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FEDERAL RESERVE BANK

c74

OF NEW YORK

, 1924,

lionthbz Report to Open Market Invest-

ment Committee for December_1923.
Dear Governor

Pursuant to the procedure outlined in our inWagiepprt of November 30

a

to the Open Market Investment Committee on theAoNj

count of the Federal Reserve System, I enclos

f,

i11mss undertaken for ac-

0-)3
briefoetatement which has been pre4

pared for the members if the Committee covering'be feromommikaccounts for the
month of December.

The important developments durii

;

the month were:

A reduction of 03,000,000 in the bills held for the Bank of Japan, that
amount having been discounted for than on the 18th and the proceeds transferred to the
Yokohama Specie Bank.

year.

This is the first important change in this account for over a

As a result of the recent disaster in Japan, we expect to see gradual withdrawals

as the money is needed for reconstruction.

Following the rapid redaction in the amount of bills held for de
Kederlandsche Bank in November (from 020,000 000 to 06,000,000), we were asked to dis-

count the balance of their portfolio, 06,000,000. on December 1.

Since then their

portfolio has not been replenished and we were holding no bills purchased for than at
the end of 1923 as ccmpared with C22,000,000 at the end of 1922.

During December, the bill holdings for the Swiss National Bank increased
from 0908,000 to 03,995,000.

This c,-3,000,000 increase came from the investment in bills

of the proceeds of 02,000,000 Treasury certificates held for them

which matured on

December 15 and the receipt of an additional 01,000,000 from one of their other New York
correspondents.

The proceeds of the Treasury certificates held for the Bank of England
and the Bank of France which matured on December 15 (0:240,000 for each bank) were

switched into bankers bills in accordance with their instructions.



R
"izzd/ e-SERVE BANK OF NEW YORK

2

January 3, 1924,

The present percentages of participation of the Federal reserve banks in
these

foreign

accounts is based upon capital and surplus as of last January and these

percentages are being brought up to date as of the first of this year.
entail only minor changes in

the

This will

various percentages,

The Federal Reserve Bank of

Boston withdrew from participation in

these

foreign accounts during last year and its share (7,5%) has been assumed by this bank.
Be will be ;1_,ad to continue on that basis

ly agreeable to us

to

for the ensuing

divide up Boston's share among

course, that they would desire to

increase

the

other banks assuming, of

their participations,

question, and I

learn the views of the Committee on this

year or it would be entire-

We would like to

would appreciate it if you

would drop me a line at your convenience.




Very truly yours,

J. H. CASE,
Deputy Governor.

BAKERS ACCEPTANCES

Bank of Japan

De Nederlsrdache Bank

De Javarche
Rank

Close of business
Nov.30,1923.
On Hand
$9,548,873.86

46,174,380.98

47,898,849.58 $

Purchased

1,963,393.42

- C -

Matured or discounted

4,969,150.04

6,543,117.24

- 0 -

908,658.49-

6,174,360.98

On Hand
Dec.31,1923.

Rankoyri urad
Ministerstva
Financi

Swiss Natl.
Rank

2,862,154.91

3,543,841.29

oo-

- 0-

$

7,964,791.68

Totals

$ 24,530,762.91

$ - 0 -

245,089.17

- 0 -

o-

3,995,673.29

Bank of
France

245,115.86

2,796,212.81
- 0 -

-

8,857,594.65

o-

14,394,570.32454,826
18,993,787.24
245,089.17

245,115.86

TREASURY CERTIFICATES

14

Bank of Japan
Close of business
Nov.30,1923.
On Hand

-

Bank of
,Eniaand

$ 9,508,000.00

Bank of En71ard

Swiss N. B.

t 1,975,500.00

$

Bank of France

238,000.00

$

Totals

e 11,959,500.00

238,000.00

Purchased

6,508,500.00

-0-

0 -

-O -

6,508,500.00

Matured

6,492,000.00

1,975,500.00

238,000.00

238,000.00

8,941,500.00

On Hand
Dec.31,1923.

9,524,500.00

0-

-0-

9,524,500.00

0--

C -

FREE BALANCES

Close 11/30/23.
Close 12/31/23.

Bk. df
Rk.of
N.B.of
France
Be17ium
Bk.of Japan Nedorlaresche Bk. Javasche Bk. Swiss N.B. Bankoyri England
296.62 4 296.62 $ 3,666.64
$ 249,108.69 $53,594.30 t101,171.12
$1,001,533.60 $ 260,972.63

1,000,157.15

260,972.63

11,205.55

249,962.07

TOTAL

coblassioNs

101,171.12

791.28

Bankers Acceptances

4,090.04

Treasury -certificates

Custody charge on
earmarked gold




$

-

5,206.75

ederlardsche Pk.
$
- 0 -

Javasche Bk.
$
1,620.34

3,666.64

EARNED

From 11/-3-0-713 to 12/31773.

Bank of Japan
$
1,116.71

815.62

Totals
$ 1,670,640.22

Swiss N.B.
$ 1,910.7C

Bankovni
$
- 0 -

Bank of
En,lsnd
P
89.08

Bank of
Franco
$
89.01

-0-

-0-

-0-

-0-

- 0 -

- 0 -

- 0 -

- 0 -

-0-

-o-

-o-

-0-

o-

89.08

Totals
$

$ 1,620.34

s 1,910.7c

-

$

89.01

4,-825.84

4,090.04
- 0 t

8,915.88




Form 1204
CLASS OF SERVICE SYMBOL
Telegrar

Day L...,,

Blue

Night Message

WESTEk,i3sT24SA

Nite

TEL

WNW

AM

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

NEWCOMB CARLTON, PRESIDENT

Telegram

Day Letter

Blue

Night Message

WESTERN UNION

Night Letter
NL
If no, , these three symbols
appeal':
_ihe check (number of
words) thir,s-L.feiegram. Otherwise its chq,a,ter is indicated by the
symbol appeari.-g after the check.

UNION

CLASS OF SERVICE SYMBOL

N ite

NL
If none of these three symbols
Night Letter

appears after the check number of
words) this is a telegram.
wise its character is indicated by the
symbol appearing after the check.

RECEIVED kT

JN

4.0

D 145

Q NEWYORK NY 510P

JAN 15 1924

BENJAMIN STRONG
THE.BRLAKERS

PALMBEACH FLO
.g41,4)

,

(or,.

ANSWERING TELEGRAM VERY SATISFACTORY PARTRIDGE MEETING ATTENDED BY
ALL EXCEPT MCDOUGAL WHO STAYED HOME BECAUSE OF BANK SITUATION AFFECTING HIM AND YOUNG ALSO PRESENT COTTON MILLER CURTISS WILLS JAY UNANIMOUS
LY VOTED TO CONTINUE PRESENT PROGRAM CORN AS TO MATURITIES AND RATES
WITH ADDITIONAL AUTHORIZATION

TO BUY UP TO FIFTEEN MILLION DECEMBER
1-134CA

NINETEEN TWENTY FIVES ALL CORN AS HERETOFORE ONLY ON OFFERINGS AND
HOLDING TO PRESENT APPROVED PRICES WITHOUT FOLLOWING MARKET DOWN FOR
YOUR INFORMATION MONEY CONDITIONS SHOWS SLIGHTLY STIFFER TENDENCY

Form 1204
SYMBOL

CLASS OF SERVICE SYMBOL
Telegram

Blue

Night Message

Day Letter

Blue

N ite

Night Message

N ite

Night Letter

NL
If none of these three symbols
the check (number of
is a telegram. Otherwise its cte,acter is Ind icated by the
symbol appearing after the check.

NL
If none of these three symbols
Night Letter

aPeee:
words',

RECEIVED AT

appears after the check (number of
words) this is a telegram. Other-

NEVVCOMB CARLTON. prutsiowr

52 J N D

ACQUIRED THREE

GEORGE W. E. ATKINS, FIRST VICR-PRESIDIENT

2ND SHEET

wise its character is indicated by the

symbol appearing after the check.

NEWYORK NY

AND ONE HALF MILLION SHORT PAPER TODAY AT RATES

ESTABLISHED ALL AGREED ON POLICY TO MAINTAIN GOLD NINETEEN TWENTY
THREE LEVEL NO CHANGE IN SYSTEM BUYING RATES FOR BILLS ALTHOUGH DEALERS
2/1A4

QUOTATIONS HAVE DEOPPED ONE EIGHTH

I

etrfrkv

EXPLAINED TO PARTRIDGE YOUR

Octriq,

II
-

'

VIEWS AND POSSIBILITIES ABOUT EGGS' NO SUGGESTION OF UNFAVORABLE ATTITUDE
'' AA4-

6Y"

FROM ANY QUARTER PARTRIDGE ALL FAVORABLE TO PARTICIPATING IF SATISFACTORY
PL AN

PRESENTED




BUTTER
546P

Form 1228A

, to tiv-: account of
.SS OF SERVICE DESIRED
tgram

-day Letter

WESTE -- UNION
kaEL
m

Receiver's No.

WESTERN UNION

Night Message

TEL

Night Letter

Patrons should mark an X opposite the class of scrvice desired;

OTHERWISE THE MESSAGE
WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

NEWCOMB CARLTON, PRESIdENT

Check

ATIL
Time Filed

GEORGE V. ATKINS,

VICE-PRESIDENT

4

Send the following message, subject to the terms
on back hereof, which are hereby agreed to

January

15

1924

Benjosin btrong
The Breakers

Pals Beach Florida
Answering telegrtm

Very satlettctory partridge meeting attended by all

except McDougal whc stayc=4 hose because cf bank situAion affecting him and
Young

Also present Cotton Miller Curtiss Wills Jay

UnLnimc)usly

voted to continue presnt program corn an tomaturitiee and rates with
additional authorization to buy up to fifteen million December nineteen
twenty fives



All corn as heretofore only on offerings tnd holding

ALL MESSAGES 'TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING T.
To guard against mistakes or delays, the sender of a message should order it repeated, that is, telegraphed back to the originating office for comparist.
one-half the unrepeated message rate is charged in addition. Unless otherwise indicated on its face, this is an unrepeated message and paid for as such, in co
whereof it is agreed between the sender of the message 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 message received for transmission
peated-message rate beyond the sum of five hundred dollars; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any message
transmission at the repeated-message rate beyond the sum of five thousand dollars, unless specially valued; nor in any case for delays arising from unavoidable
in the working of its lines; nor for errors in cipher or obscure messages.
In any event the company shall not be liable for damages for mistakes or delays in the transmission or delivery, or for the non-delivery, of any mesas
caused by the negligence of its servants or otherwise, beyond the sum of five thousand dollars, at which amount each message is deemed to be valued, unless a gre
is stated in writing by the sender thereof at the time the message is tendered for transmission, and unless the repeated-message rate is paid or agreed to be paid, and
additional charge equal to one-tenth of one per cent of the amount by which such valuation shall exceed five thousand dollars.
The company is hereby made the agent of the sender, without liability, to forward this message over the lines of any other company when necessary to reach
destination.
Messages will be delivered free within one-half mile of the company's office in towns of 5,000 population or less, and within one mile of such office in other citi
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, endea
or to contract for him for such delivery at a reasonable price.
No responsibility attaches to this company concerning messages until the same are accepted at one of its transmitting offices; and if a message is sent to such
office by one of the company's messengers, he acts for that purpose as the agent of the sender.
The company will not be liable for damages or statutory 'penalties in any case where the claim is not presented in writing within sixty days after the message is
filed with the company for transmission.
It is agreed that in any action by the company to recover the tolls for any message or messages the prompt and correct transmission and delivery there
shall be presumed, subject to rebuttal by competent evidence.
Special terms governing the transmission of messages under the classes of .messages enumerated below shall apply to messages in each of such respective class
in addition to all the foregoing ternis.
No employee of the company is authorized to vary the foregoing.
THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON, PRESIDENT

TELEGRAMS

CLASSES OF SERVICE
ing and wgeement that the Company does not undertake that a

A full-rate expedited service.

NIGHT MESSAGES
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 ensuing business day.
Night Messages may at the option of the Telegraph Company be
mailed at destination to the addressees, and the Company shall be
deemed to have discharged its obligation in such cases with respect
to delivery by mailing such Night Messages at destination, postage
prepaid.

DAY LETTERS
1 deferred day service at rates lower than the standard telegram
as follows: One and one-half times the standard Night Letter

for the transmission of 50 words or less and one-fifth of the initial
rates for each additional 10 words or less.
SPECIAL TERMS APPLYING TO BAY LETTERS:

In further consideration of the reduced rate for this special Day
Letter service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters may be forwarded by the Telegraph Company as
a deferred service and the transmission and delivery of such Day
Letters is, in all respects, subordinate to the priority of transmission
and delivery of regular telegrams.
Day Letters shall be written in plain English Code language
IS not permissible.
c. This Day Letter is received subiect to the express understand


Day Letter shall be delivered on the day of its date absolutely, and
at all events; but that the Company's obligation in this respect is
subject to the condition that there shall remain sufficient time for
the transmission and delivery of such Day Letter on the day of its
date during regular office hours, subject to the priority of the transmission of regular telegrams uflder the conditions named above.
No employee of the,Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2:00 A.M. for delivery on the morning of the ensuing business day, at rates still lower than standard night message
rates, as follows: The standard telegram rate for 10 words shall be
'charged for the transmission of 50 words or less, and one-fifth of
such standard telegram rate for 10 words shall be charged for each
adclitOnal 10 words or less.
SPECIAL TERMS APPLYING TO NIGIIT LETTERS:

in fUrther consideration:of the reduced rates for this special Night
Letter service, the following special terms in addition to those enumerated above are hereby. agreed to:
Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect to delivery by mailing such Night Letters at destination, postage prepaid.
Night Letters shall be written in plain English. Code languagc
is not permissible.
No employee of the Company is authorized to vary the foregoing.

Form 1228A

to the account of
17 SERVICE DESIRED
Telegram

'lay Letter

VVESTE .3 ..., UNION

Receiver's No.

WESTERN UNION

TEL

Night Message

Night Letter

Patrons should mark an X opposite the class of service desired;

OTHERWISE THE MESSAGE
WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

Check

AM

Time Filed

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

NEWCOMB CARLTON, PRESIDENT

Send the following message, subject to the terms
on back hereof, which are hereby agreed to
r.)

to preeent approved prices without following market down

For your

information money conditions show slightly stiffer tendency
three and one h

Pcquired

million short paper today at rates established

All agreed on policy to maintuin gold nineteen twenty three level
No change in system buying rates for bills although dealers
have dropped one eighth

possibilities about eggs
any quarter

Partridge

I explained to Pahridge your views and

No suggestion of
all favorable to

plan' presented




quotations

BUT:ER

unfavorable

attitude from

participating if stitisfactoty

oEDERAL RESERVE BANK
OF NEW YORK

January 16, 1924.

Dear Governor Strong:
I was very glad to receive your telegram of yesterday, announcing your
safe arrival: at Palm Beach and asking for information regarding the meeting of the

Open Market Investment Committee.
OPEN MARKET INVESTMENT COMMITTEE
I immediately wired you, using wherever possible the code words arranged
between you and Ur. Jay.

While my telegraphic message was brief, nevertheless it

furnished you with a pretty complete birds-eye picture of what happened.

However,

I have just completed making up the minutes of Monday's meeting which, of course,
give a little more detailed information on the discussions which took place and the
subsequent action.

In order that you may be fully informed and brought up-to-date,

I am now enclosing the following data:
I.

7

4.

5.

Copy of my telegraphic reply of yesterday to your telegram,
Copy of the minutes of the meeting of the Open Market
Investment Committee of January 14, 1924.
Index, to whiCh are appended seven different statements submitted to the 'committee.
Information as to Government security holdings - F. R. bank.
Copy of a letter which was approved by the committee and sent
to each Federal reserve bank, in reference to maturities
and price limits approved by the committee and governing
purchases.
FOREIGN BANK ACCOUNTS

lc)

Copy of monthly report, showing changes and important developments during December.
Copy of a letter approved by the committee, to be sent to
all Federal reserve banks, except Boston, regarding
participations in these accounts.
Summary of our relations with the Bank of Japan.

I may say, in passing, that the minutes of

Monday's meeting have been pre-

pared with a good deal of care and are the joint product of Mr. Jay and myself.




(7

AaPeni._Strong , Fag.

AL RESERVE BANK OF NEW YORK

1/16/24.

411V4
l`cA-1

Manday's meeting was ideal in every partio ,ar.

Tn$ best of feeling prevailed and

:veryone was in sympathy with the whale progi adopted.
during the morning, as though the members

or

pa

It did look, at one time

ittee would be averse to con-

tinuing purchases because of the temporary ease in money and the tendency for securities
to go higher.

However, I got them to agree that, while we should not again lower our

buying prices at the moment, we should be fully prepared to take such securities of the
type and maturities authorized as come within the price limits fixed.

Yesterday there was a complete shift in call money, some $20,000,000 or
thereabouts having been loaned at 5%.

As a result, we were enabled to pick up, yesterday,

some $3,500,000 of short paper maturing this year, and a similar amount early this
morning.

All of our guests, with the exception of Governor Harding, who returned
on the afternoon train Monday, attended the dinner that night.
The minutes will show that I carried out your idea in dealing with the
foreign accounts.
enabled

112

Governor Crissinger spent yesterday with us here at the bank, which

to go over carefully with him many items of mutual interest.

It also gave

Jay and Harrison an opportunity of satisfactorily discussing the question of non-cash

collections and tohear from a few bankers their unfavorable information about taking
away services which we are now rendering.
I trust that you are, in good golf form and will have the best kind of an
outing.

Faithfully yours,

Benj. Strong, Esq.,
The Breakers,

Pam Beach, Florida.




J. H. CASE.

FEDERAL RESERVE BANK
OF NEW YORK
January 17

1924.

Dear Governor Strong:

With this I am handing you a copy of a letter which I received this morning from
Governor EcDougal, together with copy of a memorandum prepared by Kr.

cKay, expressing his

convictions regarding the several phases of our open mafket activities.
This morning Governor McDougal talked with we over the telephone and told me that
he had had a conversation with Young; and, while he thought the South Dakota. situation was
still serious, he believed Young had the matter well in hand, and hoped there would be very
little further trouble from that quarter.
I am also enclosing a copy of my letter of to-day's date to EcDougal.
In the minutes and in writing you yesterday, I touched very lightly on the subject
of the Bank of Japan.

I might now add that kr. Jay and I emphasized the confidential

nature of this discussion and outlined very briefly the character of the possible change
that might occur in their relations with us, owing to the fall of the yen.

Messrs.

Crissinger and kdller, as well as all the members of the committee present, expressed a
sympathetic attitude and believed we had a responsibility in doing our part to enable this
country to continue its heavy exports of American goods to Japan.

methods of doing this were touched upon, principally by Dr. killer, but it was finally
the

thoroughly understood thatgThCussion was largely of an academic character and that nothing
whatever would be done about it unless and until some proposal was submitted for consideration.
Everything continues to go nicely at the bank.
Cordially yours,

Benj. Strong, Esq.,
The Breakers,
Palm Beach, FloridaEnos.




J. H. CASE.

FEDERAL RESERVE BANK
OF NEW YORK
January 18,1924.

Dear Governor;

Just two or three high spots for your information.
Copy of Governor McDougal's letter of

South Dakota situation.

January 16, which discusses the unfavorable bank situation in South Dakota, is
enclosed.

The statement made in the fourth paragraph about chloroforming the

bank as to its old indebtedness and yet continuing to receive and pay against new
deposits made on and after January 14, shows a strange sort of banking procedure.
Reichsbank.

Enclosed is copy of their inquiry to us under date

of December 19 as to the German capital in this country, and copy of my reply of
January 15.

Comptroller's Office.

Revision of forms.

Comptroller Dawes re-

cently indicated that they had under contemplation revision of the forms used by

examinemin reporting examinations of national banks, and asked if we would be good
enough to give him the benefit of any recommendations we might have for the inclusion of particular information desired by or which would be helpful to the Federal
reserve banks.

I have gone over this matter carefully with Messrs. Chapin,

Morris and Dillistin, and enclose a copy of my reply, in case you have other ideas
of your own about this which you may wish to discuss with Comptroller Dawes when
you are next in Washington.
Transaction for TrItas2ry.

transaction for the Treasury.

I consummated to-day a very interesting

Winston told me late Wednesday evening that the

Post Office Department desired to sell $20,000,000. Fourth 4 1/4s promptly upon as
favorable terms as possible.

As they were then quoted at 99 - 99 1/32 and were

within a point or two of the lowest of any of the outstanding Liberty bonds, it




FEDERAL RESERVE BANK OF NEW YORK

Governor Strong.

2.

occurred to me that this offering might interest the British Treasury.

January 18, 1924

Accordingly,

with Winston's permission, I took the matter up direct with our friends at the corner,
offering them the entire block at 92 net and interest (free of all commissions).

They thought my price was much too high and suggested that at 98 1/2 they would recommend the purchase to their clients.

They finally agreed to cable the offer without

comment, and this morning they received word to buy.

Payment is being made for

them to-day against delivery from our stock held for the Treasury.

This was an

interesting deal to handle and I have enjoyed consummating the transaction.
There is very little else of interest to report.

Money continues to be

easy, and our additions to the special investment account are very moderate.
ever, the total purchases now amount to approximately $50,000,000.

Trusting that everything is going we
Yours

Mr. Benj. Strong,
The Breakers,
Palm Beach, Florida.

Encs. (4)




with yu, I am,

How-




FIFTEEN NASSAVSTREET
N EW YO

LES
itigua,43 19,

1924.

F1"11' XlfaiieY1 PANT\
OF birfir YORK

Dear Governor Strong:

For your information, here is a copy of a letter just
received from Dr. Miller stressing the importance of moving slowly
at present in our open market operations.

As the whole committee

were in substantial agreement with this viewpoint, I have in my
reply (copy enclosed) indicated that we are pursuing a conservative
course.

You may also be interested in the enclosed communication

from Governor Harding, about having his advisory committee of stockholders get back of a bill to enable mutual savings banks to become
associate members of the Federal Reserve system.

I have told him

frankly that his present setup of this is full of prickers and will
surely lead to an attack from member banks generally, because this
proposal would enable mutual savings banks to become associate

members of the system, carryin6but a nominal reserve against their
time deposits (1/4 of 1 per cent.), while all other members having

precisely the same type of deposits would still be required to
carry Z. per cent.

When I talked with him over the telephone this

morning I thought his enthusiasm for it appeared to be waning.

He

said, of course, nothing would be done about it unless he had the

FIL

ESIM

EEO

iess

unanimous approvalf his advisory comiakee.

FEDIWALKY

BANW.
,vbFattrtioitt yours,

Benjamin Strong, Esq.,
c/o of The Breakers,
Palm Beach, Fla.

Enc.










?a zi Nv 9 -Wei 69.411. CARD
FEURAL ,13
OF 14

Rate
fasmInted MatterBut on
uck Out.
words of greeting, in addition to date, name
.*

wo .ds Po

A MATT t,R
The Add
written Pag_

address of sender, may then be written.

att,7

5--&---ov.7

114"r-1/°14Le 4°1.

J

FEDERAL RESERVE BAN K
OF N EW Yo R K
Earch 29, 1924.
Dear Governor Strong:
Since your departure last Saturday, there has been a complete reversal
A
in the money market from the low figures Which prevailed when you sailed.
cable advising you of current conditions was sent you last night, so that you
should have it on your arrival.
;

It developed in the early part of the week that there was a great deal
of interest felt in Washington as to the reason for the very sudden and marked
change which had taken place in the money market, and on konday, March 22, a
letter was received here from kr. Winston addressed to you and asking for some
Dr. Miller, of the Federal Reserve Board, called
information on this subject.
For your information I am
me on the telephone to ask about the situation.
enclosing a copy of Lir. Winston's letter and a copy of my reply sent him under
date of parch 24.

Er. Winston was in New York on Thursday and spent several hours here
at the bank, which gave Us a good opportunity to talk over some further plans
One matter that he is anxious to see cleared up is the disof the Treasury.
posal of about $40,000,000 in long-term Treasury bonds now held by the Alien
Property Custodian, and the substitution therefor of either Third 4 1/4% Liberty
Loan bonds or other short-terse Governuent paper.
Prices of Government securities are gradually strengthening, and while
we have not as yet been able to make any further purchases, it looks to me as
though there may be an opportunity to acquire some additional "Governments" the
I am also enclosing the offering sheet of S. B. & H. as of
first of the week.
this date, together with a copy of our daily letter to the Board dated Earch 28.
Our total earning assets have increased $100,000,000 during the past week.
Figures have now been received from all the Federal reserve banks, showing their
estimated expenses for the current year and the amount of earning assets required
I have had an analysis made
to be held during the year to cover such expenses.
of the average earning assets held by each bank on the basis of its weekly report
I think this would be a good thing to conto the Board from January 1 to date.
You will observe that the System as a. whole is about $138,000,000 short
tinue.
of the amount necessary to cover expenses.
I hope that you had a good voyage over and that you will have an enjoyable time during your short stay in England.

Faithfully you

Benj. Strong, Esq.,
C/0 Bank of England,
London, England.
 Enos.


V

FEDERAL RESERVE BANK
OF NEW YORK

C:_BLE ORDER
(Outgoing Message)
Date

April 30, 1924

Copy of .Cablegram cent to CODING DEPARTMENT.

Foreign Department

From

the following message addressed
Strong, Care Logan 7 Rae Monsieur, Paris.
Please code

to the

-

Number of 7,able




(If Payment

Rate reduced to 41.

Cable)

Crissinger redesignated Governor

Stewar not

resigning.

CASE.

Time

(Dept. Heads

(Officer'

Initial

$'"

FEDERAL RESERVE BANK
OF NEW YOR K
October 14, 1924.
Dear Governor Strong:

I was very glad to learn from your recent telegram to Miss Bleecker that
you are loafing hard and beginning to feel much better than you did at the time you
went away.
I understood that you wanted a rest from consideration of bank matters
and, therefore, have refrained from communicating with you.
As you have undoubtedly been advised, on Monday of last week the officers
moved into the new building.
All of our several departments are now under our own
roof, with the exception of two or three, which are still in the Annex Building and
which are to move over in a few days.
It is a bit early, perhaps, to express a
final opinion as to the building, but the officers generally feel that it is going
to work out well, and our visitors' comments are most favorable.
The publicity
attending our removal has been negligible and, as some of the artisans are still at
work in certain departments, we have refrained from sending out to our member banks
even a notice of removal and shall not do so for another week, in the hope that we
may become pretty well acclimated by the time our visitors begin to come in.
I had a cable from Mr. Jay a few days ago, stating that he plans to sail
on October 25;
and he should, therefore, arrive home just about election time.
He
sent me a copy of an entertainingletter he wrote Governor Crissinger, telling about
his interesting work with Owen Young.

