by this firm will
become current in the street as soon as we begin to buy them.
Very truly yours,

Governor.

Hon. C. S. Hamlin,
Governor, Federal Reserve Board,
Washington, D. C.
BS Jr/VCM -2



CONFIDENTIAL

Lay 23rd, 1916.

My dear Governor Hamlin:

When I wRs last in Washington, I left a copy of a
confidential memorandum covering my conversations with the
Governors of the Bank of England with Mr. Delano in order that
it might be available for eubeequent discussion and such action
as the Board considsrs desirable.
There are a number of principal points for consideration in this connection:

Paragraph E of Section 14 of the Federal Reserve
Act authorizes Federal reserve benke to open and maintain banking accounts in foreign countries, appoint correspondents, etc.,
"with the consent of the Federal Reserve Poaed."
The plan suggested by the elemorandum cannot

therefore, he put into operation without the formal authorization of the Federal Reserve Board, which as a read the statute,
should cover the opening and maintaining of a bank account and
the establishment of the Bank of England as our correspondent in
England.

For reasons which I expressed in some detail
while in ',Washington, it is in my opinion, absolutely necessary

that the purchase of foreign bills and the operation of banking
accounts in foreign countries by the twelve reserve banks should




-2-

be conjucted as one account.

To Hon. C. S. Hamlin,

May 23, 1916.

I shall not attempt to repeat

the explanation made in Washington, except to say that if the

account is to be managed in that way, it should be done under
a sufficiently binding agreement so that when the necessity
arose for really protective measures to be undertaken to save
this country from a drain of gold, the entire burden will not
fall upon the Federal Reserve Bank of New York.

I regard this

feature of the Federal Reserve Act as one of the most important

and far-reaching in its effects, so mudh so that, as I stated to
Secretary McAdoo, if the other reserve banks decide not to participate in the arrangement, we would nevertheless undertake it
ourselves, provided our Board of Directors authorize us to do so.
The question of neutrality involved must, it

seers to me, be taken into consideration by your Board when
or withholding its consent to the appointment of the Bank of
England.

I have never believed that a Federal reserve bank is

a government institution in the sense that it would implicate

the United States Government in an unnentral transaction, if our
relations with the Bank of England were considered to be unneutral.

Furthermore, the Bank of England is a private institution and in
no sense a part of the British Government.

It is probably less

so than we are, although, as you know, it is the principal fiscal agent of the Government in the management of its domestic financial affairs.

The wisdom or unwisdom of undertaking investments in foreign bills at the present time depends,of course,




.To

Hon. C. S. Hamlin.

kay 23, 1916.

entirely upon the degree of security afforded by tee arrangement
made with the Bank of

ngland.

After making a very careful

study of conditions in England and France, I became convinced
that the opening of accounts and purchase of bills abroad during the continuance of the war would not be justified by the
Federal reserve banks unless we were eepecielly protected by
an engagement on the part of the Bank of England in England and
the Bank of Frnnce in France to liquidate our accounts in gold,
if we require it.

No other bank is eble to make as effective

gold engagement as is the Sank of England, it being the custodian of the gold of the nation.
There is no occasion at the present time to consider operations, but occasion may arise, however, scae time in
the Fall and I would like to 'as prepared before that time arrives.

ve might feel unwilling to
any transactions, notwi-astanding that the arrangement

Conditions may alter materially and
undertake

eas concluded in all particulars.
Whether we undertake any business abroad before

the conclusion of the war or not, it seems

to me important that

the Federal heserve Act should kle amended so as to provide that

Federal reserve banks may receive accounts from such correspondents as they may appoint abroad,

otherwise,

it would be difficult

for us to make the relationship effective.
tay I ask

he Board to give consideration to the

de-

sirability of acting upon this matter in order that I may continue




To

Hon. C. S. Hamlin.

Ray 23, 1916.

correspondence with the Bank of England and the Bank of France

and, if necessary, submit the matter to the Governors of the
twelve reserve banks?

Your Board has been advised of the character of the
arrangements already established with the Bank of the Netherlands and we are now in correspondence with the Javasche Bank
with a view to establishing somewhat similar relations with

that bank. You further understand that Mr. Warburg has discussed tentat*Vely with the Banco de la Racion Argentina the
possibility of the establishment of a relationship

with them.

Our business with each of the institutions named will very
considerably, but it may be desirable for the Board to cansider
at this time the whole subject of foreign correspondents and
whether it may not be edvisable to authorize the appointment
of the banks named as our correspondents for the purpose of
such business as we may be transacting with them from time to

tine.
I beg to remain,
Respectfully yours,

Governor.

Hen, C. S. Hamlin,
Governor, Yederal Reserve Board,
Washington, D. C.

BS Jr/VON




May 25, J.J16.

CONFIDENTIAL

Dear Mr. Hamlin:

Governor Strong and I have obtained from Mr. James Brawn a
verbal statement of the financial

condition of the firm of Brawn

Brothers and Comlanz: and the allied firm of Brawn. Shipley & ComTany,

.which conforms to the plan authorized by the Board of Directors of
this bank and which will justify placing that firm upon the list of
those private bankers whose acceptances
Federal reserve banks.

are eligible for purchase by

e have received from Messrs. Brawn Brothers

& Company a letter agreeing to give us such information as we may require respecting specific bills.

The information furnished us

includes

The aggregate capital

of

-

the two firms.

The personal responsibility of the partners outside of the firr01 capital.
The liabilities of the firms.
The amount of their acceptance
A general statement of the
the assets of the firms.

engagements.

character of

A general statement of the policies governing the conduct of the business of the
firms.

r. Brawn will inform us of any material change

in

the

affairs

of the

firs.
It is understood by Mr. Brown that his statement is
tip.' and that no announcement in respect thereto will be made.




confidenThe

#2

Honorable Charles S. Hamlin,

5/25/26.

knowledge of the eligibility of bills accepted by his firm will become
current in the street as soon as we begin to buy them.
We should appreciate advice by telegiaT1 as soon as possible

of the approval of the form of statement as above outlined.
Respectfully yours,

Chaiman.

Honorable Charles S. Hamlin,
Governor, Federa,1 Reserve Board,
Washington, D. L,
PJ/ RAH







June 16th, 1916.

My dear Governor Hamlin:

I was just about to write you this morning when you
Now I. want to thank you for

came in.

both your fine

and for coming in to see me to cheer me up.

You and your as-

sociates and the men in the bank down town have done
in your and

their power to

relieve my

letter

mind of any

evorything

anxiety about

going way and I am more deeply grateful than I can nossiblg
express.

I hope you get a good rest yourself this Fummer.

the me!Tbers of

the Reserve Board have

bben working

All

under a tre-

mendous strain and I can now with justice point to myself as a

horrible examle of going through

an exarienoe wh-ch all of you

must avoid.

Tith many thanks, I am,
Very sincerely

Hon; C. S. Hamlin,

Care Federal Reserve
Washington, D. C.
135 Jr/VC

Board,

yours,




Estes, Park, e1o., Juiy 19, 1A6.
Hon. C. S. Hamlin,
lederal Reserve Board,
shington, D. C.
Dear Governor Hamlin:

Thank you for sending me the In

ex-Digest

of the Clayton Antitrust Act. Please h4ve no fears,
however, that 1 may become entangled itafbanking
alliances here that might violg-tejtWAiw -- there
is only one bank in Estes Par with E' ital of
0.2,1500 and, unless my lit;t1e- iice raj
considered
a Federal Reserve Bank,,,f/Is t trictly n-competitive district. 1 am jid now 4gaged in a little
proselyting with the Ca ie
the Bank, who is also
Proprietor of the Lewisto, ere 1 am stopping, in an
effort to persua -14m to\ mftat par. That seems to

riilit"i.è for local

be the limit o
here.

r p rt that 1 am improving.
t. lad to yand
rmest regards to all of my
the same to your good self.

I am

1 want _22
friends

'n

activities out

my

40.

tai.g_

Cordially yours,

CONFIDENTIAL.

.Jear Sir:

At

the

last

conference of Governors of

Federal Reserve

Banks, held in Washington in April, Mr. Strong made a report of
his negotiations abroad for the appointment of correspondents
for Federal Reserve Banks in London and Paris.

Since that date

further progress has been made toward the completion of these arrangements in London and the Federal Reserve Board has now been
asked to consent to the appointment of the Bank of England as the
London correspondent of the Federal Reserve Bank of New York.
The tentative arrangement discussed with the officers of
the Bank of England contemplates that each of the

Federal

Reserve

Banks will be invited to participate in transactions in the English

market, if

they so desire.

We are writing you this letter, in

acquainted with the
for the purpose of obtaining
following suggested method

strict confidence, in order that you may be
terms of the proposed arrangement and
an expression of your views as to the

of operating an accOunt in which all Reserve Banks that so desire
may participate.

Enclosed herewith is:Copy of a memorandum of conversations between
the Governors of the Bank of England and the Governor of the
Federal Reserve Bank of new York, prepared in London in
'rch, 1916.

Copy of memorandum submitted by the Federal
Reserve Bank of New York to the Federal Reserve Board, explaining the proposed arrangement.
Please observe that memorandum No. 1. contains a

provision

that no statement or announcement respecting this matter will be

made


without the consent of both parties.

Careful consideration of the character of the business
to be conducted convinces us that satisfactory results can only
be obtained by cooperation on the part of all Federal Reserve

Banks which participate in the account and by the management of
transactions as one undivided account.

As a tentative suggestion

of methods to be pursued, we submit the following:-




(a)

The privileges of participation will consist in:S/laring pro rata in the purchase of bills in
London;

Sharing in such balances as are carried with
the Bank of England at interest;
Sharing in purchases and sales of exchange;
all of which transs.ctions are expected to result in
(b)

consist

profits.

The responsibilities arising from participation will

of the following:A pro rata liability for any losses incurred in
the purchase of bills.
A pro kata liability for any losses incurred in
the purchase and sale of foreign exchange.
A pro rata liability for losses incurred on gold
ear-marked by the Bank of England.

A pro rata liability for any losses of gold in
transit, shortage of weight on the same, or

abrasion resulting from shipments.
A pro rata liability for any losses incurred

on the storage and ear-marking of gold held for
account of the Bank of England, save losses occasioned by the negligence or misfeasance of the
Federal Reserve Bank of flew York as custodian
thereof.
A pro rata liability for any losses resulting
from the guarantee of bills purchased for account
of the Bank of England.

7.

(c)

A pro rata liability for expenses incurred in
conducting the account, except office and general expenses of the Federal Reserve Bank of
New York.
The following methods are also suggested for handling

the account:-

Each Federal Reserve Bank might, as may be decided,
contribute "capital" to the account:In the proportion which the assets of the contributing bank bear to the assets of all
contributing banks;
In the proportion which the capital of the
contributing bank bears to the total capital
of all contributors;
In the same proportion which now applies to the
division of investments made in New York, or
For an arbitrary amount to be determined by each
bank, subject to review by either the Federal
Reserve Board or by a Committee of the Governors.
(d)

The account and all transactions therein to be conducted

by the Federal Reserve Bank of New York, which would render an
accounting to each participant as soon as practicable after the
first of January and the first of

July

in each year, which ac-

count would state the amount of profits realized, or losses
incurred, for which settlement would be made forthwith.
(e)

The accounts to be rendered by the Federal Reserve

Bank to be audited and reconciled by a Committee of the Governors,
(or their nominees) named by the banks participating, which Com-

mittee of Governors would meet at stated intervals and determine




the general policy to be pursued in the management of the account.
(f)

Every participant would undertake to be responsible pro-




rata for all losses incurred on all transactions undertaken
during the period in which it was a participant in the account
and until such transactions were fully liquidated, and withdrawal from further responsibility could only be affected by

giving say six months' notice, from which date no further
liability could be incurred in behalf of such withdrewing
participant.
Weekly advice by mail or telegraph to be given by the
Federal :eserve Bank to each participant, stating such particulars of the condition of the account as will enable each
participant to make suitable entries on its books, required for

the calculation of reserve. This advice would probably be
necessary only at such times as ear-marked gold which would

count as reserve might be held by the Bank of England for account of the Reserve Banks. Other than such gold, the interest
of each bank in the account would probably appear on its books
under the ledger heading "Foreign Exchange Account."
The terms of participation, as above outlined, together

with any modifications agreed upon at the outset, or subsequent-

ly, to be set out in a

memorandum and authorized and approved by

each participant by resolution of its Board of Directors, in a
form to be agreed upon in advance, to be uniform as to each participant, and copy thereof to be lodged with the Federal Reserve
Bank of Lew York.

The benefits and liabilities accruing to each participant
to be subject in all respects to the original terms arranged with
4.

the Bank of England and

approved by

the Federal Reserve Board,

and of any modifications thereof.