Matteson tells me that you have asked him to prepare a brief report on the
operations of the Open Market Investment Committee for your meeting in Chicago on
October 24.
This report went forward on Saturday, together with a little memorandum
prepared, at my request, by Dr. Burgess and dealing with this subject from an
economic standpoint based upon current conditions.
In connection with the Chicago meeting, it occurs to me that possibly you
might wish to have the committee consider the desirability of the Federal Reserve
Mr. Warburg
System's making a moderate investment in sterling bills in the near future.
recently attended a meeting of our executive committee, just before going to the
Federal Advisory Council meeting held in Washington on September 25, and discussed with
our executive committee the idea of this bank's making an investment in prime sterling
bills, with approved American banking indorsements on a guaranteed dollar basis.
Mr. McGarrah and the other members of our executive committee expressed the opinion
that the development of a market for sterling bills in this center would be most
desirable, and further expressed the view that we should give the idea our sympathetic
support by being prepared to buy, from time to time, moderate amounts of prime
sterling bills bearing approved American banking indorsements on a guaranteed dollar
basis.
We subsequently purchased one lot of prime bills, aggregating £100,000 and
bearing the indorsements of Rothschild and of the International Acceptance Bank, Inc.,
This has
which lot of bills was carefully reviewed by the executive committee.
since been increased by the purchase of four additional lots,of £100,000 each,of




FEDERAL RESERVE BANK OF NEW YORK

2.

Governor Strong.

10/14/24.

prime bills, each lot bearing the following indorsements:
London )
.Swiss Bank Corporation
Seligman Bros.
National Discount Company
Union Discount Company
International Acceptance Bank,
New York
Inc.

In discussing this matter with Mr. Warburg, i expressed the strong conviction that, if a market were to be developed in this country, the primary transactions
should occur in the open market and the Federal Reserve System should merely be the
backlog for the purpose of having the bills melted down from time to time, rather than
become the original purchaser; and I further expressed the belief that,if the System
should desire to make a substantial investment in such bills, we should effect it
through our correspondent, the Bank of England.
As you will recall, just before you went away the Bank of England had agreed
to put £100,000 of our account on an interest basis, and full details of this transacMeanwhile, the Federal Advisory
tion were received here the latter part of September.
Council had held its meeting in Washington on September 25 and adopted a resolution
favoring the investment by Federal reserve banks in foreign bills under certain condiI thought it best to write Governor Crissirger
tions, a copy of which is enclosed.
the complete particulars in respect of our investment through the Bank of England,
making a comparison between it and the investment in the same type of bills in this
A copy of my letter, dated
market with approved American banking indorsement.
September 30, is also enclosed.

Messrs. McDougal*and Fancher were in the bank to-day, attending a meeting
of the Pension Committee, and before they left they wanted to know about the Open
I then told them a bit about these
Market program for October 24, which I reviewed.
They appeared to be very much interested and expressed the
foreign bill purchases.
Herson
hope that you would discuss this subject at the forthcoming conference.
arrived at the bank on Saturday, at noon, availing himself of the holiday, Monday, to
make a weekend examination without interruption
I recently received a communication from Governor McKinney, of Dallas,
who desired to acquire some additional earning assets through the good offices of
I replied, under date of October 1, and have
the Open Market Investment Committee.
now received his acknowledgment bearing date of October 8, all of which correspondence
I am enclosing in the belief that you may wish to have it reviewed by the committee.

*(Governor McDougal expressed the hope that we might send him some informs,
tion for consideration in advance of the open market meeting, but, not knowing your
thoughts as to this, I shall merely send him, early next week, a copy of the Burgess
memorandum and of the report prepared by the secretary.)
Mr. James of the Federal Reserve Board has, I understand, now visited all
the Federal reserve bank buildings, including branches, with the exception of Buffalo,
I hope you may be on deck
and is contemplating covering those two in the near future.
when he comes.
With every good wish, I am,
Faithfully yours

Benj. Strong, Esq.,

http://fraser.stlouisfed.org/
Colorado Springs, Colorado.
Federal Reserve Bank of St. Louis

MIA
J. H. CASE.

MIK, 3. I-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
TO

Governor_ Strong_

DATE4anu8ry

5,- 1921.

192

SUBJECT,

J. 14 Case

FROM

Since the turn of the year, call money is becoming very much easier.
To-day, call money renewed

40,

and at 11:30 h. m. dropped to 4%, with $30,000,000

offered, which is an indioation that the rate may go still lower.
The Treasury

Department,

acting on behalf of the Alien Property

Custodian, exchanged some $35,000,000 March certificates for the new 4% Treasury
bonds, which it is desirous of reselling to the market as opportunity may offer,
and of replacing them with short-term certificates.

Of the latter, there are

now but two issues outstanding, March 15 4% certificates and September 15 Pi%
certificates.

On Saturday, January 3, I sold for the
count $5,000,000 of

the Os

Alien

Property Custodian ac-

for delivery to-day;

and, in

have prompt reinvestment, we have agreed to let them have 0,000,000 of the
March 15 4% certificates from the System account.

I could

acquiring in the ma:let $5,000,000 March 15 41% certificates on the same basis,
or effect the following combination:
March 15
June 15

4%

e%certificates, on P.47 basis
Treasury notes,
2.75 basis
on ?..75 basis

Cepth 15 2p Certificates,

$.7,000,000

1,000,000

2,000,000
$5,000,000

In view of the easier money conditions, I think it would be

desirable

not to replace the $5,000,000 sold; but I should like to know how you feel about
it.

JfiC HAS




WSC,I-75M4-2.1

FEDERAL RESERVE
OF NEW 'VOW

OFFICE CORRESPONDENCE
Governor _Strong

J. H. Case

FROM

74?:?

42°
S 1.113J 4ri

ACKNOWLE

DATo_

January 19,1925.i92_

8:14

ney M

ket_Conditions

All 4.4925
s,

As you are receiving a copy of our confidential daily letter to
the Federal Reserve Board, together with a copy of our daily statement, I am
sure you are keeping pretty well informed as to what is going on in the
money market.

The New York Clearing House statement, published as of SaturdaykArl')
January 17, shows an actual excess reserve of clearing house members of
$70,000,000.
This situation was due entirely to the fact that the daily-e.cc-11.444-.)
average reserves for the week were some $10,000,000 under the requirements,
necessitating considerable borrowing here on Friday, which was immediately
paid off on Saturday.

To-day call money opened at 3% and shortly thereafter went down
to 3%, with some $30,000,000 offered.
Accordingly, I arranged with the
dealers to take up $10,000,000 of securities which had been sold them for
delivery on or before January 22.
$5,000,000 more will go out to-morrow
and a like amount on Wednesday.
The stock market was very strong on Saturday, but has been more or
less irregular to-day.
Mr. McGarrah, in a conversation he had with Mr. Jay
and me after the Executive Committee meeting this afternoon, stated that
under existing conditions he thought it might be advisable for us to continue
to make further sales to a point that might bring the account down to, say,
around $300,000,000.
We received official word from Mr. Platt of the Board
that the Board has considered and notes with approval the minutes of the
meeting of the Open Market Investment Committee held at the Federal Reserve
Bank of New York January 9, indicating that the committee proposes to continue
to sell from the open market portfolio of securities, as it can be done from
time to time without disturbance to the market.
You will recall that at the last meeting of the Open Market Investment Committee (at which a forward contract for the sale of $40,000,000 of
securities was agreed upon), I reported that there was some $12,000,000 of
September certificates then in the market which we could purchase at any time,
This lot, however, has since been disposed of, some to the
at our option.
Treasury to replace sales of new 4% bonds from the Alien Property Custodian
account, and some to the market, presumably for the British Government account.
Messrs. S. B. & H. informed me to-day that they could use on Jan.
22, for a ten-day period, an additional $25,000,000 of September 2 i% certificates at par, which a certain large corporation desired to purchase and carry
until February 1, at which time the corporation will be taking up certain of
I shall chat this over with the various members of the comtheir own bonds.
mittee to-morrow morning, and if money conditions on Thursday appear to be
favorable to the consummation of this transaction, I would recommend that we
I assume that you will receive this memo, not later than
effect the sale.
Thursday morning, and would appreciate your promptly wiring me your views.

I
http://fraser.stlouisfed.org/ enclose (to 3:30 p. m.) the money report of to-day's transactions.
Federal Reserve Bank of St. Louis

.

OUTGOING TELEGRAM

January 21, 1925

Governor Benjamin Strong
The Breakers

Palm Beach, Florida
Test one

Yesterday total earning assets $269,000,000.

$972,000,000.
80%.

Gold

Members reserve deposits $831,000,000.. Ratio

Call money plentiful closed at 2.1-.

down to $350,000,000.

System account

all members of committee favor additional

sale down to $300,000,000. and unanimously approve selling
$25,000,000.
19th.

Septembers mentioned my- memorandum to you January

Have arranged to consummate this transaction by delivering

one half today and balance tomorrow




Case

MISC. 3. I-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Tc

Governor Strong
J. 11. Caae

FROM.

DATE January 25, 1925.
SUBJECT:

192

MONEY CONDITIONS

0_
ACIONowcerxii__:.:

JAN 2Y1925

ft
I have your telegram of to-day and am glad to note that you
agree that we must continue sales as proposed.
We have been having the traditional January "thaw," so far as
money is concerned; and notwithstanding the fact that we have sold from the
open market portfolio $90,000,000 of Government securities to this market,
it has been almost impossible to sponge up the deluge of funds coming into
the market.
As I wrote you on Monday, the committee unanimously approved our
selling down to $300,000,000, a point we have approximately reached at this
writing.
Mr. McGarrah, whom I have kept informed as to what has been going
on, talked with me to-day about the matter and expressed his feeling that we
should be prepared to sell additional amounts, if the ease in money should
continue next week.
I am not quite sure how all the members of the committee
will feel about going below *300,000,000, but I think that by next Tuesday
we should have a better idea of just what the picture will look like.
The $125,000,000 telephone transaction was cleared yesterday
without a ripple in the market, call money being 3% and going as low as 2%
in the afternoon.
That these sales are having an effect upon the reserve
balances of our members is borne out by the fact that they found it necessary
to borrow to-day upwards of $50,000,000 to adjust their reserve balances for
This action on their part, I take it, will result in showing some
the week.
actual surplus reserve in the clearing house statement to-morrow.
/ am enclosing exhibits showing the present status of the System
account, the actual tranSactions that have occurred, week by week, from
December 19, 1924, and a statement shoving that on the $90,000,000 of sales
since January 13, the net profit to the banks of the System amounts to $137,000,000.
George Harrison got off torday for hie wecek,e tri
to South Carolina,
and Jay and I have persuaded him to spend a few days in Atlant on his way back,
in the hope that a little visit from him may exert a wholesome influence in that
Jay and I have had several parties of bank president, and Sailer and
quarter.
We feel,that this is one
Kenzel have had one or two parties of vice presidents.
The bankers generally
of the very best things that we have done in aong.time.
are delighted, not only with our building but wi tj4the opportunity of seeingasome
of the actual transactions that are being carr%4
....I

-ire.-

I am glad to note that you are having such a fine rest.

JHC HAB
Encs.




/4

,,:tt

FEDERAL RESERVE)3AN K

4

OF N EW YO R K

k
S,

4'0
4{),

4*jb

January 26, 1925.

1E/600 D NOTED,

S.
Dear Governor Strong:

I have your letter of January 21, in which you make
suggestions as to the remedying of several defects in the mechanics
of our code arrangement which the practical use of the code has
brought to light.

The suggested changes and additions are certainly a big
improvement, and we shall be careful to have our messages to you
prepared in accordance with the code list.

The extra copies of the

list of additional words have been distributed to Messrs. Jay, Sailer,
Harrison and Kenzel, and the Codes & Tests Division has received its
copy.

Keep on loafing, and don't worry about the burden here.
There are enough of us to shoulder it; in any event, until you get
back.

Faithfully yours,

J. H. CASE.
Mr. Benj. Strong,
The Breakers,
Palm Beach, Florida.




lie 4(7

64r-eJ A(4fevitaTe ' oek.oeb,Afer
Ati-4a4(44.7
ScA-4*

lee naK,

MISC. 34.1

40 M

8-24

FEDCRAL RESERVE BANK
-)F NEW YORK

SENT BY
.THG HAB

SEND TO FILES

COPY'nffL:E-G.R A Tvi j.5nu5rilgrinb/1925.

Eenj

Strorg

The Dreakera

Palm Beach

Florida

Harrison address Good Hope Plantation Ridgeland South Caroline




CASF

MISC. 35M-9-z3

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

4,

Governor Strong

FROM

DATE February 5,_1925.
SUBJECT:

192

CURRENT MONEY, SITUATION_

J. H. Case

CONFIDENTIAL

In sending you information concerning the Clearing House weekly summary,
sending
yesterday, and the list of borrowings of our New York City member banks, I promised
to give you some word to-day about the money situation.
The Treasury's average balance in the Federal reserve banks during the
past week or so has been about $50,000,000.
Yesterday the Treasury retired about
*30,000,000 of the 4% Consols previously called for redemption, thereby reducing its
System balances by that amount.
The Treasury is now making a call from member
bank depositaries as of Thursday, February 5, for about $15,000,000, one-third of
which comes from this district.

In spite of this retirement yesterday, the money market continues fairly
firm, with call loans at 51-% and but a relatively small supply.
Messrs. McGarrah
and Young spoke to Jay and me at the close of the executive committee yesterday
and asked if we thought the time had arrived to consider a raise in our rate.
We expressed the view that it was a bit early yet, but that if our loans should
continue to rise during the course of the next few weeks such a procedure might be
desirable.
Our loans to the New York City banks increased to-day by approximately
$10,000,000, so that as of to-night they will owe us about $100,000,000.
AS to the stock market, the edge appears to be off, although there is
Stock exconsiderable activity in the oils, with prices up to a new high point.
The open
change call loan account continues to be about the recent high point.
market account is down to exactly $300,000,000, and unless you have something to
suggest my own thought would be to make no further sales nor purchases for the
Yesterday we transferred
present but to watch closely the daily course of funds.
21% September 1925 certificates
to J. P. Morgan & Co. a block of $25,000,000 of the
that one of our dealers was taking back from a large corporation which had acquired
In this connection I am
them some two or three weeks ago for a short period.
enclosing a copy of a letter which I sent Mr. Winston under yesterday's date reThe letter, you will note, contains a suggestion as to
garding this transaction.
the effect that the reduction of the September 15 certificates in the hands of the
outside public might have on his March 15 financing.

Gold exports continue to be heavy, the total engagements for yesterday
and to-day aggregating some $13,000,000, of which $10,000,000 is for shipment to India.
Our reserve ratio is just a bit lower and now stands at about 76%.




OUTGOING - TEIRC

Feb. 4, 1925

Governor Benjamin Strong
Ap?0,

The Breakers

Palm Beach, Fla.
#4

We are still purchasing short bills at 2i to g 7/8 as

compared with 3 percent for three months and 3* for four

months and Pierre Jay and I are proposing as of tomorrow
or Friday to make the minimum rate on all bills 3 percent.
Advise us if you see any objection to this course.

Volume

of hills in existence and volume held by system are decreasing

slihtly so that this change should cause minimum disturbance
to bill market
Case

test OX




FEDERAL RESERVE BANK
OF NEW YORK
August 7, 1925.

Dear Governor Strong:

I am enclosing a copy of my cablegram to you to-day acknowledging

receipt of your letter of July 15th me, one of July 19, two of July 20 and 21 to
Mr. Jay, and one of July 23 to me.

The matters which required immediate attention

have been dealt with in my cable.

Mr. Jay left for his vacation the day after your letter of July 20

was received which deals with a possible loan to the Rentenbank by Harris, Forbes
& Company and the National City Bank as well as the Gold Discount paper.

He,

therefore, had no opportunity to discuss the matter with Mr. Mitchell but turned
your letter over to me to take care of.

I have found out t

sailing for Europe and have, therefore, considered it unnecessary to discuss the

matter with him, since he will have an opportunity to study the situation himself
at first hand.

We received word yesterday of the reduction in the Bank of England
rate to 4 1/2%, and the reaction here has been entirely favorable.

I enclose two

Dow-Jones items and our own newspaper review on the subject.
I am also sencling you two memorandums which deal with what I under-

stand to be a protest made by Mr. Mitchell, of the National City Bank, to the
State Department, concerning the advances which we are making on gold to the
Banking Office in Prague.

I believe they are self-explanatory and indicate to you

just how we have dealt with the matter.

It seems to me that this was an astounding

thing for him to do, but it looks like a pretty clear indication that he is on the
war path.

Perhaps you and he may meet some time within the next few weeks, in

which event you may wish to discuss this matter with him.




FEDERAL RESERVE BANK OF NEW YORK

2.

Governor Strong.

8/7/25.

If one of your letters can be said to be more interesting than the
others, it was the one of July 20 about Schacht and the Reichsbank.

Personally,

I would be in favor of assisting him by the purchase of mark bills along the lines
you suggest, and believe we would be adequately secured.

The principal dif-

ficulties, of course, are possible unfavorable developments in Germany and criticisms which we might encounter here.

Bo.',/1 of those factors, however, may take

on a different light by the time Schacht needs assistance.

Unfortunately, I have

been unable to discuss the question with our directors, since all of those who
would be particularly interested are out of town and will not return until towards
the latter part of the month.

This week, only Mr. Saunders and Mr. Runkle were with us.

All signs seem to point to a more active use here of credit now and
in the immediate future.

The earning assets of the System went up $80,000,000 during

the last week and now are something more than $1,100,000,000.
continues active, with prices at very close to the high point.

The stock market
If the anticipated

demand from the West for additional funds appears within the next few weeks, it seems
clear that the stock market may get a good bump.
Winston will presently be discussing his September financing.

There

is now outstanding but $229,000,000 of September 13 certificates, with something more
than $100,000,000 of interest to pay at that time.

He thinks they will probably have

to borrow $250,000,000 to $300,000,000 by means of short-term financing.
I returned from my vacation on Monday, August 3, feeling fine,and
had a very good outing.

I am very glad to report that Mrs. Case is now much im-

proved and appears to be on the road to a complete recovery.
Faithfully y
Mr. Benj. Strong,
C/o Bank of England,
London, England.

Ends. (5)



re,




THE MARCONI INTERNATIONAL -MARINE COMMUNIC:ATION CO. Li',
MARCONI HOUSE,STRAND, LONDON,-W.C.2

-

-.

HANDED IN AT
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Recd.
from .

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192r

t.
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v

Ce--7

A)z--x-6

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/0-tuitt,

sA,FN

Cet
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t-itnited

on the back

hereof.it,

THIS FORM SHOULD ACCOMPANY ANY ENQUIRY RESPECTING THIS MARCONIG

M.

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see

over




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COPY 07 OUTGOING

CABL'''(7-9.AM

FEDERAL RESERVE SANK

OF NEW YORK

CONFIRMATION OF CABLEGRAM
WE HEREBY CONFIRM OUR CABLEGRAM OF THIS DAY, WHICH DECODED s lifewmitrirge .10 yOLLOWS:

August 7th 1J25
Benjamin Strong

Hotel Palate
Biarritz (Franoe)
7

Test

Your cable number seven received If Heiohsbank expects
export gold from New York and London may ship to us oerhaps
you Norman and Schacht oould arranee for direct shipments
London to Berlin or earmarking in London with settlement

here in either ease which *mad help them and have same
TWO

result here
Your letters July fifteenth July nineteenth t1i4DJuly
twentieth tik:7 July twenty first and July twenty third to
Jay and me received and read with much interest

TRAIN

!OUR

Referring your letter July twentieth to Jay concerning
Heutenbank and MitOhell Jay left August First for traoation
in Canada and had no opportunity to see Mitchell I under..
stand Mitchell sailing for urope and therefore consider
it unnecessary to discuss this matter with him since he will
undoubtly obtain information himself first hand
Referring your second letter July twentieth to Jay concerning
possibility our buying mark bills from Reiohsbank most of our
directors out of *own until after middle of August when I will
discuss situation with Young Wooley and others interested


MISC.132,3.5C4-25


Case

0

FEDERAL RESERVE BANK
OF NEW YORK

0

August 10, 1925.

Dear Governor Strong:

In Mr. Jay's absence, I acknowledge receipt of your letters to him 82 follows:

July 25

from Spa, Belgium, confirming copies of
cables exchanged regarding rates, and
enclosing a copy of your letter of the
same date to Dr. Stewart on this subject.

July 29

from Brussels, confirming cables, and
enclosing copies of your letters of July
29 and July 30 to Dr. Stewart, together
with extract from letter of Dr. Stewart
to you under date of July 27, 1925, all
on the subject of rates.
Very truly yours,

44744?
J. H. CPSE.
Mr. Benj. Strong,
C/o Bank of England,
London, England.




0




FEDERAL RESERVE BANK
OF NEW YORK

August 10, 19P5.

Dear Governor Strong:

I have your note of July 24 regarding Gilbert's need
for an experienced foreign exchange man who can work into the
organization,in anticipation of the time when the subject of
transfers will require an able technician.
I have particularly noted your comments as to just the

kind of man who is needed, and both Crane and I will keep the
matter before us, pending your return.
Sincerely yours,

Mr. Benj. Strong,
C/o Bank of England
London, E. C. 2,
England.




FEDERAL RESERVE BANK
OF NEW YORK
wAlr,

August 10, 1925.

Dear Miss Bleecker:

I acknowledge, with thanks, the receipt of your note
of July 27, dated Brussels, with which you enclosed the following:
Copy of memorandum covering impressions
gathered by Mr. Strong.
Copy of the translated Reichsbank statement,
referred to in a recent letter from Mr. Strong.
Very truly yours,

Miss Margaret S. Bleecker,
C/o Mr. Benj. Strong,
Bank of England, London, England.

FEDERAL RESERVE BANK
OF NEW YORK

CONFIRMATION OF CABLEGRAM
WE HEREBY CONFIRM OUR CABLEGRAM OF THIS DAY, WHICH DECODED SHOULD READ AS FOLLOWS:

August 13, 1925
Benjamin strong,
hotel Majestic,
Paris

flO Test

CONFIDENTIAL FOR GOVERNOR STRONG

Alexander named Chairman Nominating
Jackson Reynolds.

Uommittee in arsence

In condidering merits two

Harrisnn and I feel that

suggested

candidates

Mitchell will make much stronger more useful

director than Frew and that this is possibly a good opportunity to con-

sailer also agrees but Kenzel

vert him.,

that view Jay who replies Quote

My feeling that both should eventually

serve as directors and Walter is senior in every way.

other hand
time educate him

eration influences me largely.

other man makes it opportune

Communicated

strongly Vrew.

On

averse to changing and would be satisfied with

Reoharter consid-

general adverse attitude
as director.

either.

I not

You will

remem-

ber we discussed this quite fully with Strong before he sailed END QUOTE

Disregard paragraph four my letter of seventh relating
Bankovni.

Mitchell called giving full

Department originated
but

and carrying
Digitized 32E 5C..25
MISC. for FRASER


State

in response to inquiry about foreign loans.

unchanged Kenzel

on bills should

how inquiry

and

and cenvinced me his communication not complaint

formal statement facts

Money rates

explanation

Mitchell

feels time

be advanced by

rate by one-fourth

approaching

when purchase rates

one-eighth to one-quarter all along line
While still considering question am

FEDERAL RESERVE BANK

OF NEW YORK

CONFIRMATION OF CABLEGRAM
WE HEREBY CONFIRM OUR CABLEGRAM OF THIS DAY, WHICH DECODED SHOULD READ AS FOLLOWS:

August 13, 1925

p/2
Benjamin Strong,

reluctant do this now lest it may prematurely force our hand on
discount rate. Officers and gareoutive Committee considering matter
Present average borrowings
Would like your thoughts
clearing house banks ;100,000,000. average system assets 11 hundred

Monday next.

millions

Digitized132E1,C-9.25
MISC. for FRASER


CASE

.0

FEDERAL RESERVE BANK
OF NEW YORK
August 13, 1925.

Dear Governor Strong:

Your letter dated from Biarritz, August 1, and dealing with the situation
as to rate changes, has been received and carefully considered.
I also have for acknowledgment your two letters on the subject of the Belgian
financial situation, dated Brussels, July 28, and Paris, July 30, respectively, copies
of which, as I cabled you, were transmitted by me to Mr. Winston on Friday, August 7.
They reached him in time for the Secretary of the Treasury and Winston to get the
benefit of your reaction, before conferring with the Belgian Debt Commission.
Winston
has expressed his great appreciation of your courtesy in having these copies sent to
him, and I am sure they were of real help to them in dealing with this problem.
I
have frequently wished that our Washington friends would take a broader and more
businesslike view of the situation than they appear inclined to do.
I have read and passed along your letters addressed to Mr. Jay and Dr. Burgess.
As to your letter to Dr. Burgess, I am inclined to the view that it would be worth while
to let the newspaper boys know just what your reaction is to this question of publicity.
There has certainly been a great deal, both here and abroad, published about your trip.
I have also read with interest your comments on the situation in London and
the reason which actuated Norman in reducing the rate there.
The reaction in this
market to the rate reduction has not been very marked, with the possible exception that
financial writers have deduced from it that it is most unlikely that our discount rate
is to be raised in the immediate future.
The mind of the stock market operators, also,
I think, has worked along the same lines, and they are continuing to give some speculative favorites an upward twist.
American Can, for instance, has climbed up to 240,
and General Railways Signal has had an advance of 60 points within the last week.
General Electric is back to 310
the high point it had reached before the electric bond
and share stock was deducted from its assets; and Mack Trucks has climbed above 200.
These, of course, are exceptional instances, but the general average of prices in both
industrials and rails is at a high point for this movement, and, while the stock market
has not yet reached the front page stage, I look for it to have a substantial setback
almost any time.
No material change has taken place in the street loan account during the past
few weeks, it, too, being at what is practically the highest point it has ever reached.
It begins now to look to me as though, if the expected commercial credit demand should
materialize, it may be necessary next month for us to advance our rate.
Meantime,
Kenzel has suggested the idea of marking up the buying and carrying rate on bills in
This would
advance of the period when the usual autumn increase in bills will occur.
I
seem most appropriate, unless it should tend to force our hand on discount rates.
sent you a cable regarding this to-day (copy enclosed), and I hope to have some word
from you by Monday, when we, here, shall give further consideration to the subject.
The series of your impressions, sent us by Miss Bleecker under date of July 27,
and consisting of a report of your conversations with various important people in London
and on the Continent, is most interesting, and I have a suspicion that some of it is likely
to prove very useful in the future.



FEDERAL RESERVE SANK OF NEW YORK

2.

Governor Strong.

8/13/25.

I am glad to learn that Gilbert is making just the same kind of record in
position as Agent General for Reparations, as he made in his official position
in Washington, but it looks to me as though he has, thus far, traveled over the
easiest part of the road and is likely to have some very difficult problems to solve
within the next two years.
The Shepard Morgans, I take it, are having the time of
their young lives.

Ais

I am particularly interested in your comments on the subject of the Allied
debts, but, unless there has recently been a changed attitude, I am somewhat skeptical
as to the results obtained by our Debt Funding Commission.
I am sorry to have gotten off on the wrong foot regarding Mitchell and the
Czechoslovakian situation, in my letter of August 7.
Winston had told me that
Mitchell lodged with the State Department a complaint against us, but I think the real
facts are that Mitchell criticized us in his personal talk with Winston a day or two
previous, and then, at their request, he subsequently reported to the State Department his relationship with Czechoslovakia; whereupon the State Department asked for
information about our loan, and Winston, I think, rather jumped to the conclusion
that Mitchell had made a formal protest to the State Department.
I had a long talk
here in the bank with Mitchell on Wednesday, August 11, and as I reduced it to a,
memorandum, Ism enclosing a copy for your information, rather than writing you in
detail abou
ere in this letter.
McGarrah,
The more I think about the question of a suitable director to succeed/ the
more I am inclired to think that our best possible bet is Mitchell.
(My judgment is
that, between you, Owen Young and some others on our board, he would be taken into
camp completely within sixty days;
and I believe that the critical attitude of his
institution and one of his Broadway neighbors toward us, is an outstanding sore spot
that we would do well to clear up.)
8/14/25.
The Irving Bank just telephoned that Mr. Mlynarski, Vice Chairman, Bank Polski,
at Warsaw, is there and would like to come down at three o'clock to see us.
He is accompanied by Mr. Gliewic, Charge-d'Affaires of Poland, at Washington.
Masson, of
the Credit Lyonnaise, is in New York, and I attended a dinner given him by Lew Pierson
Wednesday night.
M. Masson expressed himself as being very sorry to have missed you.

Everything at the bank is running albng smoothly, although both the official
This
staff and the clerical force, owing to vacations, are at a fairly low point.
holds true throughout the "street," and we have had but two directors here for meetings
this month.
Snyder sails abroad to-morrow.
I observe with interest that you have been able to stand the gaff better than
either Norman or Stewart, and I hope you will continue to keep in fighting trim during
the remainder of your stay abroad.
All the boys join me in sending you our best.
Sincerely y

Mr. Benj. Strong,
C/o Bank of England,
London, E. C. 2, England.
Epcls. (2)



J. H. CASE.

You are getting daily reports of the money and banking situation,
and as Harrison and Burgess are planning to write you to-day, I
shall not make any comments on that subject, other than to say that there
P. S.

FEDERAL RESERVE BANK OF NEW YORK

Governor Strong.

8/13

8/14/25.

appear to be some indications of inflation develoling.
The stock market and the
stock exchange loan account you are familiar with.
There is tremendous specula
don going on in real estat:e, both in Florida and along the Atlantic seaboard,
particularly at Rockaway and Long Beach, Long Island.
P. S. 2.
We must keep in mind that there are the usual limitations to discount
rate changes during the quarterly Treasury offering period; therefore, if no rate
change is made on or before, say, Thursday, September 3, it seems to me we are
estoFped from making any change until the first of October.

P. S. 3.
After I have heard from yoU on the question of marking up the bill rates,
From a domestic standpoint,
I may have occasion to cable you about the situation.
it does seem to me that the situation calls for an increase in the bill rate, the
sale of perhaps 415,000,000 or *18,000,000odd in the open market account, and an
increase in our discount rate to 4% on or about September let; and I do think it is
highly important, from the same standpoint, that we do not let this inflationary
tendency get out of hand.

Benj. Strong, Esq.




FEDERAL RESERVE BANK
OF NEW YORK

CABLE ORDER
(Outgoing

Eessage)
Date

August 21, 1925.

To CODING DEPARTUENT
Foreign Dept.

From

Please code the following message

addressed

to

the

Betel Lajestio Faris

Benjamin strong
Number of Cable

(If Payment Cable)

Replying your cable #13
ONE

Directors Young and Saunders voted yesterday extend 410,000,000
credit Bank Polaki secured 410,500,000 gold with Bank of England
for period of 3 months at 4-1/2% with agreement make not more
than 3 renewals each 3 months. Interest rate each renewal to be
determined by us at that time.

TIO

Bank of England has cabled willingness hold

TREE

Have signed

FOUR

Federal Reserve Board advised and other reserve banks
offered participation.

FIVE

Expect Folaki will ship gold London immediately and advances will
be made by us on notioe its arrival there.

SIX

We have definite understanding with Polski credit will be liquidated
proceeds dollar heaks and currency remitted here and not by gold
they understand we do not want and which they cannot
shi

2:14",

for us.

agreement today with Vice President Bank Polski,

being

elle-

tg!

k \ , i

\

"\

\\,

it
xt

-,, ,

,

,--1
ement

V eltiem?-o

about

larger credit but they

eirowithrag

Have agreed further renewal 46,000,000 Bankavni loan maturing August 31
at 4-1/2%. Directors feel desirable that
both loans should have uniform rate this time.

EIGHT

Test Number

(Tester's Initial)
Test checked by




Time

Time

(Dept. Head'

(Of

Initial)
or

Time

Initial)

,




FEDERAL RESERVE BANK
OF NEW YoRK

PERSONAL AND CONFIDENTIAL

August 26, 1925.

Dear Governor Strong:
1.

Thank you for your letter of August 4 from Biarritz, with its enclosure
of a memorandum covering the main points of the conversations you and Governor
Norman had with Monsieur Hautain, which we have found most interesting.
Jay,
Sailer, Kenzel and Harrison have all had an opportunity of reading it; and we shall,
of course, treat the memorandum as confidential, in accordance with your wishes.

? .

I also received in the same mail your letter of August 3 to Mr. Jay, giving the substance of your talk with McGarrah concerning the matter of directorship,
and listing the names and Qualifications of possible candidates to succeed him, which
I promptly forwarded to Jay.
I have since exchanged considerable cable correspondence
with you on this subject.
Mr. Alexander seems intensely interested in having us secure a well-seasoned, forceful banker who can be of real assistance to us in time of
need.

Monday I received a packet of mail from you containing letters for Mr. Jay
and Mr. Harrison, which I have distributed to them; also a communication to me dated
August 11, replying to my cable No. 7 and relating to the improbability of the
Reichsbank exporting gold from New York.
My cable No. 16 to you, under even date, will give you a brief resung of the
current money market conditions, our suggestions as to moderate advances in the bill
rate, and the latest news on the subject of new directors.
In connection with the latter subject, I am enclosing a list of members of
the nominating committee for this year.
It is, I think, a very satisfactory committee;
and in this regard Mr. Alexander has told me a rather amusing incident.
In my talk
with him this morning he said that Jones, of the Manhattan Company, had called up and
stated that Stephen Baker wanted him to communicate with Alexander and say that, while
Baker would be back from vacation early in September, he was obliged to go away again
for a few days and thought, therefore, that it would be inadvisable for him (Baker)
to serve on the committee.
If one were disposed to read between the lines, this
certainly sounds a bit suggestive.
You have been fully informed concerning the $10,000,000 credit extended to
the Bank Polski.
Referring to my letter of August 21 concerning this credit, we have
reported the transaction to the Federal Reserve Board in exactly the same manner as we
did when the loans on gold to the Bankovni were made, and now have their simple acknowledgment without comment.
I thought you would be interested in reading the two
letters which we have written to the Federal Reserve Board in this connection, one
under date of August 20, and the other under date of August 22, copies of which are
enclosed.
You will note that in the latter communication we told the Board that
the Bank Polski preferred not to have any publicity given to the credit.
However,
the last two paragraphs of the enclosed clipping from the Journal of Commerce
strongly suggest that some member of the Federal Reserve Board did disclose to the



FEDERAL RESERVE BANK OF NEW YORK

2,

Gov. Strong

London,,Engiand

8/26-27/25

Washington correspondent of the Journal of Commerce that a credit had been extended by
What an unfortunate thing:
So far as the Bank Polski is concerned,
there will be no objection to this, because the Polish Charge telephoned to me the other
day that be had received a cable from Warsaw stating that they had no objection to our
giving publicity to the credit.
I advised him that,since we had agreed with
Dr. Mlynarski not to make any public announcement, we would prefer to let the matter
rest as originally agreed upon.
We all felt at the bank that it would be inadvisable
at this time for us to make any announcement to the press with regard to the credit.
us. to Poland.

6a.

As a further Washington comment, I am also sending you a memorandum of certain
remarks made by Mr. Gliwic, the Polish Charg, who was here with Dr. Mlynarski.
This
concerns Mr. Mellon and certain assurances which he is said to have given to a member
of the Belgian Debt Commission about our readiness to extend a credit to the National
Bank of Belgium when, as and if they desired it.
Wowt
As you know, Sailer has been giving a. good deal of thought to the subject of
getting a new man to head our protective force.
After interviewing some twenty-five
prospects and discussing the matter with the members of our Board, the directors approved the idea of engaging at a salary of $4,000 per annum a Colonel Hiram Bearss,
who was most highly recommended.
In our letter to the Federal Reserve Board on this
subject, we carefully explained that our directors and officers felt that that department needed reorganizing and strengthening, and that the engagement of a. high,-class
man to fill the place was necessary.
Sailer had a telephone communication from Eddy
to-day (8/26/25) to the effect that the Board was holding up our recommendation and
wanted further particulars regarding it.
I have no doubt, however, that they will
presently approve.

7a.

When Mr. Jay returns from vacation next week I think that either he or I
should go to Washington, with a view to chatting over matters with Crissinger and
seeing if we cannot bring about a better understanding with regard to such matters.
In trying to reach Governor Crissinger by telephone last Thursday and Friday, I
understood from his secretary that Crissinger was to be in New York Friday and
Naturally, we expected him to come in here.
Saturday.
in talking with Max.Radt of the Capitol National Bank this morning (August 27) about
his institution's line of discounts with us, I learned that Crissinger had called
upon him and had spent some time in his institution.

I don't know whether George Harrison is writing you to-day, but in the
event that he should not you will be interested to know that he has negotiated very
satisfactory arrangements with the New York Clearing House Association, whereby the
Association agrees to accept $7,500 as our membership fee instead of $22,000 (approximately) we have hitherto been paying.
Another matter of interest is that the Henry C. Meyer, Jr. claim, which
was approved and recommended for payment by our directors for not more than t42,500,
has been settled by Sailer, to Meyer's satisfaction, for a little less than '137,000.
In answer to the inquiry from the Bankovni regarding the renewal rate on
their $6,000,000 loan due July 31, we cabled them that the renewal rate would be 4%,
and they have replied that they will pay off one-half the loan and renew- for the
In this connection you may be interested in looking over the
#3,000,000 balance.
attached memorandum of foreign central bank rates, as of August 25, 1925.




This h

FEDERAL RESERVE BANK OF NEW YORK

.3..

Gov. Strong.

8/26-27/25
London, England.

There has been no change in the System's open market portfolio, other than
the sale of the September 15 certificates to meet the requirements of the Bank of
England for short Treasurys.
The account now stands at $213,000,000.
In view- of
the more or less fluctuating situation as to money rate'e which has recently prevailed,
and your desire to have us await your return to London, I have thought it inadvisable
to call a meeting of the Open Market Investment Committee.
If, after your discussions
in London, you think it advisable to recommend any change in our rates, it may be
desirable to call a committee meeting and take such action as may then be appropriate.
12.

In addition to Mr. Saunders, directors McGarrah, Reyburn and Treman were in
attendance at directors' meeting to-day (August 27),for the first time in several
weeks, and McGarrah and Reyburn spoke interestingly of their foreign visits and impressions.
All of the directors were heartily in favor of an immediate increase in
bill rates, believing that they are entirely out of line with other money rates and
tend to slow up forward purchases for autumn delivery.
All of the "boys" join me in sending you their best.
Faithfully yours,

7a cu
J. H. CASE.

Mr. Benj. Strong,
C/o Bank of England,
London, E. C. 2, England.

Enels. (7)




'to G o
MEMBERS OF THE NOMINATING COMTTFE
FOR NEW DIRECTOR

New York State Bankers Association

Alexander, Jay. S.
Brker, Stephen

)

New York City

Potter, P. O.
Ellenville

MAN*, M. E.

UcKinztry, V.

.

Newburgh

Ne* Jaren.
Young, W. r.

Hoboken

Conneetiout




S.

Bridgeport

4-

a

August 26, 1925.

FOREIGN CENTRAL RANK RATIO.

Present rate

Date fixed

Previous rate

Amsterdam

41,

Jan. 15, 1925

4-1/2%

Athens

8-1/2

Feb. 15, 1925

7-1/2

Berlin

9

Feb. 26, 1925

10

Berne

4

July 14, 1923

3

Bombay

4

July 2, 1925

5

Brussels

5-1/2

Jan. 22, 1923

4-1/2

Bucharest

6

Sept. 4, 1920

Budapest

9

!lay 27, 1925

11

Calcutta

4

July 2, 1925

5

Copenhagen

6

Aug. 24, 1925

7

Helsingfors

9

Ear. 5, 1924

Lisbon

9

Sept. 12, 1923

8

London

4-1/2

Aug. 6, 1925

5

Madrid

5

March 24, 1923

5-1/2

Oslo

5-1/2

lug.24, 1925

6

Paris

6

July 9, 1925

7

Prague

7

March 25, 1925

6

10

Riga

'8

Feb. 16, 1924

7

Rome

7

June 18, 1925

6

10

Aug. 31, 1924

7

Stockholm

5

July 23, 1925

5-1/2

Tokio

7.3

April 15, 1925

8

Sofia

10

Vienna
Warsaw




(gold)

July 23, 1925

11

10

Nov. 29, 1924

12

(gold,

to Gov, SW S

ASC, 4. I-200t4-1-24

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESP NDENCE
To

4
Governor Strong

DATE
SUBJECT:

April 29, 1926

BELGIAN CREDITS

J. H. Case

FROM

For your information I

am enclosing a copy of a communica-

tion from Governor Crissinger, of the Federal Reserve Board, addressed
to me under date of April 27, together with a copy of my reply of
even date.

Ends. (2)




192_

FEDERAL RESERVE BANK

OF NEW YORK
June 8, 1926.
My dear Governor:

The street was treated to a real surprise this morning, which has
lasted all day, in the announcement of the Treasury that no offer of Government
securities would be made on June 15 next.

The effect of this announcement was to create a real vacuum in the
Government security market, accompanied by rising prices all along the line, with
the market very bare of any sizeable offerings.

I am enclosing a clipping from

today's Evening Sun, which contains some interesting comments concerning the
Treasury's program.

As you will recall, we had in the Open Market Account some $36,000,000
of Treasury certificates maturing on the 15th, plus $14,000,000 for account of
foreign correspondents, plus $30,000,000 in the Alien Property Custodian
a total of $80,000,000.

account,

In each instance, forward purchases have been made to

cover current maturities, with the exception that there is still $10,000,000 to
cover in the Open Market Account.

Mr. Dewey has

given

me a resume of what the Treasury's position will

be on and immediately following the quarterly tax date settlements.

Treasury has maturing on that day a total of

Roughly, the

$333,000,000 of certificates

Less amount of such certificates to be turned in
by J. P. Morgan & Co. for account of British
Debt settlement

67 000 000

Leaving an amount to be met by the Treasury of about

$266,000,000

Interest to be paid on Government obligations (about)

80 000 000

Total to be redeemed and paid




(about)

$346,000,000

FEDERAL RESERVE BANK OF NEW YORK

6.8.26

Benj. Strong, Esq.

On the credit side of the picture, the Treasury expects approximately

($420,000,000 in income tax payments between June 15 and 19th, which while resulting
in

t

large temporary overdraft here on June 15, will in turn give them a credit balance

in the Federal reserve banks of approximately $80,000,000 by Monday, June 21.

I am

proposing to leave until that date the matter of repurchasing the balance of

40,000,000 now maturing in the Open Market Account.

In this connection I um calling

a meeting of the Open Market Committee on June 21 which, after consultation with the
Committee, is to be held either in New York or Washington, whichever place proves to

be more acceptable to Mr. Platt who (in the absence of Governor Crieeinger) is carrying
on for the Federal Reserve Board.

The Committee were unanimously in favor of re-

placing the full amount of our June maturities in the open market account, but agreed
that it may be well to leave in abeyance a moderate amount, say $10,000,000 or thereabouts to he replaced during the week beginning June 21.

Another thing that we have in mind for discussion is the fact that the end
of June (as well as the end of December) is growing to be a window-dressing area,
and it may well prove to be desirable to make some temporary purchases during the
latter part of June to meat this situation.

As Dr. Burgess is furnishing you with a resume of the news at the close of
each week, and as Miss Bleecker tells me she sends you a rather complete list of news-

paper clippings and reviews, there is very little additional in the way of bank news
to comment upon.

One item, however, in which you will be interested is that the Pascagoula
case was definitely settled yesterday by a decision of the United States Supreme Court
declining to review the decision of the lower courts in this case, so that the
validity of the par collection of checks in the Federal Reserve System appears to be
finally and definitely settled.

You may be interested to know that with the admission of Warburg's
International Acceptance Securities & Trust Company, we now have a total of 900 members
in
 this district,


and Burgess prepared for publication a little article commenting

d
FEDERAL RESERVE BANK OF NEW YORK

6.8.26

Benj. Strong, Esq.

413

upon this and showing the estimated resources of the member banks in this district.

You may wish to review the article in question, and I am therefore enclosing a copy
herewith.

Herson and his examining force appeared at the bank at the close of business
on Saturday, May 29, making an examination as of that date.

They had upwards of

4 billion dollars in securities and cash to verify here in the bank, in addition to
our balances in the Gold Settlement Fund and elsewhere.

Hereon reports that general-

ly he found things in excellent shape, with very little indeed to criticise.

I

think the general atmosphere in that quarter is greatly improved.
I am glad that you have found so delightful a place to rest as the little
village along the French Riviera, and certainly hope that it will do you a lot of
good.

Messrs. Jay, Harrison and I enjoyed very much reading your several letters
bearing date oC May 15, 1926, written on board the Aquitania, in which you so interestingly review the program

or

Indian currency, the strike in Great Britain, and your
This all makes a splendid record for our files.

comments about Poland and France.

With kindest regards, I am
Sincerely yours,

"
J. H. CASE.

Benj. Strong, Esq.,
C/o The Bank of England,
London, E.C. 2,
England.
Enos.




441010
f

1

FEDERAL RESERVE BANK
OF NEW YORK

[Circular No. 7261

Government Bond
Department

Pune

8,

No Offering of Government Securities
on June 15, 1926
To all Banks, Trust Companies, Savings Banks, Bankers, Investment Dealers,
Principal Corporations and Others Concerned in the Second Federal Reserve District:

Secretary Mellon today made the following announcement:
"The Treasury will make no offering of Government obligations for sale on June
15, 1926. This departure from the usual procedure on the quarterly tax payment dates
has been made possible on account of the increase in income tax and other receipts over
earlier expectations, and the fact that the aggregate public debt maturities due June 15
are somewhat less than usual.

"The amount of taxes to be received in June together with the balances now on
hand is expected to be sufficient to meet the Treasury's cash requirements until September, when further financing will be necessary."




Very truly yours,
BENJ. STRONG,
Governor

1926]

FEDERAL RESERVE BANK

OF NEW YORK
June 24, 1926.
Dear Governor Strong:

This is in reply to your note of June 8, with regard to the sale
to Messrs. J. P. Morgan & Company of $35,400,000 of June 15 certificates for
delivery June 14.

As you will readily appreciate, this transaction was made at the
request of the Treasury Department to enable Messrs. Morgan & Company to make the
British debt settlement on June 15 of $69,000,000 wholly in June 15 certificates.

While the record of the Officers' Meeting of May 24 fails to show that this transaction was submitted to the members of the Open Market Committee, it was, nevertheless, taken up with them at that time, accompanied by the suggestion that the
full amount of our June 15 maturities should be replaced by other short-term
Governments, and the approval of the members of the Open Market Committee to the
sale and repurchases was duly incorporated in the minutes of the Open Market In,

vestment Committee meeting, a copy of which was sent forward to each member under
date of May 24.

The program of the .Treasury for June 15 to omit their usual Treasury

offering on that date, proved to be a big surprise to the market.

No one apparently

anticipated such action, and as you can well imagine, there immediately ensued a
wild scramble on the part of those who had maturing obligations.

We had anticipated

this in the bank, and had covered by forward purchases our requirements of
$36,000,000, plus $14,000,000 for foreign account, and some $30,000,000 for the Alien
Property Custodian fund.

We were very fortunate, under these conditions, to be

able to accumulate this total of $80,000,000 of Governments, but as the Treasury
substituted Third Liberty Loan bonds to replace the maturities in the Alien Property




FEDERAL RESERVE BANK OF NEW YORK

#2

Benj. Strong, Esq.

6.24.28

Custodian account, it made the operation possible.

For the past week or so, I have been giving considerable thought to the
semi-annual settlement day, June 30, because of the fact that our banks generally

are inclined to show a clean balance sheet at that time, so far as borrowing from
the Federal Reserve Bank is concerned.

I have chatted this over with Mr. Winston

and he has agreed to immediately reinvest all surplus funds as fast as they accumulate in the Federal Reserve Bank, so as to avoid any jam in the money market arising
from that quarter.

Market Committee.

I also discussed the question with the members of the Open
They agreed with me that it was desirable to have a meeting of

the Committee this week, which was held in Washington on Monday, June 21.

Perhaps the best report I can make of that meeting is to enclose a copy of
the minutes of the meeting, which is being forwarded to each member of the Committee
today.

There were three members of the Board present, the only available members

in Washington.

Miller, as you know, is abroad on vacation, while Criesinger and

Cunningham were away ill.

We had a very harmonious meeting;

I found that Mr. Hamlin

was quite sympathetic to my proposal that we have authority to make additional purchases up to $50,000,000 over the June 30 period, with the understanding that the
securities so purchased would be liquidated in orderly fashion as market conditions
warrant.

Money conditions this week have remained fairly comfortable, call money
ruling at 41%,

so that it has not been necessary to make any purchases under this

authorization as yet, but I have $25,000,000 available for delivery next il.eek, when

it seems certain that money will be ruling at from 5 to 6%.

By referring back to about a year ago, I find that during the last week of
June there was something more than $100,000,000 of street loans called by the rest of
the country, and that our loans went up the last few days of the month by about
$125,000,000.

Fortunately, the desire to window-dress at the end of June is not as

strong as at the end of December, but in the event of heavy out-of-town calls the



FEDERAL RESERVE BANK OF NEW YORK

Benj. Strong, Esq.

1Ka

6.24.26

first of the week, I propose to see that such loans are spread among several of the
- larger banks here rather than to see them taken over by any one institution.

Just before you went away, we discussed the record being made by the Treasury
in borrowing money from us temporarily at tax periods at 2%, while we were paying

a much higher rate to our banks for securities temporarily sold them from the open
market account.

I had a word with Mr. Winston about this just before he went away,

and have held the matter up until his return, when we could incorporate in the
picture just what happened on June 15.

I sent him a letter yesterday, accompanied

by a carefully prepared memorandum, discussing the philosophy surrounding the
Treasury's temporary borrowings.

In principle, it seems to me that they should pay

the lowest-going rate of funds at each quarterly period, rather than having any
automatic arrangement which does not permit of any discretion being used.

I am

enclosing a copy of this letter and memorandum for your information.
Trusting that you are having a good rest, and with best regards, I am,
Sincerely yours,

I/4
Benj. Strong, Esq.,
c/o Bank of England,
London, England.
Encs.




FEDERAL RESERVE BANK

OF NEW YORK

CONFIRMATION OF CABLEGRAM
WE HEREBY CONFIRM OUR CABLEGRAM OF THIS DAY, WHICH DECODED SHOULD READ AS FOLLOWS

New York eity, N.Y.

July 17, 1926.
Bank of England,
London, England
STRICTLY CONFIDENTIAL FOR GOVERNOR STRONG:

Testword OK #35
One.

Temporary credit demands for funds due to midyear and holiday

discussed in our #31 have now passed as indicated by
Our loans to New York banks reduced to 98 million

Our earning assets 261 million and system 1147 million
(e) Call money rate reduced from 4 1/2 per cent to 4 per cent
Thursday
Two.

The period of 4 1/2 -per cent call money for the post two weeks
has been followed by

SOMR

firming of other rates.

Time money,

4 1/2 compared with 4 1/4 in latter part of June. Bills still
3 3/8 and Commercial paper 4 but tendency of both firmer
Three.

Directors yesterday reported business very active and prospects
excellent for immediate future. This view supported by other
evidence

Four.

New York banks report some increase in borrowing by commercial
customers

MISC. 13251 5-12-25




FEDERAL RESERVE BANK

OF NEW YORK

CONFIRMATION OF CABLEGRAM
WE HEREBY CONFIRM OUR CABLEGRAM OF THIS DAY, WHICH DECODED SHOULD READ AS FOLLOWS

2

Five.

Stock prices gradually working higher with some interruptions

Six.

Recent reports appear to indicate farmers' income this year will

be larger tban in 1925
Seven.

In view of foregoing directors discussed discount policy yesterday
but saw no renson at present

Eight.

It is clear we are

for change.

starting period of seasonal incrense in credit

demands with higher open market rates than last
Nine.

year and

Problem of rate change may faze us earlier and more insistently
than last year

Ten.