As similar arrangements may in time be effected with
the Bank of Prance, the Jank of the Netherlands and other foreign correspondents, like opportunity to be afforded to each
Reserve Bank to participate in such accounts, upon terms similar
to the terms applying to the account with the Bank of England.
The Federal Reserve Bank of :dew York to be allowed as

compensation for managing the account the same rate of commission
which it now receives for making investments for other Reserve
Banks in Eew York, such compensation, however, to be subject to
review every six months by the Committee above provided to be
appointed.

You will doubtless realize that considerable responsibility must be assumed in handling an account of this character.
The Federal Reserve Bank of New York would undertake to use due
diligence in conducting the account, but would assume no responsibility for the results of transactions, which would be handled
with the same care as is given

to the conduet of its own business.

Will you be good enough to consider the above and submit
your suggestions in respect thereof as promptly as possible, in
order that no unnecessary delay may arise in concluding the arrangement.




Yours very truly.

E.

JOPY

Whereas experience has shown that the payeent of debts
arising in the couree of oommeroial and financial transactions
is often impeded and rendered difficult by reason of circumstances

which interfere with and temporarily render impracticable the
safe transportation of gold from one country to another, in
consequence of which trade is deranged, values are rendered
uncertain, and widespread loss and suffering take place, the
High Contracting Parties, being desirous to

guard against such

grave inconveniences, have decided to conclude a convention
for that purpose, and to that end have appointed as their

respective plenipotentiaries.
who, after reciprocally exhibiting their full powers, which
were found to be in due form, have agreed upon the following
articles:

ARTICLE I.

With a view to stabilize exchange and facilitate the
settlement of balances, the High Contracting Parties agree that

all deposite of gold, made within the jurisdiction of any of
them for the purpose of paying debts incurred in the jurisdiction
of another, in the course of private commercial and financial

transactions, shall be treated by their Governmente ae con-

stituting an

international fund, to

be used for the sole purpose

of effecting exchange.
To this end the High Contracting Parties agree never to
appropriate any of the moneys included in such fund;



and they

-'-irthermere engage, each within its own jurisdiction, to
guarantee the fund, in any and all ciroumstanceo, in war

as

well as in peace, against seizure by any public authority as
well as against impairment by or as the result of any political
action or change whatsoever.
ARTICLE II.

The High Contracting Parties agree to act as trueteeeof
the fund mentioned in the preceding Article, and for this purpose
each of them will designate a bank within its omi juriediotion
to hold any part of

the

fund

there existing as joint custodian

with such person or persons or such institution as the High
Contracting Parties may

concur in appointing for that purpose.

joint

Duch/custodians shall hold the moneys

BO

entrusted

to them, subject to the order of the creditors for whom it is
held.
ARTICLE III.
The details of' the practical operations of the fund shall

be regulated and determined by agreement between
depositary banks, and in order

the

designated

to simplify and facilitate such

operations, the High Contracting Parties agree to take into
consideration the reciprocal adoption of a uniform exchange

standard, permitting the interchangeability of their gold
coins, for which purpose they recommend the adoption of gold

coins which shall be either a multiple or a simple fraction




341.

or. a unit consisting of 0.334Z7 grams of gold 9/10 fine.
ARTICLE IV.

This convention shall be ratified; and the ratifications
within two years, or
shall be exchanged at
sooner, if possible.
In testimony whereof, the respective Plenipotentiaries
have signs'a these articles and have thereunto affixed their
seals.
this
copies, at
Done in




day of

, 1916.

(Seal)

(Seal)

(Seal)

Memorandum of conversations betreen

the
0overnors of the rank of ThrIand
and the
Governor of the Federal Preserve rank or New York
regarding possible relations between the two institutions.

The following points confidentially and tentatively
agreed upon for stbmiseion and ratification by the respective
institutions,
t viaw to being put into operation. after the
conclunion of the War:
The Federal Reaerve rank of New York to act for itself
and for such of the other eleven (11) Federal 'Reserve
Banks as join the account.
ACC0UNTS. The Federal Reserve rank of rev: York to nain,
tain an account with the rank. of Englan.l.
As the Federal Reserve Bank of New York can only

receive deposits from its own renbors and the United States
Government, any balance naintained by the Bank of England with
the Federal Reserve rank of New York to be held as ear-,marked
Raid.




BITALS.

The Bank of nngland to purchase, as and when so

renuested, prime sterling bills for account of the
Federal Reserve Bank of New York, for the payment of

which,-t maturity, the Bank of England will be
responsible, such 'bills to comply with Section fourteen
(14) paragraph "Ps, of the Federal Reserve Act, which
requires that they shall arise out of actual caernercial
transactions, have no more thm ninety (90) ? 03 days
to run, and bear the signatrre of two or more
responsible parties. The Federal Reserve Bank of Nev
York,




likevise, to sell prime dollar bills of a similar
nature to the PAT*ofrolgland, and to be responsible for
their ptxyment at maturity. Such bills to be at the

ebtolute disposal of the In/raster, in either ()es°.
4. !Otte actounts reepectively to be kept free of chames and
cornier-lion «. except as regards actual out-of-pocket
expenses.
DiTrarST. When balances with the TV. r tit of Pngland connot

be invested in Mile, the account of the Pederal Reserve
Dank of New York ray be dealt with on an interest basis,
at rte e to be or,reocl upon.
AS the Pederal Reserve Dank of New Yo2lc is not

autheriled by leca to allow interest on balanoet, or to receive
deposits from other than member barks, boilimees ezrried bY the
Bank of 4 :Jana in order to earn interest must be invested in

0h o debtor institution at the request of the creditor
institution to FI et aside and ear-mark gold on a bullion
basil representing balances due. Such gold to be
clearly identified as to mirnership.
Ontr) WIRITIITS. The debtor institution to Ship gold to

the creditor institution, on request, at the Ooftt and
risk of the orrAitor institution. Where gold is Shipped
by one institution to the other for the purpose of
kin exchange, and not for the purpose of settlim
balances, suet shirt/lent to be at the risk and expenso of
the Shipping irtstthition.
kiamieement to be later
srrnnged by correeponeence, or otherwise, to cover all
questions of abrasion, price of bar gold, price of coin,
Shipping charges, sad other details of that character,
So that the effect of the arrangement will be to make
all shipments of gold between the two institutions upon
exactly equal terns as to each.
8. XTflAPXO11




Tt 1e expected that information will be
exchtvred by correfpondence respecting credit matters

INFOTTIATION.

al.-11 financial oonditione.

triletton. The arrangement to be subject to osylcellation
by either institution, in whole or in pert, exoept se to
transactions in process, on notice by letter or cable.
it beixg understood that ettr unliquidated balance either
Why' will be settled in lets if desired, under the terns
of the understanding. Tr circumstances require or
justify oorelencing operations before the oonclusion of
the War, e,dv.toe to that effect will be given by the

9.

ederel Reserve Pont of New York-.
10.

rt, is hoped that the ?odors,' Resortve nark of 1,70tv. 'Tort will
evont'061/7 Dee" cv-i orrammtant, on similar lines with
the lketratof France.

1.1.

No arsiouncemet directly or indirectly to be rade regarding
the conterte of this memorandum without the explicit
'oonsent of both institutions.,

SECRET.

emorandum of Conversations between
the

Governors of the Bank of England
and the

Governor of the Federal Reserve Bank of New York regarding
possible relations between the two institutions.

The following points confidentially and tentatively
agreed upon for submission and ratification by the respective
institutions, with a view to being put into operation after
the conclusion of the

War:-

The Federal Reserve Bank of New York to act for
itself and for such of the other eleven (11)

Federal Reserve Banks as Join the account.
ACCOUNTS.

The Federal Reserve Bank of New York

to maintain an account with the Bank of England.
As the Federal Reserve Bank of New York can only
receive deposits from its own members and the United States
Government, any balance maintained by the Bank of England
with the Federal Reserve Bank of New York to be held as
ear-marked gold.
BILLS. The Bank of England to purchase, as and




when so requesteJ, prime sterling bills for account of the Federal Reserve Bank of New York,

for the payment of which, at maturity, the Bank
of England will be responsible, such bills to
comply with Section fourteen (14) paragraph "E",
of the Federal Reserve Act, which requires that
they shall arise out of actual commercial transactions, have no more than ninety (90) ? 93 days
to run, and bear the signature of two or more
responsible parties. The Federal Reserve Bank

of New York, likewise, to sell prime dollar bills
of a similar nature to the Bank of England, and to
be responsible for their payment at maturity.

Such

bills to be at the absolute disposal of the purchaser,

in either case.
The accounts respectively to be kept free of charges

regards actual out-of-

and commission - except as
pocket expenses.
INTEREST.

When balances with the Bank of England can-

not be invested in bills,

the account of the Federal

Reserve Bank of New York may be dealt with on an interest basis,

at

rates to be agreed. upon.

As the Federal Reserve Bank of New York is not author-

to receive deposits
banks, balances carried by the Bank of

ized by law to allow interest on balances, or

from other than

member

England in order to earn interest must be invested in bills.




The debtor institution at the request of the creditor
institution to set aside and ear-mark gold on a
bullion basis representing balances due.

to be clearly identified as
GOLD SHUMENTS.

to the creditor

The debtor

Such gold

to ownership.

institution to ship gold

institution,

on request,

and risk of the creditor institution.

at the cost

Where gold is

shipped by one institution to the other for the pur-

not for the purpose of
shipment to be at the risk

pose of making exchange, and
settling balances, such

and expense of the shipping institution.

An agree-

ment to be later arranged by correspondence, or
otherwise, to cover all questions of abrasion,

price

of bar gold, price of coin, shipping charges, and
other details of that character, so that the effect

of the arrangement will be to make all shipments of
gold between the two institutions upon exactly equal




terms as to each.
INFORMATION.

exchanged by

It is expected that information will be

correspondence, respecting credit mat-

ters and financial conditions.
The arrangement to be subject to cancellaDURATION.
tion by either institution, in whole or in part,
except as to transactions in process, on notice by
letter or cable, it being understood that any un-

liquidated balance either way will be settled in
gold, if desired, under the terms of the understanding.

If circumstances require or justify commencing

operations before the conclusion of the War, advice
to that effect will be given by the Federal Reserve
Bank of New York.
It is hoped that

the

Federal Reserve Bank of New York

will eventually reach an arrangement on similar lines

with the Bank of

France.

No announcement directly or indirectly

to be

made re-

garding the contents of this memorandum without the
explicit consent of

both institutions.

JA.
0011

,OMFILENTIAL

ne- last couferenoe of Governere of Federal Reserve

in 4aehl4gton in Apri19 Mr. Strong made a report of his

3anite

::tegetiations abroad for the appointment of correspondents for Federal
.aterve Banks in london and Paris..

Since that date further progress

han been made tc*ard the conpletion of these arranEements in London

and the Pederal Reserve Board has now been asked to consent to the appointment of the Bank ofEngland as the London correepondent of the
Federal Reesrie Bank of LRW York.

The tentative arrae.?:ament discussed with the officers of the
..,ank of England contemplates that Guth of the Federal Reserve Bunke wIll

A:vited to partioipate in transections in the Engliah marketo if they
o desire.
-

We are writing you thin 1etter9 in stric confidencu,

rder teit you may be-acqUaintecl With the terms of the pranosed arranire-

,Nat and for the purpose of obtaining an expression of your views as to
tee following suggested method of operating an account in which all Re-

serve Banks that so deeire may partieipate,




Enclosed herewith is:1.
Copy of a memorandum of conversations between
the Governors of the Bank Of England and the Governor of the
Federal Reserve Bank of New York, prepared in London in
arch, 1916.
2
Copy of memoranduw submitted by the Federal
Reserefe Bank of Rew York to the Federal Reserve Board, expaining the proposed arrangement
-

Plows observe that neenc7andnu No

1

contaan a. provision

stktement or ae:noncement respecting this matter will be mad,

consent of bat:. part.

Carefnl ccnisideration of the character of the business to
be conducted convinoes us that satisfactory results can 0317 be obtained by 000poration on the part of all Federal hesorve Banks which

participate in the account and by the management of transactions as
one undivided account

As a tentative suggestion of methods to be

pursued, we submit the following:-

The privileges of participation will consist in:lv

Sharing pro rata in the purchase of bills in
London;

2.

Sharing in such balances as are carried with
the Bank of England at interest;

3,

Sharing In purchases and sales of exchange;

all of which tranaaotions are expected to result in profits.
The responsibilities arising from participation will
consist of the following:.




1

A pro rata liability for any losses incurred in
the puronasa of bills
A pro rata liability for may losses incurred in
the purchase and sale of foreign exchange.

rata liability for losses incurred on gold

3,

1

4.

A pro rata liability for any losses of gold in

5

-A pr i rata liability for any losses incurred
on the storage and ear-marking of gold held for

ear-marked by the Bank of EAgland,

transit/. shortage of weight oil the same, or
abrasion resulting from shipments,

account of the Bank of England, save losses occasioned by the negligence or misfeasance of the
Federa?. Reserve Bank 3f New York as custodian

thereof

-A pro rata liability for any losses resulting.

from the guarantee of bills purchased fo:, account

Of the Bank of England,

5

A pro rata liability for expenses tneurred in
conducting the accunt, except office and eene
oral expellees of the Federal Reserve Liank of
New York

The following methede are also ea6gested for handling the
azootuat:-

Saoh Federal Reeerve Bank might, as may be decided, con-

tribute "capital" to the acoount:l.

In the proportion which the assets of the contributing bank bear to the assets of all contributing banks
In the proportion wh:Ich the capital of the eon-

tributine bank bears to the total capital of
all contributors:

3-

In the same proportion which now applies to the
division of investments made in New York, or

4,

For an arbitrary amount to be determined by each
bank, subject to review by either the Federal
Reserve Loard or by a Committee of the 3overnors

The ecoount and all transactions therein to be condueted
by the Fe1ere2 Reserve Bank of riew York. which would render an ac-

oountine to each partieipant as soon as practicable after the first
of Janeary and the first of July in each year, which account would

state the amount of profits realized, or losses iric:.rred for which
eettlement would les made forthwith.
in)

T'ae aecouate to be rendered by the Pederel 'Reserve ,eaaa

ee 'ee aedited and reconciled by a Committee of the Jovernors, (or
eeeer nontueen; naaod by the "39.11ke participating, which CoMmittf),

f Ca7erncre eoeld meet at stated intereals and determine the general
aolIee te be pursued in the management of the account,

if)

Lvere eerticipaat would undertake to be roepenelbleproala

eeeeeeit7/.tlic



&771 all transactions endertaken during the
it ',?Ats

eartleirent te tee aecouat P.nd

Nlly 11ouf:dat(1 and withdrawal from farther rasl-onsJhEity oc:Ud. c1.1.

be ;,,;'-fes.ted. by q..vInJ.say six months notice, frcl,

1:urther liability could be incurred in behalf of Bich wittirminc
171i.rt:.cicsLt

ig)

Wee41y advice by mall or telegraph to be given by the :isderal

ReserveJc to each participant, stutiug such particralars of the condition of the account as will enable each:participant to make sujtable
entries on 'Ate b04ke, required for the calculation cf reserve.

7hIs

advia wlad probably be necessary onlj at such times.ae ear-mrked gold
which wouid count as reserve might be held by the Dank of England for account of the laserve am-As,
1.1.

Other than mach p:old;, the Interest cf each

the accionnt would probablr appear on its books mader the ledger.

hesZinF; 'Foreicn krelkan:78 Aocount"

l'he terms f partio:ption, as above outlined, poetiw.4 with
eaz, mcidifications agreed 1:4DOL at the outset
.)111 tn

or 8ubsequent4, tn ho as*

nemorandnm and auth,-;ri3ed and approved by eacii. participant by

ro,lolutioL of Its Board of Directors, in a form to bo agreed upon in adbe uniform as to esan participant, and copy thereof to be lodged
with'the Pederal Reserve Dauk of New York

iebifoefts and nabilities aceruing to each participant'to
nhbject tn all roe-beets to the orictnal terms arranged with the Bank
of England and approval by the Federal Reserve Board and of any modIfice7

tLca thereof
As simile- arranf-;ementsma:; lo time be effected with the -3arik

-

of France, ';:le.ilank of the 14ether1ands and other foreign correspondents,

1iceoppc,rtunf,ty to be afforded to each Beserve Bank to partiaipate in sue%




tams stm4lar

he terms emil..ying to tta account 1,hth

'rrort.te

C.7'




t

ze t:

s

-7;Q t:Ais
r.

1

v.'

-

(ler`

_

.

-

rfutal no re 31'

;

;..tre,:;:r
5

f."{:f".,C 117

Die

-

1!.

2.

M FOR SUBMISSION TO THE FLRESL1VE BOA
FREPATD BY BENJAMIN F,TBONG,

GOVERNOR OF THE FEDERAL RI:SERVE BOK OP NEW YORK

ttached is a copy of "Memorandum of Conversations between the
arnors of the Bark of England and the Governor of the Federal Reserve

lank

of New York" which was prepared in London during the month of Marnh,

916, as a preliminary step toward the establishment of foreign correspondents for the banks of the Federal Reserve System,

The general object of

he plan described in the memorandum is to give effect to those portions of
the Federal Reserve Act which authorise Federal reserve banks to conduct a
so-called "Floreign" business,

Those sections of the Federal Reserve Act

:wing applicability cry quoted in fall as follows:

Any Federal reserve bank may, under
"Sec. 14
rules and regulations prescribed by the Federal Reeerve
Board, purchase and sell in the open market, at honm or
abroad, either from or to domestic or foreign banks,
firms, corporations, or individuals, cable transfers and
bankers' acceptances and bills of exchange of the kinds
and maturities by this Act made eligible for rediscount,
with or without the indorsement of a member bank.
"Every Federal reserve bank

shall have

power:

(a)
To deal in gold coin and bullion at home
..broad, to make loans thereon, exchange Federal reserve notes for gold, gold coin, or gold
and to contract for loans of gold coin or bullion, giving therefor when necessary, acceptable security, including the hypothecation of United States bonds or other
securities which Federal reserve banks are authorized to
hold.
4.4... ***** ** 4

certificates,

To purchase from member banks and to sell,
(a)
with or without its indorsement, bills of exchange arising out of commercial transactions, as hereinbefore defined.

*****

**********

******

With the consent of the Federal Reserve
(e)
Boardc to open and maintain bankIng accounts in foreign
countries, appoint correspondents, and establish agencies in such countries wheresoever it may deem best for
the purpose if purchasing, selling, and collecting bills
f exchange, and to bay and sell with or without its in,
dorsemento through such correspondents or agencies, bills
't f actual oamMercial transactions
s s-of sx
R.- ninety
ms

dn

"te ep

Jorresponden

ld

madUm is submitted to th




'serve Bank

t,

6 4,

Iew Yo:

nnaection with

plic

016 Board's eons.

o ti

- of t

of the Bank of England

as it

corresp n6.unt

the City of L,r(ion
ing statement LI respectfullysobmitted in connection therowith
Tho application should

li

The for.° -

ba considered in two aspecta:

FIRST, As to Its legalilr,
SECOND As to it desirability as a business arrangm.emito

Considered in its legal aspects, the business contemplated to

be done

seems to conform to the powers expressly conferred ulen the Federal eservo
banks by those portions of SecQ 14 alcTe quoted

The business would consia

Ors
A

Opening and maintaining; a deposi acoount with the Bank -f Eng-

land 'see paragraPh (e) above quoted)
B.

Purchasingv selling and collecting sterling bills of exchmagc

of the Character permitted by pasagraphs (o) and (0) quoted above,
0
Purchasing dolla tile of exs,hange selling be same with the
indorsement vf the Fedelai reserve banks, and collecting the same at maturltl,
all for account rf the Bank of England fitee karagrapto 'o) and (e) quoted
abovs..,)

Beceiving and bolding gold coin and bullion for account of he
Bank of Englaut Dealing in go'-d °obi and bullion both at brme and &brawl (sea
paragraph (a) qux."!ed 60)01.

Purchasing or rerielving gold abroad and having sameimsr-markul'
by the BLak of England (see pa *graph (a) quoted ab)wei
E

All transactions ccntomp.Ated by the memczandum are awasoilzed by

the statute

None of them consist -f transaotiom which may be considered

as incidental to ,r necessarily !implied in connection with the lus7inese stich
is expressly authorized, no extrema construction ogth.
neceeeary tOr
this authoritaton Si far theveZoze as the Eademl Resar-e Act is concerned,
its language seems tc clearly prow...de for the 'conduct of such business a: is
deseribed in the memorandum

The Federal Beserv

744

4 already 7,0

'mks =ay take ths 6t111:06.7




At to ';he ump consider..

on, thar is

3
et

ee

lie:

statute sae

k..114611

es kept ele

eneros has been at times ha aesed
ectreme fluctuations of interest

_aye /ears past our foreenn

nd,

i even seriously impeded as a result of

rate,

accompanied by derangement of the

foreign exchanges: either causing et,. following large shipnents of gold

years 1893 to 18989

The

1907 and the two years of the present war afford exrema

illustrations of these occurrences.

While a continued period of adverse ex-

changes will generally result in exportation of geld, the

principal commercial

nations of Europe have developed means by which their banking syeteina cal

eitigate the evil consequences and, to some extent, control excessive gold

shienarts resulting from those conditiona,

Losses are occasioned by violent

fluctuations in exchange rather than by continned high or low quotations
This was demonstrated in the fall of 1914 and again

in the late summer of 1915

The object to be attained is to give stability to foreign exchanges.
The United States is the freest gold market in the

world.

Federal Reserve Lot beoame law no moans existed by vibieh either our

Until the

banking

institutions, in cooeeration or a central bank acting for them, could use their
resource

in a large way to arrest or moderate extreme fluctuations in interea-e

end exchange,, or prevent excessive mo7aments of gold

gland

France and Ger-

.:any ell mainten a certain degree of control over gold movements through
their central banks

The United States has been powerless to do so save by

enseension of 'old nayment, with its seriouo consequenees.
The Federal Reserve Ace authirizee Federal reserve barite to invest
a portion of their i'unds

n foreien bills for the exeress purpose of enabling

:hem to carry a large portfolio of

illn abroafe so that when the exchaegee

ere adverse theee bills mue be !.ieuidated and the Larket supplied with exchange,

teeperine an insistent doeand for eeport cf eold and avoiding the
eers and odium of




liver

lseending :;old eaynent
an

Were the Federal reserve banks

:s is tle 'ank of France

or were

'V

thee

able_

ThE.,

-

-%311

f in

d.

i,he Joh 3tock

-f London.

the appointment of an a7sent, or possibly tha
stablishment of an aceney to deal directly
with the London discount hdtasea and bill brokers.
After

lerinps all three possibilities (a) alone seems fasible

Act

v either (b) or (c) would result in our obtainins Service

:siderably let
,

Ificient than that Which we could obtain under (a). DualoCk Lanka, (bi would at times place these transactions

the lc:I-L.

-- the control

(

1.ie largest competitors of the SyateL in the London mar-

Dealin; with the discount houses would place the System at a disadvan,

.:714

tAilsted with the local and long established clientele of those
Ab cases. there would be the added disadvantaee of being unable

J.ranty of the Bank of inland on all bills purchased

The

a pure/laser of bills in the open market; bills are
for iliecount, and purchases made by the Bark of England

eser

hanks would be' handled by an a 6nt -.1hich was no,:
J.dpal_
:;a:'

he

MA7

In view of' the foregoing; consider-

7-111ES either (b) or (c) at greater
-_ouse of Enrope;

it is the

:Le principal L.old market of

banks 1:laydeal with the
'

-




for

t"ee Imancial Atbric of the -nation

he object

cEn 'se best accomplished and posa

iy acc

with the Bank of England, as contrast

ith indepem

nistic operations in'the London marke

A farther reason for dealing wit t

Bank of England lies in the fact that

A institution bears a relationship

10.

h

and pc

a.

'ay ant

basks and bankers of England which ie sizilar in many ways to that which

t Federal reserve banks bear to taerican banking institutiens.. It is more

dignified and natural that these institutions should deal with each other and
in eeperation rather than independently ef each other and in possible oppee-

tlen,
By dealing directly with the Bank of England the Federal reserve bark'

obtain a smarantee for the payment of bills of inestimable value. They are

able to a: range in advance the price at which gold will be released, they ale
aloe able to establish a basis for avoiding the expensive and wasteful meltins;
and re-oolnina ef sovereigns and eagles, and when gold is ear-marked for aocuart
of the Federal %eserve banks it is held in the sagest custody

It

must not be overlooked that the Reserve Syste

the teat service, must either empley 4 disinterested
an acency of ite revea

in order to

secure

correspondent, or establish

By dealing through the Bank of England we shall not only

obtain disinteeested sereice

S'or,

as shown above. competition

stitutions will net emist, bu, also obtain the

between the in-

advantage arising from an ar-

rangement vhich will be bete mutual and reciprocal

will occupy the

possible,

position of agent in New York and

The Federal reservebank

perform similar services for

the Bank of EnglaeS to those it desires performed in London.

The two institu-

tions, haying the lane objects to accomplish, will work in cooperation rather
than antagonism;

Te-day, every important bank in Lendon has close relationships, of
my years standing, with,j7ew

York banks while the Bank of England has none.

e proliosed relationship is the
,




only one the Bank ot Eneland would entertain.

the efore, no conflict of interest with member banks an arise,
--,Yo

ive character of the

arrantk-senel:t will 1;ractioally make

ice of criticism on the art of our Leeser banks

Meeleover,

ortai:. the
rsse-- -

As an indication that the ee-eaneassan'. proposed Is natural .end

ev.elop in other foreign counte

i'rance indicate that a screee.

eetitution.
7ank.

negotiations already poumenced with

similar plan can -711 Ame be effoci-

areane,
7'ettherlanrie

es this chorea n. have row
"!as Federal

,..