Bankers Trust Company of Atlanta. mnnleys Institution has closed

carrying with it 89 of 190 Witham banks 74 failed in Georgia
out of 126 in Witham chain 15 in Florida out of 64 in chain.
More failures
Eleven.

probable

Immediate reasons

to meet

for failure is inability of Florida banks

deposit withdrawals because funds v.ere tied up in Witham

.system
Twelve.

Of 10 banks in this district

formerly in Witham system

are practically free from Witham

all but 3

paper

Thirteen. Of the three one is a nonmember state bank quite heavily involved

and other two are

nationals but

situation has

perceptible public apprehension locally

MISC, 132B 1 M-12-25




not yet aroused any

FEDERAL RESERVE BANK

OF NEW YORK

CONFIRMATION OF CABLEGRAM
WE HEREBY CONFIRM OUR CABLEGRAM OF THIS DAY. WHICH DECODED SHOULD READ AS FOLLOWS .

3

Fourteen. Linz again offered positions executive Vice President Montclair

Trust Company at 50 per cent increase in salary. He will
probably accept effective September 1st. Will cable

suggestion for successor in a few days.

Fifteen.

Charles S Hamlin expresses grateful thanks for your
congratulations
J H CASE

MI., 1328 1 M-12-25




19, 1926.

Lear Governor:

Your two letters of June 29 are here, also your cable of July 10.
It is a pleasure to know that you are beginning to feel so much
better, although I should scarcely thine that your sojourn in Europe could by any
stretch of the imaginetion be consieerea a real rest.
Your letters to Harrison end the memoranda assembled anti forwarded

by Narren have been most inteseeting, and ehould proviae the neceesegy background
for Us in the event that we were called upon to do anytning in the way of eetablishing credit for the Bank of France.

Certainly that picture is complicated

40e

enough at the moment, and now looks as though all action may be long aeferred.
I am sorry that the newspaper writers have been getting after you so
actively of late, but it noes not aepear that it can be helped.
I have read your proposed letter to Jackson fieynolde, and while it is

an interesting epistle, I am glad that you decided not to send it.

Lifferences

of this sort are much more likely to be reconciled when carried on by word of
mouth, and I am sure that this method is the best way to handle this particular
situation.

Then too, I think that the letter emphasizes too much his unusual

advances to the street at the end of the year or at periods of tight money, and
does not stress enough that he is too heavy ana too steady a borrower when conditions are fairly normal.

Last week, for instance, the Clearing House banks

were borrowing from us about 490,000,000, 00,000,000 of which was to the First
National.




It is now down to 00,000,000.

#2

Benj. Strong, tog.

7.19.26

I nave made a little resume of the day to day position of this bank
from the first of December to tate (copy enclosed) and you will sae that the reason
for borrowing ie not because of any excessive street loans, which a g000 part of the

time are prectically negligible, but rather result from enat appears to be a deliberate policy of theirs to meet any shrinkage in aeposits by borrowing here rather than
by realizing on their own ueeete.

Their security account, for instance, has been

very stable at about $250,000,000 since the first of last December, anti the last
examination repoit 15flOWE that the bane. wee leaning the First Security Company some

$22,000,000 egainet eecurities, maeing their direct and indirect security holdings
over $250,000,000.

It seems clear that wnat they are really doing is to use our

money to finance security purchaeea on a large scale unaer normal conoitions, while

it is only occasionally that they borrow for the purpose of lending funds on the

street.
I cabled you Setureay a reeume of the credit situation, ana am now enclasing
with this a memoranaum prepared by Dr. Burgese, which is moet illuminating in that

it makes a comparison with conditions of three eonths, six months and a year ago.

Several of the directors (Mr. roang notably) have eepressed a deep interest
in the changes which have taxen place, era have aseeo our views concerning the

possible necessity of a rate increase this autumn.

This memorancum was submittea

to tech one of the directors on Thursday, ana they unanimously concurred in the

recommendation of the officers that there be no change in our discount rate at
present.

The stock market is very active, interest centering particularly in two
Morgan stocks - U. S. Steel and General Motors. Both are selling at new highs for

all time.
I also mentioned in my cable the break which ha e occurred in the Witham

I think it is more than likely that there
are still others in that section that will have to go, as these failures have naturalchain oi banks in Georgia ana Florida.




#3

Benj. Strong, Esq.

ly created a great deal of uneasiness in the South.

7.1a1.26

Thanks to our action several

years ago, the ten Witham banks in this district (on which I am enclosing a compara-

tive report) have within the past three years reduced their line from 0,268,000 to
approximately $550,000, although the Lodi, N. J., Trust Company, a nonmember inetitu-

tion, is reported to have such loans to an amount in excess of $400,000.

These

national banks tell us that they have not felt any appreciable repercussion as yet
from the Georgia failures, but I am satisfied that we have a. sitaation with these
banks which must be watched very cloaely.

as mentioned in uly cable, Mr. Line hae again been approached by the

Uontelair Trust Company people to accept the povition of executive vice presiaeat at

a salary of $18,000 a yeata and he is pretty definitely daterminea to accept it.

think the matter is practically aloeed, Mr. Lincoln Adam a who talked with me about
it, statee that the matter was about settled and that they were only waiting to
communicate with one or two of their directors who were absent.

Unfcrtunately,

Line' place is not EAL easy one to fill from our preeent oraarization, because the
only persons here that have had actual credit experience are some of the younger
element, such as Furman and Aumack, who, of course, co not carry heavy enough guns.

Jay, Gidney and I have had a long discussion about the matter, and after canvassing

the whole situation, we are inclined to thing that Herbert Lowrie is the most available
man we have in the bank.

He appears to have real credit sense and has done excellent

work in Taking credit investigations of applicants for new banks!.

Moreover, be has

a very wide acquaintance with our country bank officers, is well liked 4y them, and
while he ha a a gracious way of dealing with them, he appears to be firm and sound in
his judgment.

We are now well into the summer vacation perioa, and while things are

relatively quiet here at the bank, those of us who are on the job have been kept
fairly busy-.
Ay beet to you.

Sincerely yours,

Benj. Strong, Esq.,

c/o The Bank of England,




London, Englanc.

or,:ndum on tho 4;r

Since Ixat 'seek our loens to New York City 'beak hese been reduced

from 121 million cellars to NS million tine tbtre is prowpmot of further re.
.L174;40°11* during te tmience of this week end next seek.

et the aystem have /beim corresponding reductions.

stringency thus 44pttIcra to be',set.

Totel stalling aesete

The isumedists credit

As to the geolarq credit situttios xnd

its boftriat *a our ;oolloy to the coalaf two or three menthe, the folloring
r4.,w-ciate may be nods:
Money kir;t

th,

Oa &re entering, u;on the period. f 1141 i Icresws in credit deewnds

izettwt higher rste level thao rovi1e4e peer ago.

The acute* for a. yesr

go, dated just ?dor to our two wet reent nets incruxses, wud yeetsrdxy, xre
*0*

t. tht-- following ttble:
.y
...jt.,1-Ly.,-..I.P.,L

Our rte

21?.

3 1/2
paper
ConwerciaiV4-4
3,
iia-day bills

Cell loans, typical
for week

.12ja.
."§.2...

2,'

Ar. El.
w

3 liE

4

4 1/4-4
3 1/2
4 7/8

4

4 1/2

.*

20-day time 10 &AO

ate

4

112

1,i4'26

J

43,1;2226

4
4 1/4-4 1/2
3 1/2

4

4

1/4

4 1/f4

4

1/4

6 6/8

4 1/2

There 1* now e, tendency tewiErd higher open m4wrket rtes which will be
ecceastu. ad e ttm ft,11 dea:fmad for Vend* costs on.

There *Ili, therefore, be

t if tdez cy for open asrket rte to iet AA of 4djust&ent with our discount rate
unless tbie tendency I* otlett by apeu le,vatet wuroimt,rose or




5olarittes.

VOluze of Credit
Yember banke.

Total loans sad investments of reporting member banks are

yetr ago. This it ao increase of

a.v,roxinstely on billion dollars larger than

between E and 6 per cent and tay be ooTpared 'with a typical yesr to yefr increese

of 7 per cent for the past 50 years. The makeup of nestar bank credit is shova
in the folloring tables
(In millions of dallara)

All Acivrtioi, itmbor top

JuIY 8. 1425 J. 6
8, 188

!1b

5,kO
4.4

tao8t4

18,778

nke,

8,808

5,40N1

448

Total leans and
rodent.). ROOLAIre

Or. 21. 194 July 7. 1426

8,49E

5,09Z

Commercial loans
Irof,as cal stocks sad bonds
Investments

investments

1926

10,450

Total bills mad aecurities of tho Federal. E,3werve

yetem in July Wk.5 shelved a daily average figura of 1065 aillion dollars.

ibures thus far available. for july lZ8 sppesr to indicate

ft

The

probable average level

'i>atesca 100 and ILO million 1r4rer the-n a yeAr ago, An increase slightly larger than
has 4:4/614 the et,ise so far this year.

In addition to this incrense in Federal Reberiret

..redit the eclaitryle fold stock has been incre41APd approxismtely 100 million dollars

since 4 ystr ago, z1thoo0 this increase 4bei beet partly offset by an increaee of
AZ5,000,000 in the Alount of 4n14 etreftrked in the Fedora Reaerve Baal( of Be* Yost.
Mft ot:,age in eskeup of Feder,.11 Heserve credit UP compared with a ye4-r ago mod more

recent piriode is as follosel
(In oillions of dollars)
J "y a, 1925 JAI. O.
Yoorml Reserve nsaks

biils discounted

Bills ;Au-chased

U. S. escuritiee
Iotal bills mad

450
241
4. ...Y.-9....

l,043
securities*
Iacludee other securities
4 fortie laavis on egad.



bin
645
:',6)

1,618

1ii26

Apr. 'Zl. 116 dtal 7. 12
450

44

...AP
1,381

ae

Ea
.684

1,17Z

:Year ore in the volume of credit does

In -moral

pear to be aerio

out of line with the aormal growth due to the growth_

of trade. eo indication of a look of

juotrt between redit aud trade sEveers

in oommodity prices, although thin* it peSsible evidence of *Oh letk of adjustmont

privies of seouritlta and real astute.

Ai shown in the table for reportin

wtber books appro

the Ina-reuse in *milt. einoe a year ago SS An lovos 04 SS0046 Q0di bonds, end them'

loans axe now about us large as thoy were In ?ebruary, whoa the spring high point
of stank prioes was roached. Leona to brokers and dealers in Now York Oity, how-

ever, conttnue about 6t0 million dollars lesa thun in iIibruary. This difference
would el6sor to indicate that atoeks are now being carriod more largely by direct

loans to tadividuala rather thin by louno to brokers. ',:bey say also indicate o
somewhat wider distribution of stook ownershio, or distribution into stronger
hands.

2hIs volume of oredit supports stadk prioes, taeh are net for from the

prioes of lant february. The volume of trudine IS heovy but not ouite us Aline

as last fill or In Mnroh.
The category of loans to a.how the seoosui iaro

inorease is the ma-

c:41114,4 ocomerolel loans, which inolode loans by banko to finance companies as

well as dirsot loans to busioesaeo or twlisiduais. There 1- no 'ono of knowing
how ouch of this increase 000sista of localo to finance cont4nies.

There is also au inor se of over lt0 million in bank investments.
The dhenge In the use of redit ainee a year ogo

be summarised by

Saying that to Spite of aetive businesc there does not opj,rottr to bye becr any

large increase in the umount of credit required for carrying iaventorieo, advonote$

wageo, or other auoh inersasee *blot in the jest ha', usually aetimpettiod this




- etzd* Of the business cycle. Instend kdaltional suppliaa of credit appetr
to be utilised for iscrused pricos of ,stoOkr and band', new igg_101OF at tie-

euritioo, sole new businest onterveret, and inttullment tirying.
The corniqnhtions which tro currently made of the Ic&re dnd invert-

silents of nem.: bPaks do nA reveal in simmer$2 tbe tzn1 :o WO of eiredit,

tathnufg) tie eonsequence2 aro now being felt in eerttin qwrtert of too lr-ree
lx4oer fir enterprises on:mooted with rea1 ettate.
WOrt

Aluds.

10 VII this yekt there ohs been s44 loport belLne of gold anovating

to ab;)ut SO million dollars. At present the relative position of AkIney r4Aes

laws lark sad Lomion is to oloesar balanced Oat that is little tendency for
funds to flow in either direction. The tendenel, in both centers 411 be tor
firaer rates duriag the fall. %tot if Imatos should grow firer anis revid17 heir*
thea4 la 4ondan, to tentiencF would be to

diseetion. A pull

of

stuailvto at gold 37, evawt sa this

fonds toward this otn, this fell, nista be very ev-

Isrrossing; for Aleion sad swat at the Jaropmen *oaten.




FEDERAL RESERVE BANK

OF NEW YORK
July 30, 1926.

Lur Governor Strong:
I have your letter of July 16, which refers to the enclosed copy of
letter (X-4629) written to the Governors of all the Federal reserve banks by

Governor Crissinger of the Federal Reserve Board, approving the recommendation
of the Open market Committee that Third Liberty Loan bonds be included in those
covered by the repurchase agreement practice.
I appreciate the viewpoint you express with regard to the minds of the
Board, and am sorry that you do not agree with the procedure.
The facts are that following the adjournment of the Open Market Committee
in Washington on June 21, Governor McLougal called all the members of the Committee

together, and said that he had overlooked bringing up this matter at the formal
meeting with the Board, but that he hao mentioned it informally to Messrs. Hamlin
and James, who were still in the room.

McDougal stated that they agreed with the

-et of us that there could be no possible objection to this procedure, but for the
sake of the records they all thought it was desirable that it should be presented
formally to the Boaro.

Since the receipt of your letter, I have reviewed what took place at the
period preceding the Victory note maturity.

The records show that I had several

discussions with Undersecretary Gilbert concerning the matter, who at that time,

as I recall it, was very aesirous of having all the Federal reserve banks extend
the repurchase agreement to Victory notes, SO that following our aiscussion I sent

him a telegram about it under date of January 31, 1922, to which he replied by
letter unaer that aate, saying that he was asking Governor Harding of the Federal
Reserve Board for a statement of the views of the Board before making a request of



Benj. Strong, Esq.

I-El:ARAL RESERVE BANK OF NEW YORK.--#2--

the Feaeral Reserve Banks;

7.30.26

whereupon Governor Harding, unaer date of February 2,

0 1922, (X-3317) wrote all the Federal reserve banks that the Federal Reserve Board
would not object to any arrangement of that character.

I am enclosing copies of

this correspondence herewith.
We are now in the season of midsummer dullness, and we learned yesterday,

at the Board meeting that many of the directors will be away through the month of
August.

As Mr.

Jay

ana all of the Deputy Governors are on the job, the opinion

was expressed that there was no reason why I should not take a few weeks' vacation,
so I am planning to leave tomorrow night to take Mrs. Case and my family to the
Ahite Mountains.

My address there is Hotel Waumbek, Jefferson, New Hampshire.

Mr. McKay of Chicago was in today, and he tells me that he very rcently
learned that Mr. Cunningham of the Boara, who is still at John Hopkins, is a very
Sick man, that his weight is down to about 112 pounds and they do not appear to be
very optimistic about his recovery.

Governor Crissinger is still a sick man, although

he is able to spend some time in his office.
As you have recently been advised by both Dr. Burgess and me, money con-

ditions have worked a bit higher, and if market conditions this year follow the usual
seasonal trena, there will be a substantial amount of additional Federal reserve
credit callea into

play

within the next few weeks.

Personally, I have the feeling the

we should be giving active consiaeration to the idea of moving our discount rate back
to

0.

The wave of pessimism that we had in the Spring on the theory that we would

have a marked recession in business, is entirely passed.

The stock market is booming

and such stocks as General Motors, U. S. Steel, Allied Chemicals and a few others are
way beyond the high points of last Spring.

Commodity prices have remained fairly

stable, ana as our clearing house oanks now owe us a little in excess of $100,000,000,

with possibilities of a mucn larger amount this autumn, I am of the opinion that a

0 rate is clearly inaicated.



FEDERAL RESERVE BANK OF NEW YORK

Benj. Strong, Esq.

7.30.26

Trusting that you will have a restful and enjoyable time during the
balance of your stay abroad, I am,
With Best hegaras,
Elncerely yours,

benj..--,trong, Esq.,

c/o The bank of England,
London, E. G. 2,
England.




FEDERAL RESERVE BANK

OF NEW YORK
December 22, 1926.

CONFIDENTIAL
Dear Governor Strong:

We had a regular "field day" here at the bank all day Monday, the date
of the directors' and officers' dinner to Mr. Jay.

Among those present were

Governor Crissinger, Mr. Platt, Mr. Hamlin and Mr. Miller, of the Federal Reserve Board, most of our directors, and a goodly number of the chairmen and
governors of the other Federal reserve banks.
It seemed an opportune time for an Open Market Investment Committee

meeting, but as Governor Crissinger advised me that the minutes of the Federal
Reserve Board meetings contained a resolution that meetings of the Open Market
Investment Committee were not to be held anywhere but in Washington, unless
with the Board's consent, and as there was a division of opinion (three to three)

as to holding one here, he thought we should do no more than to have an informal
discussion in any event.

We had a very careful comparative survey (charts en-

closed) made by Dr. Burgess, of what had happened during the last two weeks each
of 1924 and 1925, bringing it up to date for comparison.

I am also enclosing an

extract from our Board of Directors meeting of December 16, on this subject.




Roughly, the three factors with which we have to reckon are:
Treasury Account - they expect this week to accumulate
$100,000,000 in the Federal reserve banks, with the
probability that they cannot reinvest more than
$25,000,000 to $40,000,000, although they are prepared
to go higher if Third Liberty Loan bonds can be obtained
within their price range.

Additional (seasonal) currencysrequirements which we estimate
will amount to $150,000,000 or so for the country, and
about $50,000,000 for this district.
The customary "window-dressing" by corporations and banks
throughout the country, which runs into large figures.

FEDERAL RESERVE BANK OF NEW YORK

#2

12/22/26

Mr. Benj. Strong

With regard to the last item, I think I have already explained to you

that I have talked with the presidents of some seven or eight of the more important
banks with regard to their assisting in the care of that situation this year by

having them agree to go into the market, if money tightens up too much, and take
over $25,000,000 or so of loans and thereupon borrow here.

I find them quite

agreeable to do this if it should prove to be necessary.
At the Executive Committee meeting Monday afternoon, we had an informal
but most interesting discussion concerning year-end adjustments.

For the first

time, so far as I can recall, our directors, members of the Federal Reserve Board,
and officers of other Federal reserve banks were present.

Every one expressed his

views, and while a number felt it might be well to test out the situation by making
no open market purchases, I think I am safe in saying that the majority believed it
would be well for us to buy. E0,000,000 or thereabouts, with a view to taking off
the ',peak" and then to resell them early in January.

Governor Crissinger promised

to bring the discussion of the situation to the attention of the Federal Reserve
Board yesterday, December 21, and let me know promptly just how they felt about it.

Up to the present time (noon) I have not heard from him, but I shall ask him about
it in the morning.

All business in the bank on Monday, so far as this floor was concerned,
made way for our party to Jay.

We had a splendid time with our visitors and at

the dinner to him on Monday evening.

All talks - including my own - were good!

The directors presented Jay with a beautifully illuminated tribute in the form of a
resolution.

(See copy of the resolution, enclosed.)

At the conclusion of my talk,

I read and handed Jay your personal letter, and, in the name of the directors and
officers of the bank, presented to Jay the beautiful ivory Inimidor which had been
selected as our gift to him.




With the thought that you might be interested in my

,t,t3

12/22/26

FEDERAL RESERVE SANK OF NEW YORK

Mr. Benj. Strong.

was
talk (whiclulfrom the officers' standpoint), I am enclosing a copy of it.
I sincerely hope you will have a bully good rest and will soon regain
your strength.

When you are a bit stronger, I shall want to talk with you about

some of our organization problems.

All the officers join me in sending you our very best.
Faithfully yours,

Mr. Benj. Strong,
Broadmoor,
Colorado Springs, Col.
Encls.(5)




Honorable S. Parker Gilbert

Agent General for Reparation Payments

Honorable Ogden L. Mills

Congressman from New York and appointed Under
Secretary of the Treasury

Honorable R. C. Leffingwell

Formerly Assistant Secretary of the Treasury and
J. P. Morgan partner

Honorable Edmund Platt
Honorable Charles S. Hamlin
Mr. E. A. Goldenweiser

Vice Governor, Federal Reserve Board
Member, Federal Reserve Board
Acting Director, Division of Research and Statistics,
Federal Reserve Board

Ex-members of Federal Reserve Board
Honorable
Honorable
Honorable
Honorable

Paul M.. Warburg
Albert Strauss
Carter Glass
David F. Houston

Chairman, International Acceptance Bank
Seligman E. Company
Senator
Financial Vice President ,American Telephone

ec

Telegraph
Receiver for U. S. Supreme Court in extensive litiHonorable Frederick A. Delano
gation, etc.
Formerly, Director, Division of Research and StatisDr. W. W. Stewart
tics, Federal Reserve Board.
Deputy Comptroller of the Currency

Honorable Charles W. Collins
Directors, Federal Reserve Bank of New York
Samuel W. Reyburn

Delmer Runkle
L. Saunders
obert H. Treman
Clarence M. Woolley

W

Theodore F. liThitmarsh

Hon. Owen D. Young

Pres., Associated Dry Goods Corp., and Lord
Taylor
Pres., Peoples National Bank, Hoosick Falls, N.Y.
Chairman, Ingersoll-Rand Company
Pres., The Tompkins County Nat'l Bank, Ithaca, N....
Chairman, American Radiator Company
Company
Pres., Francis H. Leggett
Chairman, General Electric Company

Ex-Directors, Federal Reserve Bank of New York
James S. Alexander
W. McGarra1
at

George Foster Peabody
Charles Smith
Frank L. Stevens

Chairman, National Bank of Comerce
Chairman, Exec. Comm., Chase National Bank and
Director of the Reichsbank
Retired banker
Pres., Citizens National Bank cc Tr .Co.,Oneonta,N.-.

Charles A. Stone

Pres., Stevens 6; Thompson ,Inc., Manufacturers of
Paper
Chairman, Stone cc Webster, Inc . ,and Director,

William '77oodward

American International Corporation
President c Director, Hanover National 13;,,nk




0....0Buffalo

Branch Directors

W. Schneck enburger

Frank W Crandall

John A Kloepf er
-21liott C . McDougal

Harry T. Ramsdell

Managing Director, Buffalo Branch, F.R.L. of NA
President, National Bank of Westfield, N.Y.
President, Liberty Bank of Buffalo, N Y.
President, Marine Trust CompanyBuf falo, N. Y.
Chairmai, Manufacturers Traders Trust Compa,-iy,
Buffalo

Federal Reserve Bank of New York

J. Herbert Case
Louis F. Sailer

Deputy Governor, F. R. B. of N. Y.
It

Edwin R. Kenz el

ff

Dr. 7. Randolph Burgess
L. Randolph Mason

J. H. Philbin

It

t/

1t

It

George L. Harrison

11

It

11

11

It

If

It
It

Assistant 'Federal Reserve Agent
General Counsel
Assistant General Counsel and SecretLry

James F. Curtis

Formerly Deputy Governor, F. R. B. of N. Y.
Meni;er law firm, Curtis, Fosdick and Belknap.

Chz.,..irm

Governors

ti as

Pierre Jay
. L. Austin

E. R. Fmcher
Geo, J. Scay

:ii. A. Heath
Wm. McC. Martin

John R. Mitchell
Isaac F. Newton
Honorable., George V. McLaughlin

14,7mal

e#14-4,..,Wardor

Honora!:le Owen T. Reeves, Jr.




-Boston
New York

Geo. W. Norris

Geo. Deez..,mio
W. T. Hoxton

Federal Reserve jank of

44c Dugttl
J. U. Calkins

Philadelphia
Cleveland
Richmond

Chicago

St. Louis

Minneapolis
San Francisco

Formerly Superintendent,State of N.Y.7anking Dept.
If
President
Chief National Lank Examiner, Second Federal
/1

Reserve District

- I1L

20;4a.

Zee officers of the bark approach this occasion with mixed enotions,

J ay has so long been our guide, philosopher and friend of' the officers of the

bank.

that we are just beginning fally to realite how much we shell miss him.14 I we think

of our loss, we are sad.

AA our loss is ettrope's min, and as we reeognize the tree

mendons importance of the position to wit ch he has been appointed, and the increased

opportunity it will ref ord him for splendid aohieveneat, t/e try to reconcile ourselves
to the inevitable, In any event, it is true that 14. 4oyes aseociatee in the Officers'
Council take his departare vary seriously.
enly this morning the rembers of the Gomel' were so reach interested in this

evcnines affair that thee volunteered to dictate my speech, or, rather, my two speeches.
Their idea was sone/thing like this: that I lhould prepare two distinct and radically
different speeches at exercise my discretion at this morsent as in Which one I ehould
use.

Their feeling is that if Governor Crissircer, Ur, *wan, Lir. Young and 2r.

Gilbert failed to laud Ur. Jay sufficiently, I should two weeoh No. 1 and do a real
job. If, on the other hand, the first fear speakers were properly tealogistic, I Via S

to use speech No, 2 - and tell the truth :

aomething tells ree that speech no. 2 is

clearly indicated.
Zea epeakers eteo have preceded me have very eloquently emphasized 11r. tiaes

statesennlike qualities - his great abilite, his sagaeity, his kindliness and tact and their praise has been sweet music in our ours. Yet, after all, I submit that
the time is acne vhen the frieze/4 iho have actually lived with him all these years
should reveal some of the lovable idiosyncrasies ehich rake up that mealy intimate

side which eulogies never touch at all.

,,e feel this all the more strongly beoause

of Ur. Gilbert's prosaic:to here this evening.

If he were to go aer3y elith nothing but

the kindly and laudatory reearks of the "receding speakers in his mind, he midst be

so overawed tiv.t he would die of shock when he first heard Ur Jay indulge in a little
apt profanity - a little-suspected aoctonplisheent that he occasionally eathibits with

resalts refreshing to ell.



2

It is

t

avoid filial tha t the Officers feel that tale is the tierie for me to

give you the "lowdown" on hiri.

ae have eivere felt that a great deal of La*, Jay's

ieilant to help him keep it.

charm lay in his moi:eeta
ylia=.;14j.titasau.
One of

r. Jay's cheracteriaties is therougintess, but se-lett/nee oval this

be carried to extrenes.