,rve Pan:.

6

a:

than vrrr.1.1 ha,

e 01.

aftor-the c

:41blu Tire favorable than

a.

nd,artases of 1.7:e 2;uarantec az

of thes feature vr.

v

nder

yhici) now exist

F;elleving thatthe
Ymded to alT/y to Net such em

rssult of the European war, I bel

es as hal

.isen and will recur as a

it to be ..r.aarly the duty of the man

the Federal Reserve S:.stem to Lface awFle trcIarations at the Iresen,,




e7chanels are in Tavor of the United Seates, for the strain -.7hioh
:

011 its

akinrsyste:. at the c*nolusion of the war, who)

at LIM

the e:xllailt;es are liable to run adverse for a ?wit; loriod
These 1r

and the principal trail...auctions Iroposed.

;1.i.bed as follows: At the present tire or possible this i
q3 e_ehane,e se11ix

Lela.

serve banks qin coopeirat
3ite

or 90 daL, 1)1110 )f

Alich would ,Jither be held in

.try and later collection in London

acceitanceo IL the Lion r
Jr pa-plant by the Batt of Englt
r!ailled by the rate of

-(21

seoUr

_

7

-

di

7

Befnre th

-Aame de

nrmal rate n for ocee

A and n.4,:

;4e

forced to reduce .113 price for

47"-SO that the Banit nf England Ty'

liff4re nearly than at preient

atutory purchase taois of 77

perse Ier (uncle

paM4,7 of exchange would thereby '-,

Tho

A.rt

etored to abcut 4 066', so that only when exehange rose above 4 8c2 cor!

rts of gold be made a. a Ilrofit

When exchange however

reached a pr

where it became Cheaper te expert gcld than to buy checks or cable transfer
Federal reeerre banks would begin to supply the Aarket with exehaage
1,7-7 first s.ainst whatever ,_;c1d nigh" have been ear-malted for their a_
Eank of England

The

the nupply of earparked gold was eXharsed

wenld e!ther !le anewed :o run rff er would be sold and the prroeeds check
acainst in supplying the maficet with exchange
Atrde the Reserve bark a

Upon the eathaustien of bc.

ther uvler the 1,:eposed arrar-

sell exchange for account cf the ?auk of England. or the Bark
tw:.,1, could buy dollar exharge (which would Le at a coreop ndloc; diseour
London) and mold' it '.4c, New Tent for its account

The preceeda If New 310r7c

sa7e8. or of London .s ,a4cLittances in dollars, would be invested in Lille in New
Y(Tk for account of the Bank cf lIng.tand
.:Teserve batiks would be oblIgated
lag'm




ter the payment of which the Federal

in Other words the Bank of England would then

o operara tr dollars with New York just as in the first i:astance New York
in eterllm6,.wIth London

If It

-

t).ezzley tweL
i4n.;gland five mill

asstreed t'hat the Federal Rese2:
in

it
,he niark-

a

an

.




eS"-

a

5hly.,ent
i

10 triflinG co!
7Tin the fixobances axe deranGe

-Ltable toat confiaence

lcsses in both financi
-;,. 11.1c)cting this businee.

1

thee are aLcst ne;11ib1e
:atton of a dlmwer in !Luny ca,
epts(

eaoh instance by the

lly the clearinz banks

,

a

079 :orsement of first-olaes bil:
as the Union Discount Compt

7 will

'

--71aranbeect irno

the aareement

a

the cb1i,,L;a4.

71h5ch can :ither be cal-c-r.

tn this country
zed on suCh an account must als
--22-AR of profit

one ex:ch

L7_1 arent

the

:.;rdha:
712.0

acc

xod

for a on
7ith a

01L15 hOWC ,woul

,rficlity

ehe Reserve banks
-:ril'ar) in London

balances

from :5 per

cent.

ik

in bue)

tc 5 712 per cent

In the. Bank of &Leland 'eould possibly bear a

terest, these ates bethj
era. reserve,

h'ete:

eariNie can at present

et etabiltzing

eL a.

than any rates at which the fends
be employed,.

mind that thie account would not be
f3,

r

,

It must, however

conduced primarily fer prefi

le in

eet for the

exchange and exercising son* control over gold shiymen

in the fUture_
The arrangement

propesed are tentative and experimental

and it is

expected that experience will derelop in what respect improvements can be effected, Same improvements essential to advantageous managemen, of the accoan.
will require amendments to the Federal Reserse Act

These amendmen'e shcald

.erovide that Federal reserve barks are authorized to purchase bills having 90
lays to Ten s411.1e;tve ef daye,s4; Emu.,

ceive deposit accounts from

and that Federal reserve banks may re-

inetitutions as they se,ect to be t/rir correz-

.pondente !/1 foreigu countries,

The laremage of the stetute conferring unlimlted powers upon Federal
reserve banks tc, deal in god would seem to imply that gold held abroad far ac-

count of Federal reserre banks would nevertheless count

as reserve

for unless

the xtatute so intended- the limitationr which would be teposed anon them in

their foreign operations weuld seriously impair their

abilitj effectively to

perforr this important funcAvi
It has been euggested that it would be more natural for the Reserve
banks to parehase in

thee

country 60 and 90 day bills

with documents attadeed,

drawn. on English acceptors by American exporters, ship these bills to the Bank

of England for acceptance and hold them there in portfello
said, would represent soeely Ameican commerce and we

eetieime that fanas oF the Fe4e/10. reser7e system a-

Blecle Lii is

it

therefore avoid he
.

' 115edthj

leee'eet for the jemmet ou of Englesh cemmerce

e:ii O3 11 ee. Tally th& f(11 17.




:

:Lae t aeon .he

11?

JO

af4 delivery of the ;4)c,le

All Amle

u bark,

charaeter reeegnize the rske:'involved and have developed aft

ef training:, a force cf Wcil/ed men especlally.tralned to pass
ereaSte and tIe!, technicalltias involved

This the Federal reeert

should avoid.
2n1

By purehasileg bills at the point cf origin it weuld be dif

ficult to make any arrautewene for unoonditional Guaranteo by our aorrespot.dent in ;endue.

The Bank of Ena].and is williee; to .:13.arantee bills for the

Reserve banks where it reseed on the credits itself ana knows ehit the billo
are aCesalutely good

It would not guarantee bills Where our ludoment aorne

determined what bills oheuld be purohased
Zied

If the Federal reserve banks 3o int, the American market to

buy long bills they will be directly competing with their own neember and in
a department where the profits are already oeneiderably reduoed by competitiok
and where it in essential that eneoursi3emont be afforded to the membee badre
for'immeatate develotmen of their business. The Federal Reserve 8:intern wa
desienea among other things to promote the extension of cur bankini: aystoi

into forei,tn countries for the benefit of our country s foreign commerce Tee e

will be little inducement for the member banks to do so if at the outset they
are met with coml.otition from the Recerve banks. Nor could the member banke

meet ads competition as they aIlew interest ou practically all the einde whidh
they amlloy *hopeful thu aoserve banks pay no interest on their deposits and
eould always underbid them an buyera of loik; bine in this eountry

While mome

bills xeuld doubtless be drawn on acceptors who would be satisfactory to the
Lank of Ruglan: and such as they would ouarantee it would be imrossible tt

werk out a plan by which when the acomint is reversed the Bank of England oolld

1=7 bills it the same mannor

drswn vu American aoeptors as most Of the

now in the New York market aro drawn in the East or in South America or

or the Continent and aever reach the London market for-nootistzen
acceptsnsf5-




While the law therefore, autherizes Feeeral le

hills IA this country prior to aceektance abroad
1.7

see.

thole oterctoinie this peeler.

In brief the plan proposes that the -eeserve banks nail
'r 1):.c.,;, parity and invest the proeeeds in London

tz

e

l(

t

At ,a.rniw
withdrawn' if 4tel
When excl.:an.

London at a diaoola_

the Reserve bank
Itader

::he Bank of

invest the

Zftlit in New.7%

-

iilr gaarantees.
It ia suested that the roa op3ration of tile Federal

ahould rot be cueendea or poetpcned until the conclusion of the
should be inaugurated at the present time in order to meet the emergencic.

Whioh ara certain to develop as a result of the war
Coasideration has been Avon to the question -fsrha.:, dense: ra.%-h4-

artse In case of war letween the United States and Great Bri*.ain

Ti

to ,:eard ai2aiL2t such a contingeacywoald involve either

The negotiation of a treaty or
The inoluaion of one o..% more other parties with carotin
trust 'features embolied La the place,

Le to (a), nothilu would go so lar "award Lnproperly invo1ein4 cUT
GoverraeW than making the Government a party tc the nef:otiaeng aua tht

time require& is prohibitive

Evan a treat,e m14ht not afford prote%.tion

case of war
113 to 0)), some plan may be poseible, after frper7'.enoe by whieh

three or mere banks of as many natione may be brukeht to join it a plan where-

by the interests cf any bolligerent parti)s could be tafegusraed throuji the
acency 01 the neutral parties

Prance Nolland, and Sattserland are about the

only Wropean nations with which such Ae:;ottatione evaild now be possible or

where similar hankinj arrala;ements wolaa be juntlfied ant later thew' may be

faaelble or solae of them

it the delay involved in ouch a course would

obviously be prohibitixe at the present time and any such onlargement of the

plan should not4 thereforeo lc ceriously

on.0tderEx

.

o such attest to rafe-

guurd banking tatorests ta time of war has heretefore beln za, old Cna requirement of such

measures

carried to a logical cooelvein, %nal.

imply that all International busines7. wee unsaro a.T2,. all pr-Ima,t:

able to forfeiture in time of war

Such a v.ew of tlk,s ;--iata of Ma? 10i.

business is not jut. fled by past exper'flno




14-*,

.zaplated or necessary under the p

.r1

ar such unusual .afelyttaAts
sox the,

Ac.:.-




Jr.
:0,10

s Tem,

..

a...,:ohan;es a..

Reserve

.arry out the real

he
>f the Bar."
and
3

Reserve Bank or
be'ivan.

Yo. ..k J'aga..4 33,3
4 tlif i0119.

po ris confl.de:

17 and tecOaci-e7.7 agreed upon fq:.'

red:

th 3 r`tew to be

on by

,t-

-

-,'ederal.

t.

at

Lflt

ieser.re raL.
rith the Bonk o.L

."ork to

Bank of New Yoi
own numbers ar
balance na.r.intal,

only re

United
07 the

the Federal Reser,,Y Bank of
h

auk

Je

aroarkld golde

aoglad to purchase, as and when

aterling bills for account of
e Dank of New York for the pay

ma:nitity0 the Bank of

ment
be 7.:
ft.

OE; .

-e thar they shall arise
'..;ransato t:ons 9 ha

,..

tiro

gland w-1,171.

such bills to complj with Section
zagrap.h "E"- of the Federa:, 3iistN3
PO)

1"'",` t

Ayts
te011c

pal
ke v/

lb

Isar

of

no

'UTP

nal 1

_




04,

0
112

,

a

.4..luvir,o-A to

to

,aelb reps eent14

to ship gold

araditar

,sk of ttt or
by one in,

.king Onaliv

o

'oalanG

,:ne of
7

later
OCrv

:1.10 prie

af

, 17- r

s0; the opet
Where gold

other for the

- for the purpose et'

to be at the rek
tituron.
reidene r

Qt abrasion, price

-App*ng ohorges and

sc that the effect

to maks all shipments of
-7t1ons upon enautly equal
nformatAnn will be
....:,;4.H.
,.speoAng ozedAt matters
be-øubje

O

or in part,

°a/e).Niabo'.te

on notfiaa by let=
..:lorsteod that any unliquidoi-,,
oettled in gold. if If
a understandingc
proeOes

r.7)-mmoing operations

.Hee to that effeot
of Now Yorit

:,iank of Now 'fork

ua similar lAnes

to
nnoorur-lut withnL1,. a
,

NODITIONAL NMEZANDIlir
TO THE FEDERAL RESERVE BOARD
IN RE FOREIGN CORRESPONDENTS FOR THE BANKS OF THE

FEDERAL RESERVE SYSTEM

Paragraph (e) of Section 14 of the Federal Reserve Act requires

that the ederal reserve Board must give its consent to the appointment of
foreign correspondents and

does not limit or cIrcumsoribe the power of con-

sent conferred upon the Board, and should the Board feel that it must take
into considerntion in giving or withholding its approval of the application
made by the 'Federal reserve Bank of New York, not only the terms of the

Federal Reserve Act but of any other 1ew or treaty

of the United

States, and

of international lnw, before giving consent to the appointment of the Bank of

England as a proposed correspondent, the following considerations are suggested as affecting the decision of the Board on those points:

1st.

the business proposed to be conducted unneutral
In character, and

2nd.

character,
does the conduct of this business between the
Federal reerve banks and the Hank of England in
any way implicate the government of the United
States in unneutral acts?