I ranatber one occasion, several years flee, taxon

epard

aOrrgin, eho ye's teen Ur. Jay's assis tant, burst bete my rem end canplained aespairingly:

"Pierre Jae is au aneompromiaire idealist; he is not satiefied ti th perfection but must

have'eerfeetion plue."

eell, this is just one of the idiosyncrasies that we have had

to s tend, and yet there you e;et the measure of the etandard to :dada we have had to sub-

scribe.

Could there be a higher ideal?

capacity for teaing endns",

done one has said that 'genius is the Infinite

If this is io, then Pierre Jay is a tete genius.

gareadialleta.

Another of 1.4. Jay's well-lateen charaoterietios is his sociable and h.espitable

rntare.

I recall a day, a year or so age, during the extra_tely cold weather, vhen

Jay vas expeeaelc a ais tinguiehed viei tor.

In order to provide a warm welcome for

his guest, Ur. Jag Oct about building a cheery wooafire in his orate. Alt alas! diet
did he do but light the lire without opening the damper: Sinews of emoke iseked the

tenth floor; tire Sailer directed a bucket brigade whielt preeptly appeared, prepared
to souse anything t1i. t looked red, and lir. Zees guest after a momentary effort to disregard the thica fames, tearfully alezed the k .ay to the vaults.
'A.. Jay ,ala indeed the "unamproeising tdtmlls t -

very :Iparten - in matters

dealing with the furnishings of the Iei buildiree. Serving as Vice Chairman of the
Azildire Committee, he scrutinixed every it eith each care that he nearly broke the

hearts of the architects and Ur. Sailer by insistitg Vat an turesually fine desk,
similar to one installed in Governor Streuee roan, be mewed fron his office, and an
ordiatry, plain desk, stiller to those used by the Deputy Governors, be substituted.



Reluctantly, Mr. Sailer h'ui the desk ?moved.

But, in the matter of the directors/

table, ehich also cane under ar. Jeers ban, and vhich 7013 the one thing that the ara firm Stand

chitects (figurstively epeo.7,err) vanted to "sprone teeeselvse on", we to
:end the table remained.

Some ofof you will remember the dinine rem whith vie had fixed up on the thirty-

third floor of the &.ezitable ittildi, with sererioe from the Bankers Club,

me most delay

red shed.

Zis roen

Ur. ;Jai 1 er had a rather elaborate clock ins tall ed.; it dis-

"aten began a parade of clocks, each one appearing and diaappearing

appeared.

strangely as the Cheshire Cat's grin, until we bad had a total by actual count, of seven,
before one Ines found that complied with lir. Jay's idea of simplicity.
clock finally approved, VMS

as I recall it, son* Os.

Ze cost of the

Burt a certain jovial cynic

whispered that it looked like thirty cents.
Ur, Jay 13 a east

star- of the ;tines .414ish; and on many occasions we eould

go to him to have him smooth out a difficult situation with vhich we were dealing.

(Xtt

would cone his pencil - abort, stubby, soldem mith mueh of a point to it, but sharp
enough to erme the fino lines and delieate shades of meaning that we needed when revamping or rearranging an in-earth/It "screed".
SLUCeleedalL

Pierre Jay has put more into the bnnk than he car ever tea@ out of it.
has relweye been reedy to do more than his share and to go the soceni mile.

Re

He has put

into it his vein personal magnetism, his sincerity, his devotion to the interests of the
I:tester-1, his judgaent, knowledge and hiep purpoze, and the bank is a bettor place because
of him.

Zie officers always iosee whore In find him; I have been in the bank some nine

years and have yet to hoer anyone say a 'cord shout hire &It

e5 not kind.

-40 are proud of lila t ir, Jay Imo acconplish x1.ee are proud that Lir. Gilbert
hue seen fit to walk into our Ttrd en and take away Our prise gardener to help him in

cultivating perhaps more difficult acres.



e hope that in his

Irnt Er. Jay,

4

like the true gardener hole, will find juot vhere to plant the fine seed, just where to
dig for happiness,




,43, wish tint for him in abundance!

At their leetia4 on Deese.ber le, 15E6 tl'et Director* of the Ftderel
ieeerve Bank of 4e* Tor k adekted the. foileeint tributel

From the &tit or lie orgeniettien, zere then teeive pears 443,
Fierre Jay txx sarvxd tt4e Federel Reserve Penk of it:te fort 4* Chtirmsn of
the Boardene.! . Odere/ fteserve Aeent.

He

404 reeixnint to become the

jezerieen Mosher of the Trenefer Committee under the D4vis nx4.

, en *Meer et* t!!e htnk and 4x t reireeentetive of the Federel
heeerve Beard he hee eahieved u aniqu- eoeitien a

stAfl *cAigallor 5tnti 4

tactful leeder.
fie Lee iireeided tt the eeetings or tht irector% with dienity
ykathetic understanding of varying point* of view.
tribute! to the diseuealone 4 oemerenenaive =,,naeled6e of t

etc beak, ene

kaal con-

tfr or

elver ineitht into ito erobidee.

Lys the bree4 field at pelieT te nee exerted, by hie eeholerly
enalyeis of Federal heeerve ,roblemt and hie quiet diplomaoy,

large

influence upon the recerdee decisione And the unerittea treditian of the
/adore& fteaerve aystea,

Threueh hie aritint. en speekinie he bee eede

veineble con-

tributien in the interyretttion of the iodate' Reserve Spat% to the
eubliee

By hie ,ereonal or and hie kindliness t,e kuot lendepAred bixtoelf

ell hie to,4044tex.

To Merl.* Z.Fly, unaelfieh eervent el the alio intereet, 'tetteman of fineace, euti kindly friend, we, the directors *f t'ses Federel i,teerve
Bank of Be* fork, expreee eur ekprecietien of the zervitt he hes readered,

our r gret et his leivtillg u*, and our confideLoe thet he All find the
eatiefection of great ecconiliehment in hie !Jew and teportent




*uric.

FEDERAL RESERVE BANK

OF NEW YORK

\\

1 ' k,)\9

1)

(-)

December 25, 1926.

Dear Governor Strong:

Due to an oversight, the original of the attached letter was
forwarded to you at Colorado Springs.

I am, therefore

this copy, together with all copies of the enclosures referred to therein.

Governor Crissinger telephoned me this afternoon, stating that
the Federal Reserve Board desired to know just how things were progressing
here.

I told him that money had gone to 6%, and that our loans to New

York City banks today increased by $50,000,000, bringing them up to
$170,000,000.

Governor Crissinger also stated that the Board was in-

clined to feel it was inadvisable to purchase any Government securities
and would like to see the matter worked out, if possible, without doing
so.

I have promised to keep in touch with him from day to day and advise

him of any important changes.

While, personally, I think it would have
C.4400(',A

been desirable perhaps to have taken off the "peak"

out $50,000,j, I

am sure we can get through very comfortably without it.

(I was informed

by the President of the Stock Clearing Corporation that the banks were
showing a much more liberal disposition this year than heretofore, in that
they were willing to lend freely at 6%.)
Our very best to you.

Benj. Strong, ESQ.,
Grove Park Inn,
Asheville, North Carolina.




CLASS OF SERVICE

SYMBOL

TELEGRAM

DAY LETTER

BLUE

NIGHT MESSAGE

NITE

-:.11GHT LET1ER

NI

iIf none-

these three symbols
appears fter the check number of
words) this is a telegram. Other.
wise its character is indicated by the
s,
DI appearing after the check.

WESTE

TEL

NEVVCOMB CARLTON PRESIDENT

CLASS OF SERVICE
DAY LETTER

AM

BLUE

NIGHT MESSAGE

NITE

NIGHT LETTER

NL

If none of these three symbols

4.

p:i;

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

,-,

pears after the check number of

rds);thlg is a telegram. Other.

Wise itsthdracter is indicated by the
symbol appearing after the check.

The filing the as shown In the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME.

Received at 62 Patton Avenue, Asheville, N. C.
111




627ja
CFB496 112 1/60

6

3.3,

B BROOKLYN NY 4 541P
BENJ STRONG

-333
STUYVESANT ROAD BILTMORE FOREST BILTMORE NCAR

OWEN ADVISES ME HE HAS BEEN CALLED OVER TRLF,PHONE BY GOVERNOR WHO

SAYS HIS COLLEAGUES INCLUDING SECRETARY UNANIOUSLY WOULD LIKE OWEN
TO RESIGN PRESENT POSITION AND THEREUPON ACCEPT APPOINTMENT TO VICE
CRAIRMANSHIP STOP OW EN FURTHER SAYS GOVERNOR INDICATES THIS WOULD

FACILITATE WORKING OUT MUTUALLY SATISFACTORY ARRANGEMENT CONCERNING
FIRST VACANCY WHICH THEY FEEL SHOULD BE FILLED BY SOMEONE BETTER
KaowN STOP

SYMBOL

TELEGRAM

IE

.ree symbols
dck (number of

mg after the check.

TEL

NEWCOMB CARLTON. PRESIDENT

DAY LETTER

NITE

NIGHT LETTER

AM

BLUE

NIGHT MESSAGE

NL

If none of these three symbols
elnears after the check number of
words) this is a telegram. Other-

wise its character is indicated by the
symbol appearing after the check.

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

"'

de filing time as shown In the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on. all-mess3g,es, Is STANDARD TIME,

Zeived at sg Patton Avenue, Asheville, N. C.

CFB4E-J6 2/52

,4/

4 PM 6

CWEN STATED THAT BEFORE ANSWERING THIS PROPOSAL HE WOULD LIKE TO

DISCUSS 1T WITH HIS ASSOCIATES INCLUDING US WHICH HE FLANS TO DO
DAY AFTER TOMORROW AND ASKED ME TO OBTAIN YOUR VIEWS STOP SAid TO
WHOM

I

TALKED ,BEVORE HE WENT DOWN TONIGHT AGREES WITH LE THAT

SUGGESTION IS GOOD ONE




HERBERT.

SYMBOL

TELEGRAM

WESTERNON1ON

NL

ielegram. Other,' is indicated by the

UN!

WESTEL

CLASS OF SERVICE

33




4,1.
ON, V.

014

W.

1114

f+

PA

4,

k 41°'

O.

CLASS OF SERVICE

SYMBOL

TELEGRAM

DAY LETTER

BLUE

NICHT MESSAGE

NITE

NIGHT LETTER

NL

If none of these three symbols
appears after the check number of

Vr." this is a telegram.

Other.

wisc as character is indicated by the
symbol appearing after the check.

WESTE

TEL

NEWCOMB CARLTON, PRESIDENT

UNION

CLASS OF SERVICE
DAY LETTER

BLUE

NIGHT MESSAGE

NITE

NIGHT LETTER

AM

NL

If none of these three symbols

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

appears after the check number of
words) this
is Other.
a telegram.
wise its character is indicated by the
symbol appearing after the check.

The filing time as shown In the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME.

Received at 62 Patton Avenue, Asheville, N. C.
B3C.) 3 27
1927 JAN

RQ NEWYORK NY 4 220P

.4 PM 2 36

216

BENJ STRONG

STUYVESANT ROAD BILUORE FOREST BILTLIORE NCAR
SAUNDERS HAS,RECEIVM CULIPLIIZNTARY LETTERS FROiii PLATT AND HliaLIN

BUT LETTERS SAY THAT ON PRINCIPLE OF ROTATION BOARD BELIEVES
THAT SOLdE ONE ELSE SHOULD NOW BE NAMED.




CASE.

SYMBOL

TELEGRAM




'ASS OF SERVICE

SYMBOL

TELEGRAM

DAY LETTER

BLUE

NIGHT MESSAGE

NITE

NIGHT LETTER

NI

ESTE 0 UNION

CLASS OF SERVICE
DAY LETTER

wise its character is indicated by the
symbol appearing after the check.

TEL

Of tit

NEVVCOMB CARLTON. PRESIDENT

NITE

NIGHT LETTER

AM

BLUE

NIGHT MESSAGE

WESTERN UNION

If
of these three symbols
appears after the check number of
words) this is a telegram. Other.

SYMBOL

TELEGRAM

NL

If none of these three symbols

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

appears after the check (number of
words) this
is a telegram.
Otherwise its character is indicated by the
symbol appearing after the check.

The filing time as shown In the date line on full rate telegrams and day fetters, and the time of receipt at destination as shown on all messages, Is STANDARD TIME.

Received at 62 Patton Avenue, Asheville, N. C.
i927 JAN 5

cal.63 7
-

1ENJ

RQ NEWYORK NY 5 11.21.A
STRONG

1-5t1
STUYVESANT ROAD DI LTMORE FOREST DI ITMORE NCAR

SENT IOU TELEGRAil LAST NIGHT FROM EIROOKIN




CASE.

tP

beliverco

All

I I

46




ft Beli

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Par

'MI RUM
COM) A

111 Ir

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It at II rim

ii MIR 1COP

FEDERAL RESERVE BANK

- OF NEW YORK

February 9, 1927.

Dear Governor Strong:

Supplementing our talk over the telephone this morning, I
am enclosing the following:

Federal Reserve Board Statement for the
Press, X-4788, for release February 10,
and
Statement of Owen D. Young, Deputy Chairman,
The
Federal Reserve Bank of New York.
statement in the second paragraph, second
line, has been modified to meet your
criticism.
With best regards, I am,
Faithfully yours,

J. H. CASE.

Mr. Benj. Strong,
Stuyvesant Road,
Biltmore Forest,
Biltmorei, N. C.

Enclosures (2)




Feb. 18, 1927.

Confidertial.
The enc1osq7e

.IT

a-e:

Eeb. 15, 1927 from Gibney to Mr.Case
17,

Lett-

"

?

11.

P. Townsend, Lquitable

Trust, N. Y. C., to Mr.

-L11 in -0
also




Mr. J.

Mitchell.

M emo-anoum Dated keb. 17, 197, -.--06ented
tit
& Promotions meeting 2/17/27.
in re 7-eassignment of duties.

MISC. 136 2I3M 6-26
FEDERAL RESERVE BANK
OF NEW YORK

TIME

TO

INTEROFFICE

ROUTE SLIP
A. M.
P. M.

DATE

DEPARTMENT

DIVISION

SECTION

REMARKS

Fr'OM

DEPARTMENT

DIVISION
SECTION

USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSIBLE.
Digitized .for FRASER
N.
To IKSURS PROMPT AND
http://fraser.stlouisfed.org/ ACCURATE DELIVER,' LL COMMUNICATIONS SHOULD BE DISTINCTLY LABELED
Federal Reserve Bank of St. Louis

I
February 17, 1927.

PERSONAL

Lear Governor Strong:

Your personal letter of February 13 regarding promotions and new assignments in the brink was supplemented by Harrison's talk with you over the
telephone this morning about OUT idea of appointing R. F. McMurray, now Chief
of the Wire Trenefer

Division, as Manager of the Collection Department.

were very glad to know that you were in agreement with us on this.

at a meeting of the Salary

We

Accordingly,

and Promotion Committee held thie noon, T submitted

a memorandum (see copy enclosed) stating that, in accordance with the provisions
of the by-law e of the bunk, you had made a reassignment of duties of several
officers, transferring:
C. H. Coe (Manager)

from the Check Department to the
Loan & Discount Depertment (Manager),

I. W. Wetere (Manager)

from the Collection Depeetment to
the Check Department (Manager):

That, as

n result of the vacancy

creeted

Heedeieke resignation

as Controller of the Government Bond Department, it was proposed to abolish the
office of Controller of that department and to consolidate the Government Pond

Department and the Safekeeping Department and put them

Manager of the

under S. S.

Vansant, now

safekeeping Department:

That, for the vacancy created by Waters' reassignment, you recommended
the appointment of:

F. F.tecMurray as Manager of the Collection Lepartment (his salary to
be increased from fe1,700 to $5,500 per annum):

That the memorandum outlinee in some detail the weakness at present
existing in our Credit Department, and, in order to meet this eitaation, you




\s/
2.

Gov. Strong,
Biltmore, N. C.

2.17.27

recommended the appointment of S. A. Mitchell (formerly Assietant Cashier of

the Importers & Tradera National Bank)as Chief of the Credit Division, at
a ealary of f7,500 per annum.

As to Mr. Mitchell, I have pereonally looked up his record and

have found it to be first-class in every respect.

He is well known in

credit circles, and I feel that he ie juet the type to make a very desirable
acquisition to the bank - much better, perhaps, than a younger man with leas
experience.

I em enclosing data concerning Mr. Mitchell.

AF to the Bank Examinations Lepartment, I will pase along to
Burgees your comment on Egbert, with the euggestion that he (Burgese) talk

the matter over with Mr. McGarrah before anything definite ie done in that
I heve talked with Sailer and Harrieon about your ideas for Founds

and GiltArt; also, your suggestion a6 to future possibilities in connection
with the Buffalo situation.
Faithfully yours,

-aPeeiV

3. H. CASE.

Mr. Benj. Strong,
Stuyvesant Foad,
Biltmore Forest,
Biltmore, North Carolina.

Enclosures.




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February 17, 1927

COPY
resignations in the official staff
During the past six months we have had two
Credit and Discount Department, and Mr.
of the bank, Mr. Adolph J. Lins, Manager of the
Department, which positions up
Laurence H. Hendricks, Controller of the Government Bond
to this time have not been filled.

In order to meet the conditions caused by these re-

provisions of the By-laws, made
signations, Governor Strong has, in accordance with the
officers:
the following reassignment of duties of several

C. H. Coe, Manager

to
has been transferred from the Check Department

LOAN AND DISCOUNT DEPARTMENT
become
in place of Mr. A. J. Lins, who has resigned to

vice president of the Montclair Trust Company.

Mr. Coe

has been in the employ of the bank for about ten years,
that period,
and has shown marked executive ability during

and is qualified to fill this important

I. W. Waters, Manager

position.

to
has been transferred from the Collection Department

CHECK DEPARTMENT
in place of Mr. Coe.
this position.

Mr. Waters is the logical man for

He is a thoroughly trained operating man,

qualifiis safe and reliable and possesses the necessary
cations for this job.

Bond Department, has reMr. L. H. Hendricks, Controller of the Government
Rediscount Corporation, leaving a vacancy
signed to become president of the American
supervision,
In order to effect economies and closer
in the Government Bond Department.
of Controller of this Department and to consolidate
it is proposed to abolish the office
Safekeeping Department and transfer Mr. S. S.
the Government Bond Department and the
department to be known as thp Government Bond
Vansant, Manager, to the consolidated

and Safekeeping Department.




- 2 -

Appointment

of a

New Manager of the Collection Department

Due to the transferring of Mr. Waters from the Collection Department to the
(1Qheck Department, a vacancy occurs in this important department.

The officers believe

that it is most opportune and timely that a promotion should be made from the ranks to
this position, thereby encouraging and creating a better spirit among the employees.

After considerable study and thought, the officers recommend, with the Governor's approval, that Mr. Robert McMurray, now Chief of the Wire Transfer Department, be promoted
to Manager of the Collection Department.

Mr. McMurray has had a rounded banking experi-

ence, is 44 years of age, is thoroughly equipped to handle collections, having had years
of training in this work, and during his employ

with us (about ten years) has shown

himself capable of handling men and departments in the most efficient manner.

Appointment of Chief of the Credit Department
Due to the fact that Mr. Roy Furman, now Chief of the Credit Department, is
to presently sever his connection with this bank, it will be necessary for us to secure
someone who has had a thorough training in commercial and bank credits.

Not only has

the Credit Department lost Mr. Chapin, Mr. Morris and Mr. Aumack during the last couple
of years, but it has also lost some of its most promising material in the Department
through resignation, and

as

a result we find ourselves at this time in a position that

no one in our organization has had the necessary technical knowledge or training in
credits to fill the position which Mr. Furman leaves.
in the outside market.

We must, therefore, seek someone

After making a thorough canvass, the officers recommend, and

Governor Strong concurs, that we employ Mr. J. A. Mitchell, formerly assistant cashier

of the Importers and Traders National Ppnk, who for many years was in charge of their
Credit Department.

Mr. Mitchell is a man between 45 and 50 years of age, has a splendid

personality, and is highly recommended to us.
a valuable acquisition to our force.




If we can secure his services, he will be

FEDERAL RESERVE BANK

OF NEW YORK
February 17, 1927.

Dear Governor:

I have your letter of February 13 returning the correspondence with
the Bank of France, regarding the purchase of gold, which I am turning over to
04001V.

Mr. Harrison.

I am planning to leave the city tomorrow for Pinehurst, and hope to
stay there until Sunday, February 27.

I have not as yet looked up the train

service from Pinehurst to Asheville, nor have I examined the mab to see how
close these two points are, but while I am there I should certainly like to
run over and call upon you.

Several of my friends are at Pinehurst, one of

whom has his car with him, and if the distance is not too great, it may be
possible for me to motor across country and meet you that way, rather than to
go by train.

I was in Harrison's room this morning while he was telephoning you,
and was glad to learn that you were feeling fit.

Looking forward to the

opportunity of seeing you some time next week, and with best regards, I am,
Faithfully y

J. H. CA,
Mr. Benj. Strong,
Stuyvesant Road,
Biltmore Forest,
Biltmore, N. C.




4-4

zz
dee/E

6--

*.

CLASS OF SERVICE

WESTEk
TEL.

SYMBOL

TELEGRAM

DAY LETTER

BLUE

NIGHT MESSAGE

NITE

i.

NI

.ETTER

UNION

CLASS OF SERVICE
DAY LETTER

Other.

wise its character is i ndicated by the
symbol appearing after the check.

NEVVCOMB CARLTON. PRESIDENT

BLUE

NIGHT MESSAGE

NITE

NIGHT LETTER

AM

evitz

SYMBOL

TELEGRAM

WESTERN UNION

If no,... ...f these three symbols
appears after the check number of

words) this is a telegram.

Jai

NL

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

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

The filing time as shown In the date line on full rate telegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD

Received at 62 Patton Avenue, Asheville, N. C

12

of

1ELEN-LNED
CFB552S BLUE
CH P INEHURST NCAR 22 902A.
BEN J

STRONG

B ILTMORE 'FOREST B I LTMORE NCAR

YOUR LETTER T'ENT IETH I CANNOT CONVENIENTLY MAKE TR IP BEFORE
-1

END OF WEEK tlq V IEW YOUR PROGRAM PCR THAT PER IOD I PROPOW

MPERRING V IS IT AND MAKE SPECIAL TRIP OF IT




CASE..

zfie

,
Eel

1."`'

2N.

MSC. 34.1

40 M

1-26

FEDERAL RESERVE BANK
OF NEW YORK

SENT BY
SE,RTID

Benj. 6trong,

COPY OF TELEGRAM

To RJ_Es

Mnrch 16 .17
_NI

Stuyverant road,
Biltmore Forest,

Biltmore, nith .arol, .
Your letter March 12.

Am

plt,naing

1=17e

here Friday afternoon tor

leavingAsheville '61nday efternooa far T:a2hington.




!SE.

-




-

Form 1228A

Charge to the account of
CLASS OF SERVICE DESIRED

X

TELEGRAM

.Y LETTER

NO.

CASH OR CHG

WESTERN UNION

NIGHT MESSAGE
NIGHT LETTER

THE

MESSAGE

WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

CHECK

TEL :peer AM
11

Patrons should mark an X opposite the class of service desired;
OTHERWISE

UNION

VVESTE
NEWCOMB CARLTON, PRESIDENT

11

TIME FILED

GEORGE W. E. ATKINS. FIRST VICE-PRESIDENT

Send the following message, subject to the terms on back hereof, which are hereby agreed to
March 22, 1927

4:25 p.m.

BENJ. STRONG

STUYVESANT ROAD, BILTMORE FOREST,
BILTMORE, N. C.

Referring our telephone conversation will not see Vissering until tomorrow noon
but feel certain he will gladly leave here Monday next to visit you

STOP

He would arrive Biltmore march twenty ninth and it occurs to me his arrival
then might be inconvenient to you if you expect to come north March thirtieth
or thirty-first.

STOP

Please wire

CASE




Form 1228

Arge to the account of
pr. z

ASS OF SERVICE DESIRED

X

'am

Day Letter

WESTE0,7,ENA

TELV

UNION

WESTERN UNION

Night Message

"MT

Night Letter
Patrons should mark an X opposite the class of service desired;

OTHERWISE THE MESSAGE
WILL BE TRANSMITTED AS A
FULL-RATE TELEGRAM

NEWCOMB CARLTON, PRESIDENT

AM

GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT

Send the following message, subject to the terms
on back hereof, whichare hereby agreed to

Larch 23, 1927

STROM

slavLagn

ROAD, BILTUORE FOREST,
BILTLORE, N. C.

Believe Vissering and Baahmann would appreciate if definite time fixed for visits
with you. Suggest Visserik; goes to Atlantic City April 6 to remain two or three
days as you wish and Bachmann goes kpril 11. ?lease wire if these dates agreeable
or suggest others and indicate duration their visits with you
CASE
(Charge F.R.B. of r.Y.)

igo

ALL MESSAGES TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERMS:
ALL
To guard against mistakes or delays, the sender of a message should order it REPEATED, that is, telegraphed back to the originating office for comparison.
this,
the unrepeated message rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED MESSAGE AND PAID
AS SUCH, in consideration whereof it is agreed between the sender of the message 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 message, beyond th
eceived for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED message, beyond fifty times the
tic-um 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 messages.

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 message.
whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this message is hereby valued, unless a gn
ilLvalue is stated in writing hereon at the time the message is offered to the Company for transmission, and an additional sum paid or agreed to be paid based on such v,.
urequal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this message over the lines of any other Company when necessaryto reach
its destination.
Messages will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities
or 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 messages until the same are accepted at one of its transmitting offices; and if a message is sentto 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 message
is filed with the Company for transmission.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition




to all the foregoing terms.
No employee of the Company is authorized to vary the foregoing.

THE WESTERN UNION TELEGRAPH COMPANY
NEWCOMB CARLTON, PREsioCr,

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT MESSAGES
Accepted up to 2.00 A.M. at reduced rates to be sent during the night
and dehvered not earlier than the morning of the ensuing business day.

Night Messages may at the option of the Telegrapb. Company be
mailed at destination to the addressees, and the Company sh'll be
deemed to have discharged its obligation in such cases with respect to
delivery by mailing such Night Messages at destination,postage prepaid.