As to

the first

Is

If it is considered to be unneutral in

depend upon the

consideration, the

character of the business would

construction placed by our government

tions which are necessary in affecting commercial
of this country and

citizens

upon financial transac-

settlements between citizens

of a belligerent country.

The provisions of the

Federal Reserve Act, authorizing Federal reserve banks to purchase bills in
foreign markets, were designed to facilitate and

arises out of the magnitude of our

ted

export trade, a large part of which con-

munitions of war; but the proposed arrangement 'would not ' ...._nmeocia,,!__

with any

ment towards
be

the country's foreign

The necessity for embarking upon the business at the present time

commerce.

slate of

protect

no doubt.

partiorlar class of exports.
the export

As to the attitude of our govern-

of munitions and the financing

The transactions proposed do not

involve a violation by our

government of its recognized obligations of neutrality.

declared that our 'citizens are entitled to conduct a
ents in munitions of war;

thereof there seems to

Its officers have

commerce with belliger-

that la, articles which are contraband of war and

conditional contraband of war, such commerce having been described by the




State Department in one of its ciroulare as "neither unlawful nor unneutral"

and by Secretare Of State Lansing in his reply to the Austro-Hungarian Government as "legitimate trade."

The conduct of stomeerce of that oharacter nec-

essarily results in financial transactions between the citizens and banking
institutions of this country and those of belligerent nations.
merce which gives rise to these financtial transactions is

If the com-

"lawful"

and

"legitm

imate," it can hardly be held that the financial transactions necessary to the
conduct of the commerce are nevertheless unlawful 'or illegitimate.

Admittedly, the government of the United States can have no part in
such commerce, nor can it use its funds or credit for the conduct of sech

°amerce, without being implicated

in an =neutral sot,

and the question

really involved, therefore, is whether the Federal reserve banks can be held
to be departments, agencies or instruments of our government, and whether
the Bank of Pngland Onn be held to be a departeent, instrument or agency
the

Retie:

of

government to such a degree that the relationship pronosed to

be established between these two institutions would result in making the
government of the United States a party to transactions whioh might be cone-

trued as =neutral, although otherwise "lawful" and "legitimate.'
As to 2ederal reserve banks, they are corporations created by Act
of Congress, with which the relations of the government are distinctly set
out and limited by the statute itself;

they are privatele owned and are as

distinct from the government as is a national bank.
The

points of contact between

the gevernment and Federal reserve

banks are 'principally the following:

They are created by Act of Congress.
They are supervised by a government appointed Board.

Their business is conducted by a noard of Directors of nine,
three of whose members are appointed by the Adore' Board.
They are authorized to act as the

Fiscal Agents of the United

States Government, and are all of them so acting at the present time and hold

large deposits of the funds of the government.
E.

They are made the instruments for the Issue of Federal reserve

notes, which the government of the United States is obligated to pay.
6.

A specified share of the profits

paid to the government an a franchise tax.




of the bank

is required to be

7.

In general, the wupervision exercised by the government through

the Federal Reserve Board and the three government appointed directors is
probably greater than with other corporations oreated by the laws of the United
States, or of any of the separate states, with the possible exception of the
national banks and common carriers.
An examination of the law, however, discloses the fact that the 2ederal reserve banks wee no different in substance from the

national banks so far as

their legal relations to the Federal Government are concerned.
one would hold that a national bank is prohibited, by

Probably no

reason of the existence

of war, from opening an account with the Bank of England, from

buying

bills

and making other investments in England, or through the Bank of England, or,
in fact, from making direct loans to

the

British Government for the express

purpose of financing that government's purchases of munitions of war in this
country.

National banks are created by Act of Congress; their business is

supervised and they are examined by a government official (the

Comptroller of

the Currency), whose powere in that respect are similar to the powers of the
:aderal Reserve Board.

(The supervision of national banks does not however

extend to the appointment of government directors.)
instruments for the

National banks are the

lame of national bank notes for the payment of which the

government is obligated by Section 6, Chapter 708 of the Act of Ally 14, 1890,
,iust as effectually as is the government obligated to may the ?edema reserve

notes.

The share of the profits of Federal reserve banks accruing to the

government is stated in Ssotion 7

of the Federal Reserve Act to be a franchise

tax and was undoubtedly imposed in lieu of other taxes
banks might have

which

Federal reserve

been required to pay as consideration for an exclusive and

Valuable franchise.

National banks likewise act as fiscal agents of

the

United

States Government and hold large amounts of the government's funds on deposit.

They also pay substantial taxes called "duties" to the Federal Government.'

It Is difficult to see low in law any
exist between the relations sustained

difference can be shown to

by Federal reserve banks to the govern-

ment and national banks to the government.
As to the Bank of England, it is a private

by Act of Parliament in 1844.

corporation

The British Government assumes no control and

has no legal connection with the management of the bank;




reestablished

it gets no share of

the profits, nor has it any monied interest in the stook of the bank.

Rela-

tions between the British Government and the Bank Or England are those of

principal and agent, the Bank of England acting in a most elteneive way an the

banker and fiscal agent of the British Government, for which it is paid large
compensation.

It is not, however, an exclusive agency es the government also

has dealings with other financial institutions.

It is generally understood

that in the relations between the British Government and the Bank of England

the bsnk jealously guards itself from governmental interference on the one
hand and the government on the other hand carefully refrains from assuming
responsibilities in eon-Aection with the management of the bank.




DRAFT OF PRESS STAITILENT

Negotiations for establishing relations between the Bank of England
and the Federal Reserve Bank of New York, which were commenced by the governors
of the respective institutions some months ago, have now been concluded'.

The

arrangement provides that the Bank of 7ngland will act as the correspondent
and agent in London of the Federal Reserve Bank of :Tem York and that the Fed-

eral Reserve Bank of

Zcra York will act in a similar capacity in New York for

the Bank of England.

It is not the intent of the plan that these institutions engage in

coercial foreign transactions, the relationship established being primarily
for the purpose of affording greater stability to rates of exchange by maintaining with each other mutual accounts of deposit, and by representing each
other in the purchase of bills.

The plan will also create machinery by

which transactions in gold and gold coin will be facilitated, which should
result,

in normal

times, inselininating or reducing the extensive and unnec-

essary shipments of gold between

nations to

settle international balances,

which have heretofore not infrequently prevailed.

also establish a means by which it

is hoped financing

The relationship will

between the two coun-

tries can be accomplished in tines of emergency without undue strain upon
the exchanges.

Provision is made for participation by other Federal reserve banks
of the Ilnited States desiring to join in the transactions contemplated.




Denver, Colorado,
January 2, 1917.

Dear Governor Hamlin:

It was good to hear from you and I appre

ted your writing

me very mach indeed. My progress is satisfact y but slaw just now,

n very easily

but, as you realize, my temperament

with this irksome inactivity.
Governor Harding's lette

announcement has net yet

reached me and I await it

It is, of course, most

going to be in position to linit

satisfactory to feel that we

Bank of Aigland

up our Federal Rose
I hope with

the

of Europe.

It

other great

and ultimately

central banks

d seem to me tt the supreme importance of this
reciated, not as to present condi-

relationship ha

ages which will result fran such

all

ces in future years.
the Board's anno

Whi

The only fly in the ointment is the fact

ement really violated a very sacred pledge
o with

I had entered

Lord Cunliffe and having been made as

it me abroad and worse than that auuse him a
deal of embarrassment

with his own

directors.

,00d

Concerning all of that,

however, I will be able to write more fully a little later.

With warmest regards and

every good wish for the liew Year, be-

lisse me,
Faithfully yours,
Hon. C. S. Hamlin,

Federal Reserve Board,
Washington, D. C.

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




Denver, Colorado,
January 15, 1917.

CONFIDELITIAL.

2v dear Governor Hamlin:
of the 9th.

I was delighted to receive your eX dential let
As you may imsgine, it is only my car

spondance that p

development of a mental stagnation out mere - that wo

making

worst fate that I could cont
though at this stage it is

ther slow,

vents the
be about the

progress, al-

icular y as I a-- disbar-

red as yet from much acti

exercise, parti

on account of the weather

and partly due to t

lye caution of

doctor, but I have added

a total of 18 lbs. t
of course indicates pro
In reply to what
much tempted to writ

air

done so to the

peat now.

municated to

as could have
can come from

*

SO

sterious process, and that
L_.)

if nothing else does.

the foreign arrangements, I am
e account of the situation, but, having
possibly it is better for me not to reintention to make the announcement been cow,-

I could have pointed out many reasons

7ikay

it was unwise

en done also from the office in New York, but little good

Tying

over spilt milk, and 1 am now hoping that

nv health

and arrangements at the bank will permit me making another trip to Europe
this summer and make these foreign arrangements complete and effecting

and as comprehensive as present conditions

justify.

In conclusion, let me suggest that the establishment of these relations between the System and the great banks of Europe is to my mind

2/'

To - Governor

January 15, 1917.

the most important development Which can now be undertaken for the

purpose of regulating after war developments, and I know that that view
is shared by some of the most important bankers both in New York and
abroad.

I hope that no consideration -al

with their prompt

conclusion.

With kindest regards and again sy thanks for yo 3 letter,
I am,
ours,

Hon. C. S. Hamlin,
Federal Reserve Board,
Washington, D. C.




qv
Denver, Colorado,
January 26, 1917.

Dear Governor Hamlin:

It was very good of you to write me again
seem unresponsive to the needs of any

I do not want to
-tion, particularly

when I am so far away and out of touch with things, b
ment, as I wrote you, did give me
I

hock.

am now corresponding

-11ain of

Prance and feel quite sure tha

the Bank of

elude negotiations with that

institution, but in Paris much more

arise in dealing with

importan

pondence.

ground righ

Were I o

hat announce-

in London many difficulties
d to

al a matter by corres-

sow, I am sure the matter could

be promptly conolud

This si
in my e
is alwa

titn

to

once illustra

foreign

espondenta better than any other

truth of the saying that a man with money

popular.
live and keep

and imp

where such rela

health, you will see our bank in a close
with all the great central banks of Europe

nships can be of value, and it is one of the matters

which has been uppermost in mg mind ever since we started our organization.
When that part of the work is done maybe I will retire and grow potatoes.
Again thanking you for your letter and your good wishes, I am,
Very sincerely yours,
Hon. C.
al Reserve Board,
Washington, D. C.

BS/CC


July 11, 1919.

/../E3RARY
JUL 1 2 1919

FEDERAL RESERVE B.

Dear Mr. Hamlin:

It was fine of you to send. me that little book,
which I will read. on the steamer with a great deal of interest
and profit, I know.
Also many thanks for your good wishes.

I have

been looking forward to this trip for a good while and. know that

it will be most interesting as well as a good. rest.
With kindest regaras to you and your associates,
I am,

Sincerely yours,

Honorable,

Hatn,

Federal Reserve Board,
`Washington, D. U.




Hotel Trianon Palace,
Versailles, July 29, 1926.
My dear Mr. Hamlin:

Many thanks for your nice
terday and

which I

letter of July 16th, which reached me yes-

have read with a great deal

This you will understand to be a

of pleasure.

private

reply.

and personal

You understand of course that I have at times, and more recently than
formerly, felt a good deal of anxiety about my relations with some of the members
of the Board.

phere of

It will be very difficult for us

suspicion or

mistrust

or hostility.

to

accomplish much in an atmos-

The news of your reappointment gave

me a good deal of satisfaction and relieved my mind, because you end I have managed to get along so well over so many years and without a hint of any such develSo I am relieved and pleased, although you may feel

opment in our relations.

that it is a bit out of place for me to say so.
The situation over here is most complex and at times has been filled
with peril possibly beyond what is understood at home.

I shall not

attempt an

account of it all in this letter, but await my return to discuss matters verbally
to supplement the reports I have made to
Mr. Harrison writes

me that

the Bank.

he has taken

opportunity

to keep the members

of the Board informed of the substance of my reports, which is quite as I wish it,
but I was a bit surprised the other day

that a

resolution had been introduced

directing that some sort of inquiry be made of our Directors an to the object and

need

for my stay over here.

Of course I we unaware what may have inspired this,

but such inquiries, and especially made in that way, are not calculated to accom-

plish very much and they appear to
was full

explained to Secretary Mellon and Governor Crissinger

was fully understood




overlook the fact that the object of my trip

and

and, I am sure,

approved.

Unfortunately, it

will be a bit longer than I had planned, because of

2.

Mr. Hamlin.

July 29, 1926.

my illness which kept me at Antibes considerably longer than T. wished.

In a few days I am leaving for Amsterdam to have a visit with pr.
Visswing.

T shall probably see Schacht and then make an effort to visit the

Banks at Prague and Budapest.

It looks as though I could not complete my trip

in time to get home before September.

7ith best regards and many good wishes, T
Sincerely yours,

Hon. Charles S. Hamlin,
Mattahoisott,
Massachusetts.
73S:14




am




RESERV

BOARD

AsHiN7bN
September 11, 1914.

Dear Mr. Strong:
\\,.._

I enclose a

Igfe)qrlonr.

Lawrence Tweedy, who is strongly recommended for a position under the Federal
Reserve Bank of New York.

Would you

quietly find out something about him and
let me know.

Very sincerely yours,

Governor of the Board.

Benjamin Strong, Jr., Esq.,
16 Wall Street,
1s1ew York City.

Enclosure.

FEDERAL RESERV BOARD
WAS IN 1'0N
September

IP:4116

SEP 1 4 1914
Dear Mr. Strong:

send herewith a note from Mr.
Fleming, in charge of one of the Bureaus of
the State Department.




Will you kindly

look it over, and see if there are any
suggestions which will be helpful in
dealing with present problems.
Very sincerely yours,

Governor of the Board.

Benjamin Strong, Jr., Esq.,
16 Wall Street,
New York City.
Enclosure.

AD.

-SS OFFICIAL COMMUNICATIONS TO
TIE SECRETARY OF STATE, WASHINGTON, D. C.




Aolui'VISP 11
1914
DEPARTMENT OF STATE
WASHINGTON

September 4, 1914.

The Honorable C. S. Hamlin,

Governor, Federal Reserve Board.
Sir:

In compliance with your suggestion made at the
informal conference at your office, we are sending you
a memorandum of the suggestions touching the possible
use of the Consular Service in facilitating trade between the United States and foreign countries.
Very truly yours,

MEMORANDUM.

At an informal conference between Mr. C. S. Hamlin,
Governor of the Federal Reserve Board, Mr. W. B. Fleming of
the Office of the Foreign Trade Advisers, Department of
State, and Mr. G. L. Brist, Chief of the commercial section
of the Consul Bureau, Department of State, some suggestions
were made which it was thought might interest the Federal
Reserve Board.

These suggestions were in reference to affording trade
facilities in the way of bank credits or exchanges where the
credits or exchanges were disturbed by war conditions.
Pending the establishment of American banks in foreign
countries or the reestablishment of former exchange methods,

it was suggested that the Consular Service might be brought
into use for the purpose indicated by having it act as an
intermediary.

For example, if a foreign merchant is prevented from
selling goods to an American importer, by reason of the lack
of commercial exchanges, let the American importer place the
necessary funds for the purchase in his bank and, through
the Department of State and its Consular Service, notify the
foreign merchant and his bank of such deposit;

or, vice

versa, if the American seller suffers under the exchange
disability,let him and his bank be notified through the




Department

2

Department

de*

of State and its Consular Service of the deposit

made abroad by the foreign buyer.

Quasi official information as to the responsibility
of the depositary might also be conveyed and, in the absence
of a responsible bank, the Consul himself might be made the
depositary.

In some cases at least a course like this might tend
to bring about that confidence which is necessary for the
transaction of business.

If to this were added information by which the credits
between the respective countries could be cleared, much might
be done to unfetter trade.

This plan, if deemed practicable, could be submitted to
the Department of State for its approval.







FEDERAL RESERVE BOARD
WASHINGTON
September 12, 1914.

SEP 1 4 1914
To Messrs. J. B. Forgan,
S. Wexler;

L. L. Rue,'
Benjamin Strong, Jr., and
Thomas P. Beall
Committee on U. S. Clearing House Banks.
Cenclemen:

For your information, and for such suggestions as you
may care to make, I am enclosing a copy of a notice given to the
press yesterday by the Federal Reserve Board.
Very truly yours,

Governor.

Enclosure.




Washington, D. C.,,

September 11, 1914.

The Federal Reserve Baard at its meeting today renewed

consideration of the report of the corittee in favor of establishing a fund If 0.5o,000,00n in gold for protection of the
foreign exchange situation.

In view of the announcement that

New York City has completed arrangements for payment of her
maturing obligations and for providing for the necessary gold
remittance's to Europe, the Board felt that it may not be necessary

to create the proposed fund of 0150,000,000 in gold, and decided
to await developments before giving the matter further consideration, holding itself in readiness to consider any additional
suggestions which may be submitted by the Bankers' Committee
to meet the altered situation.




FEDEIRAL R ESE RVE BOARD
WASHING...T.0>r'

September, 15, 1914.

Dear Mr. Strong:

Many thanks for yo r two notes
of September 14th.

I shal

to see you and Mr. Forgan

be very glad
any time.

have just received a tele ram from Mr.

Beal in Boston stron
tion of the propos
hope, before long,

the formafund.,,/ I have

rom the other

members of the committ
Very sincer ly yours,

Gov rnor of the Board.

Benjamin strong,/Jr., Esq., President,
Bankers Tryst Company,
16 Wat1 Street, New York City.

I

FEDERAL RESERVE, OARD
WAHING 0.1,1

Septembef 15, 1914.

Dear Mr. Strong:

I have your note of September
14th, as to Mr. Fleming'

note and memo-

randum, which I will se,d to him.

think your suggestion

I

e a very good one.

Very sincer ly yours,

Gove nor

of the Board.

Benjamin Strong, ,r., Esq., President,
Bankers Trust Company,
16 Wall: Street, New York City.




/
FEDERAL RESERV BOARD
WASHINGTON

6, 1914.

Septembe,

Dear Mr. Strong:
Many thanks fo
September 15th, as to

4t..

your

note of

Tweedy.

Very sinceirely yours,

ernor of

Benjamin Strong, Jr., Esq.,
16 Wall Street,
New York City.




the Board.




FEDERAL RESERVE BOARD
WASH! NGTO N
September 28, 1914.

Dear Mr. Strong:

The Secretary of the Board tells me that
the typewritten copy of the letter addressed by the

Board to the Chairmen of the Clearing House Associations which I sent you, is the only copy they had
and that it is needed for their records.

Will you please be good enough to return
this document to me,and oblige
Faithfully yours,

Private Secretary.
Benjamin Strong, Jr., Esq.,
Bankbrs Trust Company,
New York.

POSTAL TELEGRAPH

COMMERCIAL CABLES

.- CLARENCE H. MACKAY. PRESIDENT.

TELEGRAM

RECEIVED AT
20 BROAD STREET

V YORK CITY
1278. 1279 RECTOR

DELIVERY NO.

4oH

The Postal Telegraph-Cable Company (Incorporated)transmits and delivers this message subject to the terms and conditions printed on the back of this blank.
DESIGN PATENT NO. 44529

16NYC-18457

lk ru 17 kiovt.
1. 4aOhn. D.O.Nov 4-14

imniamin Strong Jr., Saq,
27 Pine St-, N.1.
Telezram received will make correction




G.

hamlin.

,

235?

06-0

POSTAL TELEGRAPH-CABLE COMPANY 911E:7" THE COMMERCIAL CABLE

(1.

COMPM

AND 16]

THE GREATEST TELEGRAPH AND CABLE SYSTEM IN THE WORLD.

EXTENDS OVER TWO-THIRDS OF THE WAY AROUND THE EARTH.

THE POSTAL TELEGRAPH-CABLE COMPANY (

INCORPORATED)
TRANSMITS AND DELIVERS THE WITHIN TELEGRAM SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:
To guard against mistakes or delays, the sender of a telegram should order it REPEATED ; that is, telegraphed back to the originating office for comparison.
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM
AND
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows :
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery,°of any UNREPEATED telegram, beyond the amount
received for sending the same; nor for mistakes or delays in the trantmission or...delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the sum
received for sending the same, UNLESS SPECIALLY VALUED; nor in any case for delays arising from unavoidable interruption in the working of its lines; NOR
FOR ERRORS IN CIPHER OR OBSCURE TELEGRAMS.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-deliveryof this telegram.
whether caused by the negligence of its servants or otherwise, beyond fifty times the REPEATED telegram rate, at which amount this telegram, if sent as a
REPEATED telegram, is hereby valued, unless a greater value is stated in writing hereon at the time the telegram is ofiered te the Company fortransmission, and an
additional sum paid or agreed to be paid based on such value equal to one-tenth of one per cent. thereof.

8. The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary
to reach its destination.
4. Messages will be delivered free within the established free delivery limits of the terminal office. For delivery at a greater distance a special charge will be made

to cover the cost of such delivery.
6. No responsibility regarding messages attaches to this Company until the same are presented and accepted at one of its transmitting offices: and if any message is
gent to such office by one of this Company's messengers, he acts as the agent of the sender for the purpose of delivering the message and any notice or instructions

regarding it to the Company's agent in its said office.
The Company shall not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is
filed with the Company for transmission.
The above terms and conditions shall be binding upon the receiver as well as the sender of this telegram.
NO EMPLOYEE OF THIS COMPANY IS AUTHORIZED TO VARY THE FOREGOING.


CHARLES C. ADAMS, VICE-PRESIDENT.


CLARENCE H. MACKAY, PRESIDENT.
EDWARD REYNOLDS, VICE-PREST. AND GENERAL MANAGER.

CHARLES P. BRUCH, VICE-PRESIDENT.

UNIvii
AM 1#6400

y

Aorkmairir
GEORGE W. E. ATKINS, VICE-PRESIDENT

TEL

BELVIDERE BROOKS, VICE-PRESIDENT

NEWCOMB CARLTON, PRESIDENT

RECEIVED AT 16 Broad St. (Stock Exchange Bldg.), N. Y. A:6W
2K TV

36

GOVT.
6TH

K WASHINGTON DC
BENJAMIN STRONG

I

JR_ES

27 PINE

WITH

(ASE

27NEWYORK.
PREPARED OF

ALL EXHIBITS MEMORANDA

..EARL1EST CONVENIENCE.




NOV. 1914

ST

..PLEASE HAVE TWENTY COPIES

THE LETTER OF BANKERS
ETC

S. HAMLIN
GOVERNOR

1155

F"71

AND

SEND TO ME AT

FEDERAL RESERVE BOARD
WAS

November 9, 1914.

My dear Mr. Lewis:

I have your note of November
7th, and have received the twenty additional
copies of the report of the bankers committee,
for which please accept my thanks.
Very truly yours,

Governor.

J. H. Lewis, Esq.,
27 Pine Street,
New York City.




0

/
FEDERAL RESERVE BOARD
WASHINGTON

atc2

.0(

*194

December 23, 1914.

Dear Governor Strong:

I take pleasure in enclosing a copy of
the Monthly Bulletin of the Chamber of
...4.04.44.0~4,355t*

Commerce of the State of New York, containing

my address on the

Federal reserve system.

Sincerely yours,

Governor.

Benjamin Strong, Jr., Esq., Governor,
Federal Reserve Bank of New York,
62 Cedar Street,
New York City.




R EC,

IT

',I Et)

FEDERAL RESERVE BOARD
WAS H IN GTO N

L.

March 22

Benjamin Strong, Jr., Esq.,
Governor, Federal Reserve Bank of
New York.
Dear Governor Strong:
I want to thank you and the other

Governors for your very kind thought of me
sending those beautiful tulips.

I have had a

hard time for the last two weeks but I hope now
to go out tomorrow, and I can assure you I look
forward to that event with great pleasure.




With best wishes,
Very sincerely yours,

'

13A1;\

sinur

Form 120,.

.E

SYMBOL

Message

otter
at

.JSSage

.yht Letter

Blue

gif ZSTE,,,7N-

Nile
NL

lone of these three symbols
,pears after the check number of
words)this is a day message. Otherwise its character is indicated by the

symbol appearing after the check.

015

TEL

UNIte4
AM

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

CLASS OF SERVICE SYMBOL
Day Message

Day Letter

Blue

Night Message

Nile

NL
If none of these three symbols
Night Letter

appears after the check number of
words)this is a day message.Otherwise its character is indicated by the
symbol appearing after the check.

RECEIVED AT 16 BROAD ST. (STOCK EXCHANGE BLDG.), N. Y. A'S
K

K WASH I NGTO1\ ,

C. 1226PM JULY 14TH 1515

1068

BENJAM I N STRONG JR.

FEDERAL RESERVE BANK,

W LL YOU K I N7jLY ASK ONE
TWO OUTSIDE ROOMS ON THE

OF YOUR CLERKS TO ENGAGE
NEWBEDFORD STEAMSHIP LINE FOR FRIDAY

EVENING IF IMPOSSIBLE RESERVE




NEWYORK .