DAY LETTERS

A deferred day -service at rates lower than the standard tele-

gram 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
11.,
n

D. This Day Letter is received subject to the express understanding and agreement that the Company does not undertake that a Day
Letter shall be delivered on the day of its date absolutely and at all
events; but that the Company's obligation in this respect is subject
to the condition that there shall remain sufficient time for the trammission and delivery of such Day Letter on the day of its date during
regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.

No employee

the of
Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2.00 A.M. for delivery on the morning of the ensuing
business day, at rates still lower than standard night message rates, as
follows: The standard telegram rate for 10 words shall be charged for the
trancrnicsinn of M1 ovnrrh: nr lpeq and ono-fifth of simb el-am-1qm] 1,1offra rn




MSc. 4* 13011 9-26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPO DNCE
To_

DATE

Larch 28, 1927.

.overnor strong
SUBJECT:

FRO

J1(
Your memorandum of Larch 23 which is attached refers to certain figures
in the reports on France and Hungary.
and appear to be correct.

The French figures came from official sources

With respect to the Hungarian figures, the comma should

be a period, i.e., 27.600 million.

These reports are written in longhand and typed by the Stenographic
Department where the typed work is read back to the original copy.

In addition the

writers of the reports check up the figures, so that I think such typographical
errors should be reduced to a minimum in the future.




Misc. 24. 1 40 M 6-25

FEDERAL RESERVE BANK
OF NEW YORK

SENT BY

SEND TO FILES

COPY OF TELEGRAM

DAY LE?Ti.R

Maroh'29, 127

Benj. Strong,
Stuyvesant Rod,
Biltmore Forest,
Biltmore N. C.

Both foreign guests and the entire party of one go to Atlantic City via.
mornin3 train Tuesday fifth
dill stay Haddon Hall over following .iseek and
but understand time 4th you only two or three days,
Stewart will call
in person today for your lettere,

C01.1. Oh 4.ErECLSVIN

.(,e. MEM A0k5)(
LEDELPir Ba2E13AE BVIAK
4014

z-s2




2E01 BA

eEinD

.trE2

FEDERAL RESERVE BANK

OF NEW YORK
March 25, 1927,

Dear Governor Strong:

Mr. Sailer has been called out of town to-day for the week-end
and has given me your memorandum of March 22 inquiring about the plans of
our visitors.
ed.

You may rest assured that they are being properly entertain-

Dr. Vissering is occupying the Chairman's room;

DT. Bachmann is

across the hall in the Federal Reserve Board room; while 11r. Mahon is in
:

the room between 112.. Kenzel and me.

Mr. Spencer-Smith is here very little

and is using the room with Mr.

I think

they have all appreciated very much the faCit that we

have set aside offices for their use.
Vissering and Bachmann.

That is particularly true of

One or more of the deputy governors have entertain-

ed them practically every noon at luncheon, and yesterday they all attended
the directors' luncheon.

Hr. Young made a short speech of welcome and

Dr. Vissering replied.
We have arranged for the directors and senior officers to give
them a dinner probably at the University Club on April 14.

I imagine that

Spencer-Smith will leave us before then, but Dr. Vissering remains until
April 30;

Dr. Bachmann until April 18, and Mr. Mahon until April 15,
I have arranged with Vissering and Bachmann to go to Atlantic

City on Tuesday, April 5, to spend two or three days with you.
are delighted at the prospect of this visit.

They both

Is soon as I have found out

whether Li's. Vissering and Dr. Ritter, who is Vissering's secretary, will

go, I shall arrange for their transportation and hotel accommodations.
If Vissering and Bachmann go alone, I think it would be well to put them



FEDERAL RESERVE BANK OF NEW YORK

2

3/25/27

Governor Strong

up at the MarlboroughBlenheim, but, if there is a larger party, I shall
probably arrange to put them elsewhere.

Vissering has been spending some time visiting his acquaintances
at the City Bank, Morgan's, Kuhn Loeb, Bankers Trust, Guaranty, etc.

In

fact the people at the City Bank wanted to arrange for his trip to Washington
to talk on tax matters with the Secretary but I thought that would be most
unfortunate and have arranged to take care of it myself.

I imagine that I

may take Vissering to Washington next week to talk with Mills and meet the
members of the Board.

Bachmann may go to Washington later.

to take a trip to Boston and may do that next week.
I have not met I:=rs. Vissering but they tell me that she is a

charming person and we have been looking after her by having Miss Mary Parker
spend several days with her as a guide.

This will give you a rough idea of what we are doing and I shall
try to keep you posted further from time to time.
Faithfully yours,

J. H. CASE,

Benj. strong, Esq.,
Stuyvesant Road,
Biltnore Forest,
Biltmore, N. C.




He is

c)

-

-

Ok KEA'OdI

Ftifita:.t




FEDERAL RESERVE BANK
OF NEWYORK
PERSONAL

Dear Governor Strong:

I was very glad indeed to get your boat letter of May 17, which I

have passed around among the directors and the members of our Officers
Council.

You may be sure that all of us were more than pleased to have word

from you at first hand and to learn that you weathered the rather trying trip
in a fair degree of comfort.
In your letter you express the hope that
problems may be worked out to everybody's

all

satisfaction.

of our organization
The reassignment of

duties among the six deputy governors has been completed and will, I hope,

make for

an

equitable and logical distribution of the work.

We have been

operating very smoothly under the new order of things for the oast few weeks.
The personal equation,

to which you

make particular reference, Ls, of course,

a difficult matter to deal with and ordinarily can best be handled by the
"chief" in private talks.

I appreciate the difficulties that confronted

you in this regard, but you may be sure that you will have our loyal cooperation
and that the organization as a whole will do its best to justify your faith in
.,nd regard for us.

yesterday.

Mr. McGarrah sent you an encouraging cable on this subject

I am enclosing copy of the officers' summer vacation schedule, for

your information.

My own time, which is tentatively scheduled for August, is,

of course, subject to change.
P1.4

Jack Reynolds got back yesterday and sent over the perc.-.onal letter

and enclosure which you asked

him to

deliver to me.

kf,

First, let me say that your

physician's comments are very encouraging and must have been a great relief to you,




FEDERAL RESERVE BANK OF NEW YORK

as they are to us.

(I

2..

Governor Strong.

6/7/28.

As to the papers contained in the package with the letter,

I have been giving them a very careful reading, and Mr. McGarrah is to look them
over today, after which, in accordance with your instructions, they will be sealed
up and put in safekeeping pending Harrison's return.
TREASURY FIMANCIi\G.

The terms of the Treasury's June 15 financing were announced yesterday,
and the offering, consisting of 'f,200,000,000 of six-months14% certificates of
indebtedness, and 4,200,000,000 of nine-months'

is going along with a fair swing.

3 7/8% certificates of indebtedness,

Total subscriptions for our district at the

close of business tonight amounted to a little more than C400,000,000, with
relatively smaller subscriptions from the rest of the country.

The prevailing high

rates for money, coupled with the fact that banks throughout the country are heavily
indebted to the Lystem (New York banks are now owing us $250,000,000) have brought
about a new and interesting development in connection with the current Treasury
who

I am told that a good many subscribers to the offe4n6 /are also

financing.

indebted to the System, have figured that they could really borrow funds at a much
lower rate then 4i%, by subscribing for the certificates, acquiring a Government
deposit, and immediately reselling to the market at a discount of from 2/32 to 4/32,
the certificates allotted to them.

The very natural result is that the market

in Government securities is sloppy, with yields of 4% or thereabouts for short-term
Government paper.
situation;

I am sure that the time has come when we must correct this

and, in talking with Mills about it this morning (June 3) we have agreed

that a careful study of the subject should be made to see if we cannot devise a
scheme that will do away with this kind of thing.

I 8M sure that it will not be

difficult to work out a satisfactory program.

MONEY MUM.
There has been a general firming-up of money rates all along the line.

Governor Young has asked me to write him about once a week, reviewing for him the




Governor Strong.

FEDERAL RESERVE BANK OF NEW YORK_,

,o
C)

important changes in the money market;

6/7-8/28.

and it occurs to me that you may be interested

in looking over my letter of June 1 to him, copy of which is enclosed together with
copy of my report as of the same date on the gold movement during Nay.

The

recent high rates for call money, which on several occasions has touched 7%,

have resulted in a heavy loss in deposits to New York City banks by reason of the
fact that large corporations, firma and individuals with substantial balances
have placed funds directly into the call loan market, so that practically all of
the recent increase in the volume suppliedhas come from that source.

It is a

repetition of the old story that you so effectively explained at the Agricultural
Inquiry some years ago; viz., that high rates constitute a magnet that attracts
funds, which in turn has the effect of beating down the rates, so that, at times,
we do appear to be traveling in a circle;

but, with the continued sale e which

we have been making from the Open Market Investment Account, and the continuance
of the gold movement, it is quite clear that we have a firm grip on the credit
situation in this district.

You may be aseured that, so long as there is no

change in the expansion of credit which has been taking place, we will not loose
the grip which we now have on the situation.
A meeting of the Open Market Investment Committee was held in T;ashington
on May 25.

As you will see from the preliminary memorandum, copy of minutes and

copy of letter from Governor Young, there was complete unanimity as to our continuing
to make such sales from this account as appear to be necessary.
Yesterday afternoon (June 7) call money went to 5-i% and renewed this

morning at that figure.

While Mr. McGarrah and I were discussing this change, we

received a cable from the Bank of France, stating that it desired to earmark an

additional $50,000,000 of gold with us between June 8 and 14th, and a5,000,000
in Federal funds was paid in for that purpose today.

This has come along at an

opportune time.

The enclosed statement showing resources and liabilities of the 12 Federal
Reserve Banks combined, will, I think, interest you.



FEDERAL RESERVE BANK OF NEW YORK

17-8A8.

Governor Strong.

4.

Burgess attended the U. E. Chamber of Commerce meeting in Washington
on Monday and Tuesday of this week, which made a report on the Federal Reserve
Sdstem.

The report on the whole is, I think, excellent, and I have no doubt

that Burgess will himself write you fully concerning it.

Professor Lprague took lunch with us here in the bank on Wednesday
on his way back from Washington, and left with us the accompanying memorandum
entitled "The Reserve Banks and the Security Markets."

You may be interested

in looking it over.

BENJAMIN STRONG COLLECTION - PRINCETON LIBRARY.
A couple of weeks ago Mr. Gerould, Librarian at Princeton University,
called in to see you and, in your absence, I talked with him.

The object of

his call was to see if you had any suggestions to offer with regard to interesting
or forming a group to take over the upkeep of the collection on Foreign Public
Finance which you have maintained for so many years at Princeton.

I promised to

look into the matter for him, as I believe that the collection is well worth
preserving in a permanent and current form.

My personal conviction has been

strengthened as the result of some inquiries I have had made as to the possibility
of there being a similar or as good collection in some other library or financial
institution.

I have learned, through disinterested library sources, that there

seems to be nothing comparable to the Princeton collection on this subject - either
in volume or variety of reports, etc.

I am, therefore, proposing to go ahead and

undertake to form a group who will join in guaranteeing the maintenance, for a
limited time, of the collection.

I think this is along the lines of your hope

expressed to Mr. Gerould that a means could be found to insure the upkeep of this work.

Mr. Gerouldts letter to me, accompanied by comments from Harvey Fisk and Professor
Kemmerer, furnishes evidence of the value of the collection and the need for its
continuance.

My thought is to raise the3,500 desired, but for a one-year period,

instead of five years as suggested by Mr. Gerould, as I believe it would be wiser



FEDERAL RESERVE BANK OF NEW YORK

Governor Strong.

5.

6/7-8A8.

not to ask anyone to make a commitment for five years, but to have the matter come

C)

up for consideration yearly and judged upon the basis of its merits at the time
of such annual deliberation.

If I succeed (and I think I will) in obtaining six

subscriptions of, say, t500 each, I wonder if you would be willing to make up the
seventh member of the proposed group for one year.

Please let me know your views

concerning this.

This letter seems to have covered a rather mixed assortmentof subjects,

but I have been wanting to get off word to you for some time and, so, have written
up everything of current interest that I could think of.
All of the -"boys" join me in sending you our very best wishes.
Faithfully yours,

J. H. C26E.

Mr. Benjamin Strong,
C/O Messrs. Morgan & Co.,
14 Place Vendome, Paris, France.

Enclosures.




OFFICERS SUMMER VACATION SCHEDULE
1928

-.
OUP-Eno
pi'. rw Fill
EgidliMill

1

II

.

NI

Harrison

1

Edwin R. Kenzel

Leslie R. Rounds

:MX,.

ITTLIlTI

J. Herbert Case
Louis F. Sailer

1

.

Arthur W. Gilbart
,ii. Randolph Burgess

William H. Dillistin

iiaiiiii

III

x 11111

IIIIUI11lIU N . . I
IIIUIII1IIISII
I
. . .
l
x

____

Snyder

,

i

I

I

111

x

x

x

xxxxxx

I

III

x
x

IIRUI

x

x

x

I

III

aiuiiaui
x

_

(1

x

111

I

I
I
II

III

IIUIIIIIIII

3. Wilson Jones
Ja E. Crane
Walter B. Matteson
Carl

ix

I

Edward L. Dodge
:lay M. Gidney

I
mom
.

1

lx x

I

'

22 29 '

4111 1811E16 23 30 6 13 20 27 3 10 17

'Weeks beginning:

George L.

ouaubwi

SEPTEMBER

AUGUST

JULY

JUNE

1

Dudle

H. Barrows
Charles H. Coe
Herbert S. Downs
Edwin C. French
IRobert F. McMurra

x

I

1

'

x

.xxx

Stephen S. Vansant
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CONFIDENTIAL
!

6014 7-28

FEDERAL RESERVE BANK

OF NEW YORK

-)FTICE: CORRESPONDENCE
To

CREDIT FILES

SUBJECT-

J H. Case

FROM

June 27,

DATE

8.

192_

BANCITALY CORPORATION AND
AFFILIATED

INSTITUTIONS.

Mr. Leo V. Belden, Vice President, and Mr. W. H. Snyder, Amsiatant
to the President, of the Bancitaly Corporation, called here this morning by

appointment at eleven o'clock for the purpose, as they put it, of reporting to
Mr. McGarrah and me the recent developments that had taken place in the affairs
of the Bancitaly Corporation and its affiliations.

As to the big break in the market price of the Bancitaly Corporation
stock (from 4223 to $100 per share), Mr. Belden

reported that this had taken

place while he was in midocean, returning from q visit to Me. Giannini who was
seriously ill of lumbago and neuritis in Rome;

and thet, upon his re

had gone to the office of Messrs. J. F. Morgan and Company for advice, had also
talked with Mr. Seward Preeser, Chairman of the Clearing House

Comittee, and was

now conferring with us in order that we might be informed as to the present
position of the Bancitaly Corporation.

Mr. Belden stated

that upon his

he had been surprised to find that the Bancitaly Corporation

return

owed $55,000,000

in the form of loans secured by collateral, some of which were time loans: that,
owing to the wild stories afloat, his

chief concern was thet

there might be a run

on the Lank of Italy hational Trust & Savings Association of San Francisco, and
that, therefore, he had first undertaken to put the Bancitaly Corporation in a
strong cash position so that it might be enabled to render assistance to the
former institution.

(To accomplish this the Bancitaly Corporation had liquidated

sufficient securitiee in the market to enable it to retire
of borrowed money and also leave it with a

cash

the whole 455,000,000

balance in excess of $10,000,000.

Furthermore, the corporation holds not less than 4150,000,000 in gilt-edged listed
stock exchange securities - exclusive of bank stocks - Which could be readily


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

in case of need.)

ealFIDENTIA4
ripp-- 3. 1

FEDERAL RESERVE BANK

6014 7-26

OF NEW YORK

1FFICE CORRESPONDENCE
To

DATE

192_8

IV,

SUBJECT: _BANCITALI -CORPORATION -AND

CREDIT FILES

FROM

AFFILIATED-INSTITUTIONS.
2.

Mr. Belden submitted and left with us a typewritten

memorandum (at-

tached) showing the important items of resources and liabilities of the Bank
of Italy National Trust &

Savings

Association as at June 25, 1928, compared

with February 28, 1928 and December 31, 1927.

The figures show that the

bank owes its several hundred thousand savings depositors $465,000,000,
approximately $200,000,000 in commercial and other accounts.

and

Duo to the

fact that some $40,000,000 of new capital had been paid in early this year,
the capital, surplus and profits account now stands at more than $100,000,000.

Mr. Belden stated that apparently there

had

been no appreciable

amount of deposits withdrawn (nor, indeed, any loss through seepage - which

he termed oday to day withdrawaleo- without replacement deposits having been
made), and that deposies aad held fairly steady at the figures indicated.

He further stated that this statement was applicable also to the Bank of
America, N. B. A., of New York.

In response to our inquiry as to the

progress which was being made in distributing the stock of the Bank of America
to individual ownership, as outlined in the corporation's letter to Mr.

McGarran under date of March 23, 1928, Mr. Belden reported that

as we were

aware, they had been a bit premature in making the original announcement as

to the number of shares to be

offered shareholders in their corporation before

ascertaining our views in the matter: that the Bancitaly Corporation still owned 20%
of the $25,000,000 capital of the Bank of America ($E0000,000 of stock, par
value $25., having a market value of $165-175 per share, or,at the present

market, a value of 05,000,000), but that, nevertheless, the Bancitaly Corporation



'NTIDENTIA4
3.1

60M 7-26

FEDERAL. RESERVE BANK

OF NEW YORK

-1FFICE CORRESPONDENCE

DATE

To _,,,;REDIT_FILES
FROM

June 271

19211.

summee:BANCITALT CORPORATION AND

J. H. CASE.

AFFILIATED

INSTITUTIONS.

5.
expected to carry out its undertaking, even though that might

necessitate coming to

us in September for a possible extension of three months to enable it to follow its
program.

Mr. Belden etated that the Bancitaly Corporation continued to own 10't

of the 00,000,000 capital of the Bank ar

Italy National Trust & Savings Association

($5,000,000 stock, par value $25., quoted at $189per share, or a value of $37,800,000.).
He said quite frankly that the rapid drop in the price of the stock of the Bancitaly
Corporation had been a very painful and uncomfortable affair and that, of course, some
very heavy losses had ensued.

In reply to our query as to Whether some of the af-

filiated institutions had not supported the market

for

the Bancitaly Corporation

stock, Mr. Belden answered very frankly that they had and that the *National Bankitaly

Company now owned some 200,000 Mhares of

the Bancitily Corporation stock,

the current

market price of Which was well below *hat the Bankitaly Company had paid for it.

He

further stated that, now that the stock had gone down to as low as its present quotation,
$100 to $110, the management proposed to see that it did not "skyrocket" again and
that, if the need arose, they were prepared to feed out the stock at current prices in
order to keep it from again selling at too high a figure.

Messrs. Belden and &nyder appeared to be in a aomewhat chastened frame of
mind and stated that they had been exceedingly

busy,

tention to the affairs of these several companies.

night and day, giving their at-

They

assured

be prepared to come in any time we desired, as it was their

us that they would

intention to

keep us

hilly informed regarding their affairs.

*It is to be noted that 200,000 Shares of this stock at $100 or more represents a cash
outlay of more than 40,000,000.
It therefore seams not improbable that the National
Bankitaly Company has had to borrow funds from the Bancitaly Corporation in order to
acquire the stock in question.
In view of Beldents statement that the Bancitaly Corpora
tion had liquidated all of its borrowings in the market, it seams not unreasonable to
suppose that the Bancitaly Corporation may have made direct advances to the National

http://fraser.stlouisfed.org/
Bankitaly Company to enable it to acquire this stock.
Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANK
PERSONAL AND CONFIDENTIAL

OF NEW YORK

July 6, 1928.

Dear Governor Strong:

Since writing you on June 7 we have received your several letters

accompanied by confidential memoranda which both Mr. McGarrah and I have
reviewed and which, in line with your suggestion, we have had Miss McCarrick
lock up to be held pending Mr. Harrison's or your return.
An interesting event took place this morning, here in the bank.
Through the courtesy of the American Telephone & Telegraph Company the

inauguration of their NorwayUnited States telephonic service was marked by
an exchange of calls between this bank and our foreign correspondent, the
Norges Bank in Oslo, and I had the privilege of talking with Mr. Thorkildsen,
Deputy Governor, Governor Rygg being absent.

After expressing our felicitations

on the occasion of the connection by telephone, I indicated our regret that
you were not here personally to convey your good wishes, and suggested that,

although it was your purpose to visit them some time in the near future, your
ill health had made it impossible for you to do

SO

this summer.

We commented

on the money markets of Oslo and New York and the financial situation in
general, and Mr. Thorkildsen reported that their return to the gold standard was
an achievement of which they were very proud.

I expressed the hope that our

relations would become closer and assured them that we would be glad to perform
for them such services as they might require in this market.
Chicago has again stepped into the arena in e way that appears to bode
trouble.

On Friday,

JULB 29, the directors of the Federal Reserve Bank of

Chicago voted to increase the rediscount rate from 4 1/2% to 5%.

This was

done without previous consultation with any member of the Federal Reserve Board,
the Treasury or, so far as I know, with anyone else.



McDougal had called me up

-RAL RESERVE BANK OF NEW YORK

2.

Governor Strong.

7/6/28.

the first of that week to ask about conditions here and had told me that affairs
were riding along very satisfactorily in Chicago.

There was nothing in his

comments to indicate that he personally had any thought of moving up the rate.

On the day that the rate action was taken, George M. Reynolds, of the Continental
I;nci. (a)

National Bank & Trust of Chicago gave out a statement of his views on money
conditions and rather indicated that he would favor an upward revision of the
Chicago rate.

Following the rate action, I understand, Heath telephoned Platt

of the Board, but as Governor Young and a number of the other members of the
Board were away, and as the only members available were Secretary Mellon, Platt,

and James (the latter said to be very definitely opposed to any further rate
increases) it seemed impossible to get action.

I now understand that Dr. Miller

and some of the other members of the Board will be back on Tuesday, July 10,

at which time the recommendation relative to the Chicago rate will be given consideration.
(b)

(c)

(d)

The situation is pretty well covered in Young's letter of June 30 to

Governor McDougal, copy of which Young sent me and to which I replied under date
of July 3. (e) Copies of the correspondence, together with chart, clippings, etc.,

are enclosed for your information.

There has been no newspaper publicity

concerning the fact of this proposed increase, but it is known in marketwise
circles.

Jackson Reynolds reported to me on the following Monday, July 2, that

he had heard talk to the effect that Chicago had actually voted to move up its
rediscount rate.
(5).

The Open Market Investment Committee at its meeting in May recommended

that another meeting be held during the month of June;

but in talking over

the matter with the various members of the committee in June I found that we

were all in agreement that it would be wiser to defer the meeting until the
middle of July, when Governor Young would be back from his vacation.
have a meeting called for Wednesday, July 18.

We now

Dr. Miller recently contributed

an article to a special number of "The London Statist" on the subject of the
open market, which was discussed in an editorial in the "New York Times" of



et AL RESERVE BANK OF NEW YORK

Encl.
.

(f)

(4).

7/6/28.

I enclose the clipping for your use.

July 5.

0

Governor Strong.

3.

During the mid-year period we have had the usual strained money

situation due to the customary window dressing by banks, but, while our

New York banks were indebted to us for about $350,000,000, it was very
widely distributed, the Chase, First, Commerce, City, and Bankers owing
us approximately $E0,000,000 apiece.

We all feel that a good deal of the

steam has been taken out of the stock market situation ,and our New York

City banks are still heavily in our debt.

Ends.
(g) (h)

Copies of the published
both of 7/6/28,
statement of this bank, and the combined Federal reserve bank,/are also
enclosed.
( 5) .

The Treasury has brought out an unusual (and rather unexpected)

refunding operation, which takes the form of an offering of 3 3/8% Treasury
bonds due 1940-43, for cash and in exchange for Third Liberty Loan bonds.

Ends.
(i)

(i)

The terms are given in circular No. 859, copy of which is enclosed, together
with a copy of my preliminary confidential memorandum of June 19, to Mr. Mills.

The offering has been very well received, with cash subscriptions in excess
of $500,000,000.
( 6).

The Bancitaly Corporation matter has again come up.

The conversa-

tions which Mr. McGarrah and I recently had with Mr. Belden and Mr. Snyder
Encl. (k)

of that corporation are embodied in the enclosed confidential memorandum.
We heard yesterday of the sudden death of Captain Loewenstein,
the Belgian financier.

It has created a great deal of comment, and the

opinion here is that it was a case of suicide.

Mr. McGarran, I understand, wrote you recently concerning the
official changes in the Loan and Discount function, and the assignment of
Coe,as Assistant Deputy Governor,
out very well.




to Gilbart.

This I believe will work

.AL RESERVE BANK OF NEW YORK

0
.

(f)

0

7/6/28.

I enclose the clipping for your use.

July 5.

(4).

Governor Strong.

3.

During the mid-year period we have had the usual strained money

situation due to the customary window dressing by banks, but, while our
New York banks were indebted to us for about $350,000,000, it was very

widely distributed, the Chase, First, Commerce, City, and Bankers owing
us approximately $E0,000,000 apiece.

We all feel that a good deal of the

steam has been taken out of the stock market situatio4and our New York
Copies of the published
both of 7/6/28,
statement of this bank, and the combined Federal reserve banks,/are also
(h)
City banks are still heavily in our debt.
incl s.
(g)

enclosed.

The Treasury has brought out an unusual (and rather unexpected)

refunding operation, which takes the form of an offering of 3 3/8% Treasury
bonds due 1940-43, for cash and in exchange for Third Liberty Loan bonds.
End s.
(1)

The terms are given in circular No. 859, copy of which is enclosed, together
(j)
with a copy of my preliminary confidential memorandum of June 19, to Mr. Mills.

The offering has been very well received, with cash subscriptions in excess
of

500,000,000.

The Bancitaly Corporation matter has again come up.

The conversa-

tions which Mr. McGarrah and I recently had with Mr. Belden and Mr. Snyder
Encl. (k)

of that corporation are embodied in the enclosed confidential memorandum.
We heard yesterday of the sudden death of Captain Loewenstein,
the Belgian financier.

It has created a great deal of comment, and the

opinion here is that it was a case of suicide.

Mr. McGarrah, I understand, wrote you recently concerning the
official changes in the Loan and Discount function, and the assignment of
Coe,as Assistant Deputy Governor,
out very well.




to Gilbart.

This I believe will work

"*"
,4 A L RESERVE BANK OF NEW YORK

Governor Strong.

4.

7/6A8.

A sad loss to a good many people in this district was the death,

0

on Tuesday of this week, of Arthur K. Salomon.

He was taken very suddenly

ill with what first appeared to be a bad bilious attack, and was rushed to
the hospital where an operation for gallstones was found necessary.

Peritonitis

set in, and on Tuesday afternoon, while I was on my way up to see him, he passed
away.

I think he will be greatly missed.

The Princeton Library fund, about which I wrote you on June 7, is
coming along in excellent shape, Messrs. Owen D. Young, Leffingwell, Woodin,

Woolley and Paul Warburg all having indicated their interest in the project
and pledging themselves to a subscription of 6E00 each for one year.

There

still remain two more subscriptions of $500 each to be secured.

Mr. McGarrah is down at Woods Hole on vacation, and Harrison, I
understand, lands today.

All of us who are here send you our best regards.
Faithfully yours,

Mr. Benj. Strong,
Messrs. Morgan & Company;
14, Place Vendome, Paris, France.

Enclosures (11).




C.2214

Marquette, Michigan, June :50, 1928.
Mr. J. B. McDougal, Governor,
Federal Reserve Bank,

Chicago, Ill.

Dear Governor McDougal:

After talking with you yeeterday I attempted to gather some statistics
at this point, but could not even secure a statement of the Federal Reserve
System.
I have been out of touch with the situation for the part two weeks
and you will realize the handicaps under Match I am attempting to express myself
in this letter.

However, before I left Washington, I gave a good deal of thought to
the situation and having spent a good deal of time in the South and Middle West

and talking with many of the Governors and Agents, I have arrived at the conclusion
that there should be no further increase in the rediscount rates.

Two weeks time,

however, can bring about a decided change and it may be that it is now justifiable
but from the limited' information that I have, I feel that any further increeze in
the rates will bring about a reaction from the agricultural end business interest
of the country that will be quite far reaching and certainly I do not think the
system or any Federal reserve bank should take any action in reference to increasing the rates unless there is unquestionable justification of such action. I
still believe the whole credit situation is centered upon speculative or investment
credit which ever you care to term it.
This has received a little Est-back in the last ninety days and certainly

I am not prepared to say that it
has been checked entirely, but I have before me at the eoment, a circular letter
has become very .expensive with call money at 8%.

from a prominent New York Exchanee house, which certeinly is putting out soee very

drastic requirements in reference to margins and collateral. This action, together with what the banks are doing, is the Test effective weapon that I know of.
As near as I could gather from you over the telephone your people are
prompted to Increase their discount rate becauee of over-the-counter metes in
Chicago. That may be an entirely justifiable reason and I think you lame me well
enough to know that I am such a strong exponent of local autonomy In Federal
Reserve Beek eanagement and operation that ordinarily I would respect the views
of your Director e and approve the request of an increase even if I was not entirely
satisfied in my own mind that such action should be taken. The Board is confronted with an unusual problem at the moment. .Word has reached me indirectly
that a request will probably be made of the Federal Reserve Board to purchase
Government securities in an effort to ease the present situation.
This program I am also opposed to.

If my memory serves me correctly, the system has taken t800,000,000
from the market since laet September by sale of securities earmarking or exportation of gold- Any increase in the Government security holdings of the Federal
Reserve System at the present time would be encouragement to speculators and in
my opinion would not be much benefit to the business and agricultural interests of
the country. If it has taken in the neighborhood of $800,000,000 to tighten the
credit situation I do not see how it can be eased to any appreciable extent
except by return flow of currency or imports of gold. All evidence seems to point
that currency circulation will increase rather than decrease and that further
exports of gold are more likely than imports.



Mr. J. B. McD. #2

Of course, the system could bey U. S. Government securities in suf-

ficient amount to ease the situation, but if it has taken $800,000,000 to
tighten the situation, in my opinion it will take $500,000,000 or better to ease
the situation and again I repast, that I do not believe the present situation
should be eased.

It is believed that brokers loans have been reeuced considerably
but it is possible that short sales have contributed to this in no small way and

in addition the brokers requirements have been so dractic that many customers have
removed their accounts from the brokers and placed them with the banks. There is
some evidence that thio has been going on in the smaller communities.
The only other method of reducing brokers loans is through the
bargain hunter and he uses deposits to reduce brokers loans. This method has
not been used to any appreciable -extent, else there would be a reduction in
Reserve Requirements of the eember banks.

To sum this all up, I am opposed to an increase in the rates and I
am opposed to taking any action at this time to etase the situation and in conclusion I do not think it is fair for any reserve bank to put the Reserve
Board in the ridiculous position of approving one policy of tightening credit
and simultaneously approving another reserve banA policy of easing credit.
I would,-therefore, suggest to my colleagues and the Directors of your
bank that a conference be held with representations frog all the Reserve hanke and
the Federal Reserve Board to deteeeine which policy is probably the best one for
the country at the preeent, time..
I have dictated this communication hurriedly and have expressed myself
rather frankly which I know you want me to do. In doing so, however, pleaee inform

your colleagues that I have the utmost reseect for their judgment in the present
situation and am only too anxious to do whatever is right, but certainly I should
not be in a position to approve the policies of the Reserve Bank r that, nationally
are working at cross purposes.

If a conference is called, I could attend at any time except July Eth,

6th and 7th.

I have excluded these dater because the cettieens of my home town

are giving me a little dinner on July 6th and it is quite necessary that I be here.
Believe me, as ever,

!cure sincerely,

Mr. Case:

I came in from camp todey and dictated the above in reply to a
telephone talk I had with McDougal. Seems to me that it would be best to let
the present position stand for a little while. fjould also be interested in
any reaction you may have.



(Signed)

Young

FEDERAL RESERVE BANK
OF NEWYORK

July 20, 1928.

Dear Governor Strong:

I have received your letter of July 3 which I have read
with a great deal of interest.

I am glad to learn that you are f

so much better and hope that by the time you are ready to sail for home
you will have a very good report to make.

I wrote you on July 6 giving you a pretty full budget of
news but I do want to write you briefly about our recent change in the

discount rate and with respect to our Open Market Committee meeting
which was held in Washington this week.

There is to be another meeting

on August 15 which I hope you may be in a position to attend.

OUR DISCOUNT RATE
After sending off my letter of July 6 and reviewing the expansion of credit and the upward trend of money rates, I made up my mind
very promptly that unless we dealt with the subject rather vigorously and
immediately we might find ourselves in a jam this autumn.

So on Monday,

July 9, I diecuseed the matter fully with our Executive Committee,

Messrs. Young, Reynolds and Woolley, but did not find them at all sympathetic
to

an increase.

Following this, the Federal Reserve Board approved the

Chicago rate increase on Tuesday, the tenth, and the following day, at
Mr. Mills' request, I went up and had a talk with Secretary Mellon.

I

found that, while he had hoped we might go through the summer without any
further adjustments, he was now of the opinion that we should raise our




FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

2

rate and do it promptly.

7A0/28

I then went over and had a talk with

Mr. Owen D. Young expressing my views just as forcibly as I knew how
and I think my talk was instrumental in getting him to seeing our
view point.

The officers, including George Harrison who had just

returned, were all in agreement and after talking the matter over with
Mr. McGarrah he agreed and came down to our meeting.

We had about

two hours debate on the subject in the directors meeting with the

result that of the seven directors present six voted for the change
Mr. Reynolds voting "no."

OPEN MARKET INVESTMENT COMMITTEE MEETING

On Wednesday we had a meeting of the Open Market Investment
Committee in Washington.

While we had an interesting discussion after

considering all the factors in the present credit situation we were

unanimous in the belief that no open market action should be taken

at the present moment and so recommended to the Board.
this regard was

unanimously approved.

Our action in

I am enclosing a copy of

the preliminary memorandum which Dr. Burgess prepared together with a
copy of our recommendation.
There has been a marked improvement in our position during
the past week as you will observe by referring to the comparative state-

men

of July 11 and July 18.

as a whole is

also shown.

Some improvement in the System's position
My own thought is that it may be necessary

and desirable to hold this rate for some time.

If the credit expansion

which now appears to be checked shows some sign of receding and the stock
market becomes quiet it may be possible for us to go into the market this




FEDERAL RESERVE BANK OF NEW YORK

Goveftr Strong

5

autumn and buy a couple of hundred millions of government securities
which will enable our banks to meet some of the autumn requirements
without further recourse to us here.
With best regards, I am,
Faithfully yours,

J. H. CA0E.

Mr. Benj. Strong,
C/o Morgan & Company,
14 Place Vendome,
Paris, France.

4------a_,
Enclosures.




bey/6e-

ee.--ec&




..1,

0-A
The committee has considered the preliminary memoranda;

tubmitted by the chairman and other features of the current

credit situation.
The committee

74-41

recommen4raar action

r4

present, or until the Irtgren moderately high level of high
money

continued long enough to provide a testing of the

credit situation which may have the effect of eheeking unsound

uses of credit.
The committee believes, however, thet the present amount of
member bank borrowing at the Reserve Banks
and present money rates

would not be wholesome if continued over an extended period and

believes the Reserie System should be oreoared if en when cenditions

warrant to exercise its influence to modify these conditions.

The

committee believes this situation shoal& have careful, continuous
study and would expect to meet again for its
contideration within a
feg weeks.

July 17, 1928.

THE CREDIT SITUATION

Interest Rates

Interest rates are higher today than at any time since 1921.

The

primary reason for high money rates is that the member banks owe the Federal
Reserve Banks about one billion dollars, compared with an average borrowing of
The

about 500 million for the preceding six years and 400 million last summer.

heavy borrowing is due primarily to gold exports of 500 million dollars since last

autumn, sales of 300 million of securities by the Federal Rgserve Banksand some

additions to reserve requirements of member banks because of credit expansion40W--

.N\

-.1:12/110=1313550.

Partly offsetting these losses of funds, there has been a gain

through the retirement of over 100 million of currency (reflecting some reduction
in factory payrolls and increased use of checks).

As the autumn demand for funds comes on, larger borrowings and still
higher money rates may be anticipated unless counteracting steps are taken.

Or-

dinarily autumn trade requires nearly 100 million additional rediscounts (exclusive
of additional Federal Reserve credit called into use through the

seasonal

expansion

in holdings of bankers acceptances).

Testing the Credit Situation

The present high money rates are testing the credit situation and it
seems reasonable to believe that pressure will be felt most at the weakest point,
whether this is the

prices of industrial securities, the volume of new issues, the

amo nt of new building, or whatever else.

..--)I2400eswis

It seems likely that a brief period of

Ce...,f-

1.

e y to result in a check to movements which may have gone beyond a

--

sound economic basis.

The fact that such a testing is going on is evidenced by the

changes in the total volume of credit, which with the exception of a temporary rise




2

at the first of July has shown no increase since the early part of May.

The

volume of new long time security issues also shows some sign of pause, and security
prices of various types are considerably lower than they were early in May.

Effect on Business
If the present high interest rates are continued for several months it
seems probable that business activity may be affected six months or a year from
The evidence for this probability may be .summarized briefly.

now.
1:

Charts of business volume and interest rates since 1900 show
that continued high rates have almost invariably been followed by business declines after a lag of six months to a year.

2.

A reasonable explanatim is found in the restriction of new enterprises by high money rates,
High money rates discourage speculative building construction - as indicated by declines in building
six months to a year following high money rates.

High money rates tend to discourage new financing,
which would lead to business activity six months to
a year distant.
3.




Present business conditions may be peculiarly susceptible to restriction of credit.

There was considerable unemployment last winter,

Out-

door work, particularly building, has largely absorbed surplus labor, but factory employment has increased very little.

When outdoor work slackens,

further unemployment is at best a danger.

Any considerable unemployment will give installment selling its first considerable test.

3

It should be noted, however, that high money rates have not continued
long enough for any noticeable adverse effects.

On the contrary, the figures

which would first reflect adverse consequences show that In the first six months of this year the volume of
tracts has broken all previous records.

by the

F. W. Dodge

building

con/.

The figures reported

Company for the first six months of recent

years follow:
1925
1926
1927
1928

$2,748,695,000
3,128,158,000
3,187,993,000
3, 444,868,000

Similarly, the volume of new

financialfahas

broken all previous

records, as shown by the following table:
(In millions of dollars)
First

Six
Months

Domestic

1925
1926
1927
1928

3,130
3,436
4,508
4,528

Foreign
571

616
786

1,135

Total
3,701
4,052
5,294
53664

The foregoing figures suggest perhaps an excess rather than
of new undertakings.

a deficiency

A little slower pace would probably be wholesome,

beginning to be some evidence that the pace is in fact slowing down.

There is

Just in re-

cent weeks new issues have diminished.

Effects on World Finance
In recent months European money centers have not been adversely affected

by high rates here, largely because of extraordinary movements of funds connected
with the French reconstruction.
of funds is now beginning.
lization.




A more normal relation between rates and movements

Sterling has declined steadily since the French stabi-

The exchanges are still generally high, but long continued high rates

4

here would undoubtedly draw funds from abroad and lead to higher money rates abroad
and lover exchange rates, and perhaps even u

Ty

d shipments to this country.

It 1?vould probably take some weeks for these developments to occur, and it may also

be said that the speculation which has taken place in this country has been paralleled by similar movements abroad, encouraged by cheap money;

and somewhat firmer

money conditions here may not be unwholesome.
Germany is a particular case with peculiar conditions.

She has had heavy

speculation, rising prices and wages, together with high money rates;

and as far

as temporary money market conditions are concerned they may perhaps be bettered
rather than injured by firm money rates here.

In the long run, however, the pay-

ment of German reparations is dependent upon a steady flow of money from this country.
The foreign aspects of future policy may be summarized by saying that they
appear to offer no pressure -toward immediately lower rates here, but in the long

run would be adversely affected by a continuation of abnormally high rates here.

Future Program

From these various considerations and other aspects of the current situa-

tion, it would appear that some further period of testing the credit situation by
firm money conditions might not be undesirable.

But it would also appear that -too

extended a period of high money rates would be detrimental to business and would
react unfavorably on the world financial position.
Looking into the autumn problem for Federal Reserve policy appears to be
to find a means of bringing about somewhat easier credit conditions, without at the
same time encouraging a renewed expansion of credit.

It seems particularly desir-

able that money should be somewhat more easily available for the crop moving season.

The two alternatives which naturally present themselves are a reduction in
discount rates or the purchase of government securities.




vS

5

There are a number of objections to considering rate reductions under
anything like present conditions I.

Even after recent increases discount rates are low relative to
open market rates, and offer encouragement to borrow.

The present volume of rediscounts is now so large that banks find

2.

i

it very difficult to keep out of debt at the Reserve Banks and
the tradition against borrowing, which has been the principal
source of effectiveness of Federal Reserve policy, appears to

1

be breaking down.

The chief danger in open market purchases is that, as they appear in the
statement, they may be regarded as an indication of a change of Federal Reserve
policy and made the occasion for excessive demands for credit.
From these considerations it seems desirable That no precipitate change in policy is called for;
That rate reductions sliould be made only after the volume of

member bank indebtedness has been materially reduced;

That open market purchases should be made at such times and




in such quantities that they will be absorbed either

-

In meeting seasonal needs for additional credit;

or

In reducing the amount of indebtedness at the Reserve
Banks.

r

60-90 DA

,.....

TIME NONE
COMMERCIA. PA*

ACCEPTANCES-

1922.



19 2 3

1924

19Z5

1926

Weekly Rates in the New York Money Market.

1927

1928

t

c

COM Mt. PAPER

CLEARINGS INDEX
PERCENT.

INDEX

150

00

140

80
Pt

1-1iore

130
'

ot

12 0

i

IT

..
t

CLEARINGS
INDEX

\

Flitoilt:
.....,1
_

100

.
90

I

3 MOS. MOVING AV.

V

i.

.,
V

....:

.

'PIN
Alit

.

.

40

1

:

t

1

110

GO

IF4

_

i

ii

.
%.11

II

,

:.
::
.

am
..,

.

V 1/COMMERCIAL PAPER
INTEREST RATES

y

L

A

120

,

1

II
%

p.

tV
4

3 MO S. MOVING AV.

Alba

A.
1

i

.s.

,

100

N.1

,/
v

80

80

GO

70

40
2.0

GO

1900

1902.




1904

1906

1908

1910

1912

1914

1916

1918

192.0

1922.

L924

1926

1928

COMMi... PAPER
INDEX

BUILDING PERMITS
PER CENT.

2.50

12,00

220 -

180

190

160
COMMERCIAL PAPER
INTEREST RA7E5 i

160

3M05.MOVING. AV.

130

140

7

120

.

A

;

i6,1,1 .

100

1001
1

1

rV

70

A.

80

ita
.

40 -

60
BUILDING

PERMITS
3 MOS. MOVING AV.

10

40
20

1900

1902.




1904

1906

1908

1910

1912.

1914

1916

1918

1920

1922.

1924

192.6

192.8

FEDER4L RESERVE BANK

1,54.1.3.23

OF NEW YORK

)FF10E CORRESPO

1

Jan. 81, 1924.

192_

Mr. vase
Governor Strong
ROM

Thank you for yours of the nth, which I return with the documents which
accompanied it.

I am not at all in agreement Aith Dr. Miller in what he says

about the waitingpolicy.

That is the most dangerous policy that we could adopt

under present conditions, and at one time I thought we had him convinced of that

fact.

BS.10.4

att.



1-79.1.a

FEDERAL RESERVE BANK

OF NEW YORK

FFicg CORR SPONDENCE

DaTE_Januarr

Swam Jay* Case, Sailer* Harrison

15, 1925

192

SUBJECT:

Kenzel, Mason, Burgess and Snyder

Om_

Beni._ Strong

I

am leaving this afternoon for Palm Beach,

and my address will be care of The Breakers.
will be sent to me,
bank.

and I am anxious to

Florida,

to be gone a month,

Alkdl and the usual office reports

keep in touch with

what is going

on at the

Miss Small, in my office, will look after forwarding anything of that sort

which comes in.

Won't you, therefore, write me from time to time of enything

of importance which comes up, and, as Mies Bleecker will be there, I
to write or telegraph.

will

be able

y want to know the "situation."

I especi

I shall have a Bentley's code book, with some special phrases, a
1

fortyour confidential use, and any cables of
side, aft/r translation, can be considered by the

copy of which is att ched hereto

importance from the other

officers, and then repeated to me in code.
Telegrams in regard to 1Dank or

confidential

matters can be disguised

i

by the use of code words, without

message unless

t is important,

necesearily taking the time

to code the %h ole

,s decoding a long message is a burdensome

affair.

I am e

ecially anxi

to keep in touch with what is going on in the

a\
money market, investmenkaccoun, foreign exchange rates, money rates, changes
in our earning assets, etD,,yd especially anything bearing on the situation which
has to do with our rates.




This would, of course, include the gold movement.

FEDERAL RESERVE
F

Is4

'S477.ERED
JAN 2 G 1025

3EXA4

EVV

SZl 91
.

T

NrPalin BeaCh, Fla.,
January 21, 1925.

J. IL 0.
Dear Mr. Case:

I have your first code telegram today, of which
the enclosed is a copy as decoded.
This message brings to light several defects in
the mechanics of our code arrangement, which I think may
well be remedied before we go further:
In the first place, in your message, the word
Can we not obviate
"kejum" appears six different times.
this by adding to our private list of code words one to
mean "all figures in millions"?
Also I notice two words are used to mean 80%,
whereas Bentley has one code word which is translated
80%.

As the first part of your message covers information which you will have occasion to telegraph often, I
think we must here make additions to our private code
Miss Bleecker
also so as to reduce the number of words.
has made an addition to the list of private words, and is
attaching sufficient copies for Mr. Jay and each one of the
Deputy Governors.
Of course such things only come to light when
But if future
any code system is actually put to use.
messages are prepared by using the private phrases wherever
possible I am sure we can reduce the number of words considerably.

I'm having a fine loaf and rest, and hope my
absence does not throw too heavy a burden on the rest of
you.
Sincerely,

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank of New York,
Federal Reserve P. O. Station, New York.



CO.,-)Y 07 :rC0MING TELEGRAM

Palm B

ClitrZir
PP9ff
1I.Tic', Or
nifil Wry (",7

1,r

Mr. J.H. Case,

Federal Reserve Bank of New Yo
New York, N.Y.
No.1

Yours January 21st agree mi

t continue sales as Proposed

Hope market rate for call money can be kept for time

'higher

Test OK




Having fine res

enjamin Strong

rw.OEIVED
JAM `3

iv.t.0

116 H. 0*

f.DERAL RES RVE BAN K
IRN jc,

OF NEW

3agra worm
SUL ISZ ttiter

AT0/77ANI!

46:

January 23, 1925

Dear Mr. Case:

By way of confirmation, I am attaching a
translation of the telegram sent to you in code today.

In order to fit the code-it had to be changed slightly.
Very truly yours,

7467
/
Secy to

the Governor.

J. H. Case, Esq.,
Deputy Governor,
Federal Reserve Bank of New York,
New York City.

P.S.OEIVIED

Erie.




,

JAN :3 9 hilo

VIOA
dO

14

Decode of Telegram
Dated Jan.23, 1925
12:30 p.m.
Gov.Strong to Mr.Case

#1 (test word)

441

Threjed
.881 MVP

VOISWGr

SIMf

Yours January 21

sales as proposed

kept for time higher

Hop
Having fine rest

MSB
1.23.25

As dictated by B.S.
Referring to your No. 1
Agree we must continue
sales as proposed
Hope call rates can be kept higher
for a time
Having fine rest.




20M 12-24
_ RESERVE BANK
OF NEW YORK

TELEGRAM
COMMERCIAL WIRE-INCOMING

TRANSLATION COPY

19 COLLECT BR P
'tift 344ragy 7434
J H CASE
64WU

MQ

FRB

SZS/

WIRE TRANSFER
DIVISION

DECODED

CHECKED
COMPANY

112P JAN 23

24 vvr

ONE (FAB4 YOURS IT ArP% krt

CONTINUE PliGCE

OL,JYS HOPE YAWTY BOAHZ IVSEG ThKYT HOFZE HAVING
F I RENR E S T
if'

f"

4 - ''''

4.141."

/' ',,N

/

BENJ STRONG

4/ 9

,...N*,yr

.,

4,....




15




.

1

20 M 12-24

' NEW YORK

WIRE TRANSFER
DIVISION

TELEGRAM

L RESERVE BANK
-

DECODED

COMMERCIAL WIRE-INCOMING
JTION

CHECKED

TRANSLATION COPY

5 w u x 5 COLLECT

BR PALMBEACH FLU

COMPANY

1055A JAN 29

H

FRB

_EASE WI RE HARR I SONS ADDRESS

BENJAMIN STRONG 1114-A
g T.1"""(
kr

JAN 2 9

102,

PLA-44.4-A-01,"-./

044V.'"WIRE

.11. 1 20 M 12-24
RAL RESERVE BANK
OF NEW YORK

TRANSFER
DIVISION

TELEGRAM
DECODED

COMMERCIAL WIRE-INCOMING

TRANSLATION COPY

CF1ECKED

COMPAn

61WU D 50 COLLECT BR PALMBEACH FLO-12PM--J4 31

JHCASE ,FRB NY
FOUR FANAS AYMOH VYGIV ABUID ADBAS EGPYJ YEFHY
TWO STOP VYGIV NYNUR FEDVA RAYUX WYBCE ULMFA KR1
AND JUOGD CEWDO JAOLN JIYHA WYBCE NIBER UZKIS
FIDYH DANIC/JOOCT PYLMA GYJWA MUT,EZ STOP ANHAL

IFCAZ ASFUZ EXCLUSIVFNESS OHJUH STOP UBBDA EM
FEHBE KUKIB DOSID THEIR OVKEC BOWS() AT KOPZE CE


akAa,


BENJ STRONG
4wir

11

WW

1253P

IMP

INCOMING TELEGRAM
Palm Beach, Fla.

Feb 5, 1925
J. H. Case, Esq.

Federal Reserve Bank,
New York, N. Y.
#5

Agree with your recommendation for new rate proposed

your telegram to me numbered four
Benjamin Strong

test OK




. 11. 1 20M 12-24

JF NEW YOF2,

- rc

A.

DECODED

7

NTIO

WIRE TRANSFER
DIVISION

TELEGRAM

AL RESERVE BANK

COMMERCIAL WIRE-INCOMING

CHECKED

TRANSLATION COPY

;;

COMPANY

AOSIAt

5WU

H CASE ESQ.,

IVE FASRE X'




CT BR PALBEACH FLO FEB 5
F

R

1012A

B

\FOR KUJBO ORPOD OLJYS YEFHY FOUR
BENJ STRONG

1042A

MIS, 4. I -70014-1-24

FEDERAL RESERVE BANK

OF NEW YORK

Palm Beach, Fla.,

OFFICE E: CC) F/ Fl E:

e?

PC) NI E) E: IN C. E:

Mr. Case

DATEFebruary 7, 1925192
SUBJECT:

Rem j . Strong

FROM

Thank you for your memorandum which enclosed the
reserve balance sheet and the Clearing House statement.
is just the sort of information I need.
want the reports returned.

It

Doubtless you will

Several are attached, but if

you have sent others which should have gone back and have not,

Miss Bleecker will return them when she gets back to the
office.




etwootivyto

Fts

0 1 c.)

Fit ea

Palm Beach, Fla.,
February 8, 1925.
CONT1MTIAL:

Dear Yr. Case:

Zany thanks for yours of the third., and for the copy of
your letter to 1-Anston.
T had hoped that we world see the banks a little more
heavily in our debt before making any move as to rates, and, if
necessary, would unhesitatingly advocate further sales from the
invostlfient account.

There are a few important points to consider in connection

with a rate increase this time First, it seems to me, is to talk it over with Harding,
Norris and rancher (and possibly IlcTvugal) and sec if they would
be willine to leave their rates alono for the time being.

wouldn't care to see a general rate increase throughout the System.
)1)'not
I

Second, we must consider just what to should 'do about our

bill rates.