TWO

SEATS ON FIVE PM LIMITE

FOR PROVIDENCE.
6

C.S.HAMLIN
1229P,M

A1 fq -\\1

1111




JUL 14

PM 12 37




ANS WER,TED
JUL 30 P/15

P. J.

FEDERAL RESERVE BOARD

F

!2--

WAS

AIL ö 196 10 08AM

July 29, 1915.

FEDERAL
OF N:
,

Dear Governor Strong:
I enclose herewith a copy of a letter sent

iv

the Federal

Reserve Board this day, dismissing the petition of Mr. Fowler.
We wanted to wait until we heard from-you, but we felt that
delay was inadvisable.

Of course our action will not interfere

with any investigation you are makinginto the matter.
I leave for Mattapoipttt tomorrow at four o'clock, taking
the 11:15 train from

NOW

I shall be at the University Club,

York.

New York, from 9:30/until 10:30, and in case you wish to communicate with me you ,tan send

any

letter there.

If you want to

reach me either Saturday, Sunday or Monday, up to three o'clock,
I shall be

at

Mattapoisett.

MY

telephone number is Mattapoisett

40.

Very sincerely yours,

Governor.

Hon. Benjamin Strong, Jr.,
Governor, Federal Reserve Bank of New York,
New York City.
Enclosure:

ED

E BANK




313

The Federal Reserve Board today cont the following letter.
July 29th, 1915.

Hon. H. Robert Fowler, General Counsel,
Labors National Peace Council,
Care Hotel Willard,
Washington, D. C.

Sir: Your petition filed July ninth, nineteen
fifteen, on behalf of the Labor's National Peace
Council, was duly received and submitted to the
Board.
I am directed to say in reply that after
aralyzing and considering the averments and allegatons contained therein, the Board has concluded,
under advice of counsel, that it is without jurisdiction to try the case presented and that it is
not within its power, under the laws of the United
States, to impose by regulation the restrictions
which you seek to have imposed upon the operations
of either Federal reserve banks or national banks.

Your request for a public hearing is accordingly denied.
I am further directed by the Board to repeat the request contained in its letter to you
dated July 21, 1915, that you furnish it forthwith
with the names of all directors whom you charge in
said petition with having personally profited from
rediscount transactions of certain Federal reserve
banks.
Respectfully,
C. S. HAMLIN,

Governor.




wgsTE:zap UNION
, ATKINS, VICE-PRESIDENT

TEL

AM

NEWCOMB CARLTON, PRESIDENT

TIME FILED

ND the following Telegram, subject to the terms

BELVIDERE BROOKS, VICE-PRESIDENT

CHECK

COPY

on back hereof, which are hereby agreed to

t6apoisett, Zass., Aug. 9,

oirnor Strong,
Federal Reserve Bank, Nassau St., New York.

,.ee my telegram to Harding sent your care. Please
answer telegram immediately.
I leave for New York
New Bedford Line or Fall River Line.

-

Hamlin, Governor.
N

frall



Form 260

find hi

to-night

and have him
either on

ALL TELEGRAMS TAKEN BY THIS ..7'OMPANY
. ARE SUEJECT TO THE FOLL

To guard against mistakes or delays, the sender of a telegram shwild order it REPEATED, that is, telegraphed back to the orig.
For this, one-half the unrepeatecl telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPE
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEAT,.
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery of any REPEATED tek
the sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the world
errors in cipher or obscure telegrams.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-o,
gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereb.
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paidor agreed t.
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when n,
reach its destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such offic,
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent ex
expense, endeavor to contract for him for suel,,delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is s
such office by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any ease where the claim is not presented in writing within sixty days after the
gram is filed with the Company for transmission.

THE WESTERN UNION TELEGRAPH COMP

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

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT TELEGRAMS
Accepted up to 2.00 A.M. at reduced rates to be sent during the

night and delivered not earlier than the morning of the next ensuing
business day.
DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard night letter

rate for the transmission of 50 words or less and one-fifth of the

initial rate for each additional 10 words or less. Subordinate

to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.




Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that suffioiPnt
time remains for such transmission and delivery during regular
hours, subject to priority of the transmission of regular telegran.

NIGHT LETTERS
Accepted up to midnight for delivery on the morning of the next
ensuing business day, at rates still lower than standard night telegram
rates, as follows: The standard day rate for 10 words shall be charged
for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or
less.

Must be written in plain English Code language not pei
Mail delivery, postage prepaid, permissible.

missible.

W E STEkbalAA

Form 260

m

WESTERN UNION

_.--AGE V
CEIVE

ATKINS, VICE-PRESIDENT

S No.

TEL

.4

"r

NEWCOMB CARLTON, PRESIDENT

TIME FILED

BELVIDERE BROOKS. VICE-PRESIDENT

CHECK

ti
4D the following Telegram, subject to the terms
on back hereof, which are hereby agreed to

CUPY

4ug.

attapoisett, Mass.,
.

9, 1915.

Hardim.,
care Governor Strong, Federal Reserve Bank, Nassau St., 'New York

Have called special meeting of Federal Reserve Board for to-morrow, Tuesday
rning, in New York at office at ten o'clock of Federal Reserve Bank.
illiams, Miller and Willis will be present. Have also telegraphed Warburg.
re me on receipt of this saying that you also will be present.
M:y address
Is Mattapoisett, Mass., care '::estern Union Telegraph Company, New Bedford.




Charles S. Hamlin, Governor.

r

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJE
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that
For this, one-half the unrepeated telegram rate is charged in addition. LInless otherwise indicated on
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and I
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for /
the sum received for sending the same, unless specially valued; nor in any case for delays arising from t
errors in cipher or obscure telegrams.
In any event the Company shall not be liable for damages for any mistakes or delays in the
gram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFT DOLL
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transn
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent oi the sender, without liability, to forward this tele;
reach its destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,01
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, wit
expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepte
such office by one of the Company's --ncssengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the cl
gram is filed with the Company for transmission.

THE WEi.nii_

No employee of the Company is author iced to ;ary the foregoing.

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT TELEGRAMS
Accepted up to 2.00 A.M. at reduced rates to be sent during the

night and delivered not earlier than the morning of the next ensuing
business day.

Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that sufficient
time remains for such transmission and delivery during regular office
hours, subject to priority of the transmission of regular telegrams.

NIGHT LETTERS

lip

DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard night letter
rate for the transmission of 50 words or less and one-fifth of the

Accepted up to midnight for delivery on the morning of the nex'
ensuing business day, at rates still lower than standard night telegran
rates, as follows: The standard day rate for 10 words shall be charge(

to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.

less.

initial rate for each additional 10 words or less. Subordinate




for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or

Must be written in plain English. Code language not perMail delivery, postage prepaid, permissible.

missible.

MATTAPOISETT
MASS

40.40-7.

Are.




ed...Aat
S-e1 -.eAC:

e- (-04-G4

Ale..416...116,1111L.

AUG131915

(IQ
,FFICIO MEMBERS

CHARLES S. HAMLIN. GOVERNOR
FREDERIC A. DELANO, VICE GOVERNOR
PAUL M. WARBURG
W. P. G. HARDING

-

WILL1A:. G. MCADOO
SECRETARY OF THE TREASURY
CHAIRMAN

ADOLPH C. MILLER

TON WILLIAMS
...HOLLER OF THE CURRENCY

JOHN E

FEDERAL RESERVE BOAFZD

PCM.

H. PARKEF: WILLIS, SECRETARY
SHERMAN ALLEN. ASST. SECRETARY

ADDRESS REPLY TO

WASHINGTON

LING DEPT.

FEDERAL RESERVE BOARD

August 14, 1915.

AUG 1 0 1916

FEDERAL fiEtiffilfE BANK




Dear Governor Strong:-

This will acknowledge he receipt of
your letter of August 13th

forwarding five

copies of a report, copy of Which you state
-has already been sent

Governor Hamlin.

Very/truly yours,

/te-WA_Va4
Assistant Secretary.

Hon. Benjamin Strong, Jr.,
Governor, Federal Reserve Bank,
New York City.

Oa,

CHARLES S. HAMLIN, GOVERNOR
FREDERIC A. DELANO, VICE GOVERNOR
PAUL M. WARBURG
W. P. G. HARDING

-

ADOLPH C. MILLER

FEDERAL RESERVE BOARD

dECORRENCY




H. PARKER WILLIS. SECRETARY
SHERMAN ALLEN, ASST. SECRETARY

ADDRESS REPLY TO

WASHINGTON

FEDERAL RESERVE BOARD

August 25, 1915.

Dear Governor Strong:I am directed by the Federal Reserve Board to

refer to the Executive Committee of the Council of Governors
for its consideration, the question of the desirability of
daily settlements between the Federal reserve banks through
the Gold Settlement Fund; and if the adoption of such a
practice is considered desirable, when it dhould be undertaken?

That the Committee may have before it, informa-

tion as to the cost of telegrams in connection with the weekly
settlements through the Gold Settlement Fund, I am enclosing
a memorandum of such charges to and including the settlement
of August 129'1915.
Very respectfully,

Governor.

Hon. Benjamin Strong, Jr.,
Governor, Federal Reserve Bank,
New York City.

FILINa DEPT.
Auk.= 2

ci 1978

RESERVE BOARD

FED




A

RE8ERFEDERAL
VE BA

NCINGT°N
AUgU.

19, 1915.

Dear Governor Strong:

Your note of A
sent

s just

to Mattapoisett,

me here.

I have rea

slip from theWall

ust 16th,
reached

the enclosed

ret Journal

with

much interest, and ;ill also read the
item in "The Stat

t".

Thanki g you for sending the
clipping

to me , Iam,
Very sincerely yours,

Benjamin Str ng, Jr., Esq.,
Gover:or, Federal Reserve Bank of
New York.

FEDERAL RESERVE BOARD
WAS

October 14, 1915.

Personal

Dear Governor Strong:

I was delighteg to receive your

letter of October/

I have just re-

turned from Indianapolis, where I attended
the Bankers' Cony/ention, and I hope I shall

find the applea/at the house to-night.
I am very folic' of apples, as perhaps I

have told

yu,

and I appreciated those

you sent die last winter.
// With best wishes,
Sincerely yours,

Benjamin Strong, Jr., Esq.,
Governor, Federal Reserve Bank,
New York City.




.RKEA WILLIS

SCRETARY

Att" FEDERAL ESERVE BOARD

SHERMAN FALLEN

ASSISTANT SECRETARY

WASHINGTON

112-




Personal and Confidential.

Dear Governor Strong:-

Your letter of January 4th, in which you refer to a letter
to me under date of August 9, 1915, came duly to hand.

As you are

aware, most of the questions which you raise have been under consideration by the Federal Reserve Board.

It is this consideration

which has seemed to prevent me making an earlier reply.

The Board is generally in sympathy with the view which you
express to the effect that it is the duty of the Board and the
Federal Reserve system to be

pmaalszmylemAR,

I can state

to you in confidence, and in fact this entire letter should be regarded as personal and confidential, that with respect to the issue
of Federal Reserve notes, the Board contemplates the recommendation
to Congress of an amendment substantially on the following lines:During the year 1915 the circulation of Federal Reserve
as of December 31, 1915.
notes has increased to
Believing that the country should be prepared against any
contingency, the Board had authorized the printing of about
000,000,000 of these notes. Almost one-quarter of the total
supply printed has been placed in circulation. On December
secured by commercial paper
31, 1915, however, $
pledged with the Federal Reserve Agents was outstanding as an
obligation of the Federal Reserve Banks. The liability of
the Federal Reserve Banks as to the remainder has been discharged by the deposit with the Federal Reserve Agents of a
like amount of gold and lawful money. This result has been
achieved by the Federal Reserve Ranks responding to the requirements for currency by issuing Federal Reserve notes
rather than parting with gold. While the gold pledged with




(2)

the Federal Reserve Agents represents a very valuable protection in case there should be substantial demands for gold,
it must be Observed that the process is an expensive one
without, at the same time, giving to the Federal Reserve
Banks that additional strength and lending power which they
would secure in case the law were so amended that the Federal
Reserve Banks would remain liable for the outstanding notes but
would, on the other hand, retain property title in the gold
deposited with the Federal Reserve Agents, which, in that case,
would not be paid in for the redemption of the notes but deposited as collateral for the security of the same.
The issue of Federal Reserve notes to Federal Reserve banks
should be permitted against the deposit of notes, drafts, bills
of exchange and bankers' acceptances acquired under Section 13
and 14 of the Act, or against the deposit of gold, or of commercial paper and gold in such proportion as said Federal Reserve Board may, from time to time, prescribe.

This appears to the Board to be the main measure to be taken
at this time, as once Federal Reserve notes are issued freely in
this manner we can neither expect to accumulate the amount of gold
that we should control nor can the Federal Reserve banks be expected
to cover the heavy expense of keeping their notes out unless the
collateral advantage be secured of strengthening the system by such
issue.

As to acceptances, since you wrote your letter in August, considerable liberalization of the acceptance regulation has taken place,

and we now propose to submit to Congress an amendment asking for permission to national banks to accept against certain domestic transactions.

As to the question of fiscal agency, a beginning has been made
in turning over the funds of the Government to the Federal Reserve

banks and the plan will have to be further developed now from time




(3)

to time as the development of the machinery of

tne

Federal Re-

serve banks will warrant.
Under 1149, you mention amendments.

Points IL and B of this

have, we believe, been, or are being, disposed of as above outlined.
is to C, under which head you recommend that some consideration be
given to the possible necessity or wisdom (as an emergency measure

only) of giving power to Federal Reserve banks to lend money upon
collateral security, the Board proposes to recommend to Congress
that Federal Reserve banks be permitted to make short time loans
to their member banks against the collateral of eligible warrants
and Government bonds.

The Federal Reserve Board feels that, at this time, it should
be moderate in asking only for as small a list of amendments as
possible, because, otherwise, consideration of the subjects might
be delayed and our chance of securing any amendments might be
seriously weakened.

When this amendment under C has been secured it

may be easier to widen this paragraph later on so as to include
powers to be exercised in an emergency only.

Under D, also as an emergency measure, you recommend that, at
any rate for the present, consideration should be given to some plan
by which Federal Reserve notes might serve as cash reserves for member banks.




(4)

As you know, this is a much controverted topic upon which
public opinion is gradually swinging to the view expressed by you.
It would, however, in the opinion of the Board, be a strategic
mistake to take up this question at this time.

Moreover, the

Board has not reached any definite conclusions as to the advisability of such step as some members entertain an adverse opinion
concerning the same.
Very sincerely yours,

Honorable Benjamin Strong, Jr.,
Governor, Federal Reserve Bank,
New York, N. Y.




RECEIVED




FEDERAL RESERVE BANE
OF NEW YoRK

Copy
Trarrgral, 1-61-f

11O2244c.

Prepared b

TELEGRAM

Departmemts
Interested

Check by.

19

Code used

O. K.
File Clerk

CHARLES S. HAMLIN, 'GOVERNOR
FREDERIC A. DELANO, VICE GOVERNOR

MEMBERS

-

PAUL M.WARBURG
W. P. G. HARDING
ADOLPH C. MILLER

MCADOO
ETARY OF THE TREASURY
CHAIRMAN

', .,KELTON WILLIAMS

FEDERAL RESERVE BOARD

.iPTROLLER OF THE CURRENCY

H. PARKER WILLIS, SECRETARY
SHERMAN P. ALLEN, Ass, SECRETARY

ADDRESS REPLY To

WASHINGTON

FEDERAL RESERVE BOARD

678

June 1, 1916.

Dear Sir

There is enclosed for your information copy
all
of a letter sent by the Treasury Department, to

Federal Reserve Banks, relative to conversions of United States 2% bonds as of July 1, 1916, and a

"Schedule,:tie:

of Conversions of 2% bonds July 1, 1916".

This schedule and the letter which accampanies it are forwarded for your information and guid-

ance in making such conversions of bonds as you may
desire.

You will note that applications must be re-

ceived by the Treasury Department ten full days before
the date of conversion.
Very truly yours,

Governor.

Mr. Benjamin Strong, jr., Governor,
Federal Reserve Bank,
New York, N. Y.

2




inclosures.

)1
4,V:ill

'Ylcr




J,J1

FEDERAL RESERVE BOARD
WASHINV60100,,
PERSONAL

r

June 13, 1916.

Dear Governor Strong:

Mr. Delano told me that he found you under the weather when
in New York, but that the Doctors say that six months will bring you up
to fighting trim again.

I am awfully sorry to hear of this and beg

you to feel absolutely free to go off and take a good long vacation,
the only condition being that you leave all bank worries behind.
I cannot tell you how delighted I am to learn from Mr. Delano
that six months is all you will need to pull yourself together again.
I have been through somewhat similar experiences and can feel that if

six months is all a man needs to be restored to health he is a mighty
lucky man.

With my very best wishes, believe me,
Very sincerely yours,

f

,r,c-o5.ecAe...g

41-441'' "15

Hon. Benj. Strong, Jr.,
Governor, Federal Reserve Bank,
New York City.




1-c.

;

OF SERVICE

CLASS OF SERVICE SYMBOL

SYMBOL

Day Memos

Day Message

Day Letter

M.

Day Letter

Blue

Night Message

Mte

Night Message

Nile

Night Letter

N L.

NL
le of these three symbols

Night Letter
It
et..

after the check number of

von

..nis is a daY mossage. Other-

It none of these three symbols
appears after the check number of
wordslthis is a day message. Otherwise its character is indicated by the
symbol appearing after the check.

NEWCOMB CARLTON, PRESIDENT

wise its character is indicated by the

symbol appearing after the check.

RECEIVED AT
,

A539W 4" NL

1

NEW Yoi-t-

I

1.

EX WASHINGTON DC 28

1/e

BENJ STRONG JR

903 PARK AVE NEV YORK
THE BOARD AT ITS MELTING TODAY VOTED TO AUTHORIZE ME TO EXPRESS.TO
INCERE GOOD WISHES AND HOPE

YOU ITS

THAT YOUR JOURNEY MAY BE VERY COMFORTABLE AND YOUR VISIT IN COLORAD
MAY PROVE EFFECTIVE IN RESTORING YOU TO COMPLETE HEALTH AND STRENGTH
C

S HAMLIN




GOVERNOR.




FEDERAL RESERVE BOARD
WAS

July 11, 1916.

Dear Governor Strong:
I take

pleasure

in sending

you, under separate cover, a bound
copy of an Index-Digest of the Clayton

Antitrust Act and the Kern

Amendnent,

just finished by me, and printed as a
public document.
Very sincerely yours,

Hon. Benjamin Strong, Jr.,
Governor, Federal Reserve Bank,

New York City.




FEDERAL RESERVE BOARD
WAS

August 2, 1916.

Mr. Benjamin Strong,
Governor, Federal Reserve Bank of New York,
Estes Park, Colorado.
My dear Governor:
I was delighted to receive your letter and
to learn that you were progressing in health.

I am con-

fident that a few months' rest will send you back in perfect health.

Some of the Mississippi banks issued a cir-

cular the other day stating that they would test the legality of the clearing system, and they put in the statement

they had reason to believe that the Federal Reserve Board
regarded this as a friendly suit.

We at once issued a

publio statement that we fully recognized the right of any
person to test any portion of the Federal Reserve Act, and
that if the meaning of the words "friendly suit" is that
both parties are uncertain as to their rights and therefore wish to test it, the Federal Reserve Board will not

regard this as a friendly suit, for it has no doubt of
its power to act.




You will note that we were obliged to ask the

Postmaster General to suspend his order to postmasters to
collect checks through the mails.

We are making arrangements

now for bonding and insuring the postmasters, and it will

probably be at least thirty days before that arrangement will
be perfected.

I trust that you will not fail to write me whenever you have time.

It is always a pleasure to hear from you

and I beg you to believe that my colleagues are perfectly satisfied that the bank will run along satisfactorily.

They are

all hoping that you will not worry but take plenty of time to
recuperate.

With best wishes,
Very sincerely yours,

Governor.




FEDERAL RESERVE BOARD

AkSTON
't

December 27, 1916.

Dear Governor Strong:

I duly received your Christmas card and want to thank
you for your kind thought of me.

While I have not troubled

you with many letters inquiring as to your health, yet you can
be sure I have kept myself informed almost day by day from those
who hear from you, and the news I hear is certainly delightful.

However, do bear in mind that you must take time, but how
ever long that time is before you can come back absolutely cured
we shall rest content, so I trust you will not worry about it.

Governor Harding tells me that he has written you
about our announcement the other day of authority to the New
York bank to appoint the Bank of England its foreign correspondent and agent, so I will not bother you with any of the details.
I feel, however, that the news was received with great favor

throughout the country as evidencing an indication of the Board
to take up the matter of foreign exchange in a practical way.
With best wishes for the New Year, believe me,
Very sincerely yours,

Hon. Benj. Strong, Jr.,
41 Montview Boulevard,
Denver, Colorado.

FEDER S.E,SERVE BOARD
-

JANi 5 19;/

CONTIDFZTIAL:




AIGTON
January 9, 1917.

Dear Governor Strong:I duly received your note of January 2nd and cannot
tell you how glad I am that your progress is satisfactory, even
though slow.

The main thing to achieve is progress and a slow

steady gain in the long run is much better than a sudden change
which may later give way to further set-backs.

I fully share your gratification at the authorization
of the Board to the Federal Reserve Bank of New York to appoint the
Bank of England as its foreign agent and to open reciprocal accounts
with it, and I hope, with you, that similar action may speedily be
taken with the other great central banks of the world.
I cannot, however, quite comprehend your further statement "that the Board's announcement realy violated a very sacred pledge
which I (you) had entered into with Lord Cunliffe and having been made
as it was might discredit me (you) abroad and worse than that cause
him a good deal of embarrassment with his own directors."

I think, on reflection, you will see that the vote which
our Board passed and published was really an authorization to the Bank
of New York to take up the matter of the appointment of a foreign agent
with the Bank of England.

The vote contained no reference to any pre-

liminary conversation or understanding which had been had with the Bank
of England.

On the contrary, the vote clearly relates to future action




-2-

and. not to past understandings.

s a matter of fact, the memorandum

of your talk with the directors was never read'officially at a meeting
of the

Board.

On the contrary, the Board felt that if, acting under

its authorization, you were to proceed to enter into any arrangement

with

the

Bank of England, the arrangement itself would be formally

submitted to us for our approval.

Speaking confidentially, I would say that the warning the Board
felt impelled to give to the banks of the United States as to keeping

their affairs liquid andavAdinginvestments in securities which though
nominally short time may ultimately develop

into long time bonds, was

resented at the first, and some intimation even was given that it revealed a Pro-German inclination on the part of the Federal Reserve
Board.

It is hardly necessary to say to you that this was a pure

banking matter and that the Board in giving its warning

simply

per-

formed what it deemed to be its duty in warning the banks of the

United States as to the necessity of keeping their assets in a liquid
condition.

When, however, the Board had voted to permit your Bank to

appoint the Bank of England as its foreign agent the Board felt that
It would be plainly improper to keep such a vote from the public.

It

was perfectly clear to us that it was our duty to mention the fact in
our forthcoming annual report and we felt that the only proper way
was to take the public into our confidence and state what the vote was.

So far as any action Of the Board is concerned, it would, of
course, be open for the Bank of England to decline to enter into any

arrangement as to an agency, so far as our vote at least is

concerned.




3
Speaking personally, I do not believe that you will be placed
in any embarrassment through
Board.

It was

received

the publication

of this vote of the

with enthusiasm by the press of England and

also universally by the press in this country.

I

only hope, as I have

said, that it may be the beginning of many other arrangements with the
various great central banks.

With my very best wishes for the New Year,
Very sincerely yours,

Honorable

Benjamin Strong,
4100 Montview Boulevard,
Denver, Colorado.

believe

me




FEDERAL RESERVE BOARD
WASHINGTON
January 19, 1917.

0.P,

C=FIDEIMIAL-

JAN26 1917
Dear Governor Strong:-

1 was very glad to receive your note of January 15th.

If you have added eighteen pounds to your weight, I am sure you
ought to feel that you have made splendid progress.
You say that if the Board's intention to make the
announcement had been communicated to you, you could have pointed
out many reasons why it was unwise.

When I see you I think I can

whisrer a few words into your ear which will satisfy you, thet it
was not only not unwise, but was the highest part of wisdom.

By the way, I notice in the Journal of the American
Bankers' association for January, 1917, an interview with the
Governor of the Bank of France to the effect that he hopes a similar
authority can be given to the Federal Beserve Bank to enter into
negotiations with the Bank of Prance.
I have read many editorials in European papers and
every one welcomes the authority to enter into the proposed arrange-

ments as most wise and beneficial both to the United Ztates and
Great Britain.

I earnestly hope thnt we can now go farther and make

similar arrangements with the other great European ara Asiat!c banks.
Trusting soon to hear from you again and with the kindest
personal regards of my colleagues,believe me,
Very sincerely yours,

Eon. Benjamin strong,
Denver, Colorado.




FEDERAL RESERVi BOARD
WAS H I N

GTOOBR

AiRly

04 1919.

I /
FEDER .

g
P-19

ESE IQ

JUL 1ti6BA Ar
Hon. Benjamin Strong,
Governor,Federal lieserva Bank,
Hew York, U. Y.
Dear Governor Strong:

I take pleasure in sending you a
copy of a sturnnary entitled "The

Viar

with Germany," which I think you will
find very interesting to read on your
way across.

With best wishes for a calm sea
and a happy voyage, I am,
Sincerely yours,

Enclosure.