I would be inclined to move the bill rate ana the
discount rate up together this time, although it will probably
make a howl from some of the dealers and the principal acce7tance
Of course the advance in the bill rate would have to be
houses.

effected more gradually.Third, we will need to make sure that re have complete
\ collaboration with London.
rourth, we rant to have a talk with McGarrah about the
Clearing House rate. If the Clearing House banks will only
leave the interest rates alone when we advance to 3i-, it will
prevent a flood of out-of-torn money coming. to New York which
might have the effect of entirely overcoming any results that we
hope to accomplish by advancing rates.




2

. Case

2.8.25.

I haven't yet seen the need for any haste in marking up
our rates, although you and others on the ground may see it more
clearly than I can from this distance. But in a preliminary way,
think the foundation for a rate advance should be larger borrowing from us than is now the case.
So far as I can determine without discussion, it seems to
me your suggestion to 'Allston is alright, although, of course, the
Treasury could make another issue. of long-time 4s at Tar without
any difficulty, and there may be a strong temptation to do so.
My best to all at the Bank.
Sincerely,

J. F. Case, Esq.,
Deputy Oevern.-)r, Federal ReE1=170 Bank of 5ew York,
33 Liberty Street, IT697 York.




W. T.11. 1 20 ht

12-24

WIRE TRANSFER
DIVISION

TELEGRAM

FEDERAL RESERVE BANK
OF NEW YORK

DECODED

COMMERCIAL WIREINCOMING
ATTENTION

59WU X 19 COLLECT BR/ PALMBEACH FLO
J

CHECKED

TRANSLATION COPY

COMPANY

1220P FEB 11

H CASE ESQ
DEPUTY G VERNOR FRB

I

Di v

LEAVE TONIGHT PLEASE ARRANGE

FOR LEAST POSSIBLE

MOUNT DECODING

BETWEEN NOW AND

AY

NIGHT

aHEN GOVERNOR LEAV




FEB ci

ION

1.16

;Ma
f;:a

FEB ii 1925

M S BLEECKER 1254P

July 8, 1925

edera Reserve Bank of New York,
New York.
STRICTLY C07171DZI7M,I 7,,JR D7 UTY GOVERNOR

Directions for cables and mail will be telegra.phed from Berlin after I know address
stay




Stron

lenz:th

Spa, Belgium,

July 24, 1925.
Dear Mr. Case:

The time is coming when Gilbert will need an experienced

foreign exchange mar who can work into the organization, anticipating the

time when the whole subject of transfers will require 9 good technician.
should say that he needed a man who hed had experience in trading, but,
nevertheless, whc knew the subject of foreign exchange in a broader way
than simply the market.

These men, I know, are hard to get and especial.-

ly to get a men who is really an American and who would be as unprejudiced

in his point of view as are Gilbert and the other members of the organiza-

tion.
wieh that you and Mr. Crwie would have this matter in mind
pending my return.

There is nothing to be done right away, but, in the

course of a few months, I want tc send some suggestions to Mr. Gilbert,

after necessary investigations.
Sincerely ycurs,

J. H. Case, Esq.,

Deputy Governor, Federal Reserve Bank of New York,

33 Liberty Street, New York.

P.S.




Attached to this is the list

of German Bankers we met at a luncheon

given by Dr. Schacht on July 13th. In an earlier letter to Mr.
Jay I suggested I would send it along.

FEDERAL RESERVE BANK
OF NEW YORK

CONFIDENTIAL:

Hotel Majestic,
Paris, France,
August 14, 1925.

Dear Mr. Case:

This will serve to acknowledge the receipt of your telegram
which I received today, as follows:




"No. 10 (test)

Strictly Confidential for Governor Strong:

Alexander named Chairman nominating Committee in the
absence of Reynolds.
In considering merits two suggested candidates
Harrison and I feel that Mitchel] will make much
stronger more useful director than Frew and that this
is possibly a good opportunity to convert him.
Sailer also agrees, but Kenzel strongly Frew.
Communicated that view to Jay who replies:
74 feeling that both should eventually serve
as directors and Walter is senior in every way. Recharter considerations influence me largely. On the
other hand general adverse attitude other man makes
I am
it opportune time to educate him as director.
not adverse to changing and would be satisfied with
You will remember we discussed this quite
either.
fully with Strong before he sailed."

Disregard paragraph 4 my letter of August 7 relating
to Mitchell and Bankovni. Mitchell called giving
full explanation how inquiry State Department originated
and convinced me his communication not relevant but
formal statement facts in response to inquiry about
foreign loans.
Money rate unchanged. Kenzel feels time approaching
when purchase rates on bills should be advanced 1/8
to 1/4 all along line and carrying rate by 1/4;
While still considering question am reluctant to do
this now lest it may prematurely force our hand on
- discount rate.
Officers and Executive Committee
considering matter next Monday.
would like your
thoughts.

Present average borrowings Clearing house Banks

Paris, France
EDERAL RESERVE BANK OF NEW

444. 25

$100,000,000.

Mr. Case

(2)

Average system assets $1,100,000,000."

and to confirm the reply which I am sending today:
"No. 11 (test)

Strictly Confidential for Case:

Your telegram to me numbered 10:
ONE

Probably having frank talk with Mitchell today and will
cable results.

TWO

Letter of August 7 not been received yet.

THREE

Agr
advance in discount rate which I hope will not be
necessary until later,
Cannot this matter be
deferred until after I reach London.

FOUR

Except for two days trip Switzerland remaining here
about two weeks."

We arrived in Paris late last night after a rather hot and
tiresome trip. And today I have not yet succeeded in accomplishing more than
preliminaries. But I am expecting to see Mitchell tonight, and shall then
be in position to send you something further.
My best to all at the office.
Sincerely,

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank of New York,
33 Liberty Street, New York.




FEDERAL RESERVE BANK
OF N EW YORK

RECEIVE0
AUG 2 9 -

'

hotel majestic,
Paris, prance,
August 15, 1925.

Dear Mr. Case:

I have this morning received your cable about the Bank kolski,
as follows:

"No. 11 (test o. k.)
Vice President of Bank Polski called today and inquired whether we would give them revolving credit 10,000,000
for one year against their remittance of dollar checks and
currency in transit to New York, which credit he said might
be further secured by gold set aside for us at Bank Polski.
we promised consideration, but indicated that in event of
approval deposit of gold as collateral at Bank of tngland
or other suitable place necessary.
tie would prefer not to
ship gold from roland.
matter deferred till Monday when
he will call again. Please cable your views."

and wish to confirm the reply which I am sending today:

ONE

TWO

"No. 12 (test) Strictly Confidential for Vase:
Misinformed about Mitchell's being abroad
Would agree to his election provided Jay and preferably
Young could arrange understanding with him on following points:
Must give necessary time to the work
Will accept directors' decisions and not
further criticism or attacks upon menagement,during continuance of relationship.
If disagreement too pronounced could always
resign.'

THREE

rOUR
YIVE
bIX

DEVEN

EIGHT




Would adopt generally sympathetic attitude
and honest endeavor to understand our
problems.
Without some such understanding believe his election
would be misunderstood by him and be harmful.
Referring to your telegram to me numbered 11:
Logan informs me they are negotiating with Dillon
Believe year arrangement inadvisable until after
settlement of criticism Bank of tngland transaction.
while this would not apply to three months credit
I am still not particularly keen on business and
especially not until we know outcome pact negotiations.
if anything done gold should be deposited in London and
i feel our discount rate too low for this loan.
Will send more definite views after reaching London and

Paris, krance
FEDERAL RESERVE BANK OF NEW YORK

8 015 25

mr. Case

suggest meantime you get full story from them
why credit wanted and how to be used and cable
me.

NINE

From Dr. stewart to Federal Reserve Board:
Except two days switzerland hereuntil sail
twenty-fifth Leviathan."

.

Sincerely yours,

J. ft.

Gase,

Esq.,

Deputy Governor,
federal Reserve Bank of New xork,
33 Liberty street, New lork




(2)

0

C



Hotel Majestic,
Paris, Yrance,
August 17, 1925.
Dear Mr. Case:

I am attaching copy of the Reichsbank Statement

(translated) of July. 23, 1925, which I received the other
day from pr. Schacht.

I am expecting to receive these

regularly, and shall be glad to pass them on for confidential
use at the bank.
Sincerely yours,

H. Case, Esq.,
Deputy Covernor, Federa] Reeervo Ranh,
33 Liberty Street, New York.




FEDERAL RESERVE BANK
OF N E W YORK

RECEIVEC3
AUG 29

CONFIDENTIAL:

1

en.

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

Dear Mr. Case:

This will serve to acknowledge the receipt of your cable, received
this morning, reading as follows:
"No. 13 (test o. k.)
ONE

Replying to your telegram No. 12

Referring paragraph 4, Vice President of Bank Polski informs
us Dillon has option on additional $15,000,000 Polish Government 8% bonds which will not be brought out at less than 95.

$35000000 dollars were issued at 95 last February; now
quoted at 87.

TWO

Objection to year arrangement would be met if three months'
advance is made same as to Bankovni without formal commitment
on our part to renew, but with understanding three renewals
would be granted.
This essential and satisfactory to Bank
Polski.

THREE

Because of unfavorable trade balance, result last year's crop
failure, and food imports, foreign currency reserve(s) of Bank
Polski have decreased from 254,000,000 zloty on December 31,
1924 to 91,000,000 zloty on July 31 last, and Bank urgently
requires credit to support exchange.

Their purchase(s) and remittance(s) United States currency
sufficient to retire credit in one year.
This comes from
emigrants' remittances.
Its purchase(s) and remittance(s) entail continuing to lock up
their funds 60 days for large amounts and difficult for them to
secure zloty this purpose unless can sell dollars.
FOUR

We have advised them only basis on which we would consider
extending credit is against gold at Bank of England and they
are now willing to ship $11,500,000 gold there to secure our
$10,000,000 credit.
0
`71f C

JIVE




Vice President of Bank Polski called again today.
presses us very favorably and is anxious for definite reply
before sailing for London Saturday to confer you and Norman
on latter's invitation.

We have discussed credit with Executive Committee today and
Saunders being only member present approves.

Paris, France
FEDERAL RESERVE BANK OF NEW YORK....8..18.2.5

Mr. Case

(2)

Vico President of Bank Polski will explain to you in London his desire
for large bank credit later similar to Bank of England arrangement.

About that we gave no encouragement but $10,000,000 credit entirely
separate and distinct and urgently needed now.
SEVEN

Unless you disapprove we propose recommending to directors on Thursday
that three months' advance up to $10,000,000 be made to Bank Polski
against security $10,500,000 gold lodged with Bank of England.
Checks drawn on us by Bank Polski under this credit would be debited
in special account and remittance of dollar currency credited therein
with interest charged on debit balances at 1% above our discount
rate, with minimum of 4% and maximum of 6%.
This is their offer as to rate.

please cable your views."
and, at the same time, to confirm the reply which I am dispatching today, as follows:
"No. 13 (test) Replying confidentiallyyour telegram to me No. 13
Paragraphs identically numbered
ONE

Believe unlikely Dillon will take additional bonds but
might lend bank on gold security if we do not.

TWO

Any arrangement made should have definite date of
termination.

THREE

Do not understand explanation last sentence but we should
have explicit understanding that they will actually
apply such remittances to liquidating loan and so avoid our
receiving gold which we do not want.

FOUR

This is

FIVE & SIX

Think no large bank credit likely but this can wait.

SEVEN

Have no objection to loan in this form so long as they are
not encouraged to believe we can arrange any further transaction similar to Bank of England
stop
Their discount
rate now 10%. Believe that our charge should be 1-1/2%
above our discount rate but without any maximum. And we
should consider whether Bankovni should now be advised
that their rate at next maturity will be advanced to 1%
above our bank rate in view of changed conditions.

EIGHT

Difficult to have definite views without opportunity for




correct method

Paris, France
FEDERAL RESERVE BANK OF NEW YORK

8.3.8.25

Mr. Case

discussion but have no objection to loan if you all
agree and above suggestions are observed."
MP.

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank,
33 Liberty Street, New York.




Sincerely yours,

(3)

FEDERAL RESERVE BANK
n,

CONFIDENTIAL:

OF NEW YORK
Hotel Majestic,
Paris, France,
August 23, 1925.

Dear Mr. Case:

On my return from Switzerland last night, I found your two cables, as
follows:

ONE

TWO
THREE
YOUR
FIVE

SIX

SEVEN

LIGHT




"No; 14 (test o. k.) Replying to your telegram 13
Directors Young and baunders voted yesterday extend
$10,000,000 credit Bank Polski secured V.0,500,000
gold with Bank of England for period three months at
4-1/2% with agreement make not more than three renewals
each three months; interest rate each renewal to be
determined by us at that time.
Bank of England has cabled willingness hold gold for us.
Have signed agreement today with Vice eresident Bank
Polski.
Federal Reserve Board advised and other Reserve Banks
being offered participation.
Expect Bank Polski will ship gold London immediately
and advances will be made by us on notice its arrival
there.
We have definite understanding with Bank Polski credit
will be liquidated proceeds dollar checks and currency
remitted here and not by gold shipments which they
understand we do not want and which they cannot afford
to make.
Have given them no encouragement about larger credit
but they propose discussing it with you.
have agreed further renewal $6,000,000 Bankovni loan
maturing August 31 at 4-11270. Directors feel desirable
that both loans should have uniform rate this time."

"No. 15 (test o. k.)
Stock market continues strong; industrial stocks
averaging 20 points above 1919 peak; street loans at new
high;
money practically unchanged; governments up
yesterday 1/2 point;
system assets unchanged.
Fancher's loans up temporarily 025,000,000
whereupon received word from washington they would
look favorably on rise discount rate from 3-1/27. to
470.
rancher does not agree.
Thinks his Board will
stand hitched to present rate.
Newspapers here quoting London insist Bank of
tngland will presently further reduce its rate.
Mitchell sailed August 15, due London August 22.
Had talk with him here regarding proposed flotation

Paris, France
FEDERAL RESERVE BANK OF NEW YORK 8.23.25

Mr. ease

(2)

Showed him your letter July 20
Rentenbank loan 25,000,000.
He stated
this subject, for which he expressed thanks.
charter change by Reichstag not later than August 13 esWrote you fully regarding
sential before flotation here.
this August 13.
Young strongly favors selection of Mitchell rather
than Frew and is sympathetic to serving second term himself
if satisfied no tradition is violated, which we have assured
him is not.
Have just seen Alexander.
He states committee will meet
If it agrees with him, proposes to cable
early September.
Mitchell telling him he is committee choice and suggesting
that he might like to discuss matter with Strong, London, as
to amount of time directorship would involve.
Alexander
also says no other name will be presented to succeed Young."
to both of which I have replied today, as follows:

ONE

TWO

THREE

FOUR
FIVE

"14.(test) Strictly Confidential for Case:
Replying to your telegram 14 paragraph 6
Hope there is no misunderstanding as to payment by
gold if remittances inadequate within term of credit.
Replying to your telegram 15
Believe advance at Cleveland not justified and effect
would be undesirable. Await cable from London.
Money growing easy in London. Can report conditions
next week.
Regard Young's reelection most important.
Proposal to nominate Mitchell without discussion or
understanding as suggested my 12 would be dangerous for
following reasons:
He will interpret as indicating we are unduly
affected by his attacks and he has won a victory.
Might be considered as evidence by public that banking
community support his criticisms.
Will deprive us of advantage of his appearance before
Congressional Committee in case of inquiry, when we
may welcome Wall Street criticism.
Will introduce discordant element in System at time
when there is 'plenty anyway.
I would welcome his election, however, if preliminary
talk could assure us he would "play the game".
I
hear he has gone to Scotland and from there goes to
Scandinavia, but if you can arrange for me to see
him in London next week I could gain some understanding of his probable attitude.
Otherwise it seems a risk and certain to increase
rather than lessen our problems and anxiety just
now."
Sincerely yours,

J. H. Case, Esq.,
Deputy Governor,
Federal Reserve Bank of New York,
33 Liberty Street, New York.







FELLS

Anersatomorr......n.Ar.ar

DtivISION

.SEP 24

FEDEOLIERVE
OF
NEW

-

/Olti

5

4'

t,

FRE,Ct-Z-..±ViEJEDERAL RESERVE BANK
SEP

5i

OF N EW YORK

C.
Hotel Majestic,
Paris, France,
August 25, 1925.
Dear Mr. Case:

Thank you for yours of August 13, which arrived with the mailpacket this morning.
I will reply by separate letters as to one or two of
the subjects, as you may have occasion to use the letters separately.
This will be about Mr. Mitchell:

I am glad you had a talk with him, but am as uncertain as you
as to the effect of such a conversaticn.
The time has come when we must
tell Mr. Mitchell definitely that the policy of the Reserve Bank isto establish
and develop these relations with banks of issue, and that his own antagonism
to that course will not move us to any change of policy.
I have cabled you briefly just the way I feel about his nominaMr. Mitchell, as you realize, has an exceedingly active and well detion.
veloped ego.
If the committee of bankers, out of a clear sky and without

any intimation that they have conferred with us, should cable him asking him
to accept the nomination, he is almost certain to conclude that the bank, if
it has been consulted, has been influenced by his criticisms and attacks; and,
likewise, that the nominating committee, which presumably he would understand to
represent the sentiment cf the banking community, sympathized with that attitude.
Furthermore, we are just now in position wherewe may be facing an
inquiry by Congress of great consequence to the system, and involving the continuance of our charters and important amendments to the act, where it might be
most helpful to have Mr. Mitchell called to appear and state his grievances.
Should he become a director before any hearings, it would either put him in
position where he would not be willing to appear and would feel obliged to leave
it to the executive officers of the bank to state the bank's position, or, if he
did appear, it would give the impression that there was dissention in the management of the bank.
There is also that other consideration - that we have got a lot
of troublesome questions ahead of us just now which add to the worries and
anxieties of the officers of the bank.
And it seems an unnecessary harrassment to add Mitchell to the others by taking him into the family.
From my cable, however, you will understand that I would waive
these questions entirely and welcome him as a director
were it possible to have
a talk with him in advance and tell him very frankly the
way we feel.
I can quite appreciate that Mr. Young
and others, who feel that
the time has arrived to invite him into
the Board would, in a general way, feel







SEP 24
ilf,;',..RAL /NM
,F NEW YOU

-

RANK

jit

Paris, France
8.25.25

FEDERAL RESERVE BANK OF NEW YORK

Mr. Case

(2)

I
Uccnfident that the result would be desirable, and, in the end, satisfactory.
ethave that feeling myself, always subject to its having first been made clear to
'Mitchell that he could not run the bank and that he must, if he became a director,
It is entirely a question of method of
accept the decisions of the directors.
And I am sure when these facts are considered that you will agree with
approach.
So I am hoping that it will still be possible to get in touch with him.
me.
But I will, of course, feel that that should be done through the committee and
from New York, rather than for me to attempt to do it direct.

She tells me that he is
I met Mrs. Mitchell at dinner last night.
shooting in Scotland, and that he goes directly from Scotland to Scandinavia. But
of course he will be in London on his way, and it is just possible that I can
hence my cable.
catch him there;
I am sorry that this came up when it was too late to get in touch
with him, and still have hopes that you may be able to work it out satisfactorily.
Sincerely yours,

j. H. Case, Esq.,
Deputy,Governor, Federal Reserve Bank of New York,
33 Liberty Street, New York.







,)EP .24

I

r l -RAL RFS!ii, ,

L

OF Nil) iligo

' ... sz,

i
4i

C

f-°f-t"Q
09 1° II:"

FEDER L RESERVE BANK
L
OF NEW YORK

11-h

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

Dear Mr. Case:

I notice that the borrowings of the First National Bank
are pretty heavy, one report showing as high as k555,000,000.
I don't
know what the occasion for this is, and it may be perfectly all right.
But from the standpoint of the money market, we should bear in mind
that we deal with the total quantity of credit and when our policy
results in the member banks owing us a large sum of borrowed money
the effect of that policy can be made negligible if the entire amount
borrowed is by one member bank.
Our policy is most effective when
the total quantity which the Street has to borrow is distributed over
the greatest number of banks.
This leads to the suggestion which I want to make that
you go over the First rational Bank's record with some of our directors
and, if the situation justifies our doing so, explain to Reynolds that
it is desirable from the standpoint of the Reserve Bank and the situation generally that no one of our New York City members shall be a persistent borrower.
If the First National should liquidate, say,
$25,000,000 of its borrowings I have no doubt it would immediately result
in that amount of borrowing being forced upon from five tc ten other member banks.
This distributes the pressure of our rate so as to be most
effective.
Sincerely yours,

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank of New York,
33 Liberty Street, New York.




RECE.AVEC)
SEP

!).

51.




4.

RECEIVED
FEDERAL RESERVE BANK

SEP 10 1.02&

0 F N EW Yo R K

tri.
Paris, France,
Hotel Majestic,
August 27, 1925.

CONFIDENTIAL:

Dear Mr. Case:

This is to acknowledge the receipt, this morning, of your cable as
follows:

"No. 16 (test o.k.) Confidential Strong:

No misunderstanding as to payment in

ONE

Your cable 14 paragraph 1 gold if necessary.

TWO

Paragraph 5 - Young thinks it wholly inadvisable to approach
Mitchell with conditions but felt that Alexander's suggestion that
Mitchell talk with you about amount of time required in service as
director would give you favorable opportunity to have informal disMitchell's
cussion with him of other matters you have in mind.
address until Friday afternoon 36 Eishopsgate, London, but do not
see how you could discuss this matter with him even informally
until after committee meets early Sectember.

THREE

Had conference with Alexander today who wrote (nohan ?) following
statement for you "Alexander thinks it impossible to commit Mitchell
in advance in way you propose and very inadvisable to make attempt.
Alexander wonders how you would regard Wiggin if he assured Alexander
of his pleasure and purpose to work in harmony in interest of system".
Alexander further expressed view that Wiggin more competent and
seasoned banker than Mitchell but that either of them distinctly
preferable to Frew.

YOUR

Referring bill rate, my cable 10 and your 11, scarcity of bills and
buying for foreign account have resulted in low dealers portfolios
which have been permitted at present low market rate for bills which
are much out of line with money conditions.
ing since foreign buying is now only nominal. Cctton bills are appearing and distribution stagnant.

FIVE

Commercial demand and rediscounting middle west increasing. Total
up $75,000,000
earning assets system slightly under $1,100,000,000;
since middle of July;
Our rediscounts $190,000,000
on increase.
of which $100,000,000 is for Clearing House banks.

SIX

In this circumstance officers feel time appropriate while portfolios
are low to advance buying and carrying rate as named my 10.

SEVEN

While time of advance could be deferred until bills accumulate in
dealers hands, we feel effect then more likely to jeopardize discount
rate than if done now.




But s

Paris, France
FEDERAL RESERVE BANK OF NEW YORK

0-EIGHT

.1r7

A.,

Mr. Case

(2)

Do not wish to push you but officers would like recommend directors
make advance effective Monday August 31 unless you object."

as well as to confirm the reply which I have today despatched, as follows:
"No. 15

(test)

Strictly Confidential for Case:

ONE

Referring to your telegram 16 paragraph 2 - Entirely agree.
My suggestion was not so much to impose conditions as to state
This cannot be done now.
our position to Mitchell.

TWO

Paragraph 3 - Also agree with Alexander but equally important
Wiggin should agree to give necessary time.

THREE

Paragraph 6 - Reach London Friday evening. Shall telegraph
Am now inclined to agree
fully Saturday after sounding Norman.
to slight advance proposed."
Sincerely yours,

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Dank,
33 Liberty Street, New York.







EP sdet 925
FEDERAL

RESERVE
NEW

.BOK

Y(M.




FEDERAL RESERVE BAN K
OF NEW YORK

Hotel Majestic,
Paris, France,
August 27, 1925.

Dear Mr. Case:

There is a story connected with the attached
which the Governor has not time to write about at
m

Will you be good enough to have it translated
theoment.

and, after reading it, have it handee, to Miss Small to be

put with other matters for Mr. Strong's attention on
his return.
"ftrirrommasiaarred.....4.

Very truly yours,

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Rank,
33 Liberty Street, New York.

En c.

Rcocts4K°
so, 10 192;

J. ei




OPINION AMERICA INE

SUR LES DETTES DE GUERRE.

Aveo cinq aria de retarr', la France vs envoyer Washington une
commission pour causer de sea dettes avec la "Debt funding commission"
smerioaine,

Queues quo soient les raisons pouv lesquolles fees dettes furent
eontraceees et, quels qua soient lea usages saxquels oet argent emprunte
serviteoes aettem existent et alors qu'en 1918 des areuments seatimen
taux suraient pu gtre effiosoes, aotuellement ils sont trop vieux at

ont dte trop utilises par la presse frangaise,
Ce n'etait pas dens l'espoir de gains monetaires ou territoriaux
quo le Pr6eident Wilson dirigna ma nation vers la guerre : C'etait

uniquemant per idealiame, pour la defense du droit. C'etait pour faire
ee qui lui eomblait gtre juste.

Ces derniers mots peuvent lembler peut-gtre sonnor faux, maim
Oen oat rian. reekmeeique oontreirement sax autres nations Anglo-samonnes

eet trks sentimentele et pout, omm un enfant, s'enthousiasmer pour tin
ideal, Mats cot etat d'esprit no fut pax epontand, comma quelques uteriamine frencophiles wuraient pu 1e lsisser croiro.
On re :Oast jamais rendu compte en France du travail surhumain fait
ear la Preeident Wilson erent lea en/16es 1915418-17 pour demontrer h
plus de cent million d'habitents que la cause des allies etait celle

qu'il falleit voutenir.
La guerre terminee, lp francs eattendit h tort h oe qua lea Etats-

Unis oontinuassent
sl000upeer des affaires europeennes.
Lea Etsts-Unis n'avoient rien a gagner
entrer en euerre. Restant
nentress ils waraient continue A. fournir aux Allies des oonooura financiers importants, ils seraient restos des priteurs, Du fait qu'ils sa
sent rerses lux ootes des frangais, ou'ils sont devenus leurs Rinds,
doivent ils faire abandon de l'argent prete
enee s'v
Et d'ailleurs, at la
prise a temps, il eat probable
que den condition preferebles a cellos qu'elle pourra obtenir maintenant auraient t4 accordees per lea e;tats-Unis pour le renboursement

etait

de ses dettes. Mais devant le silence du gouvernement frangais, a'etait
il pas natural quo l'opinion ameriorine at commence h oroire quo la
Franco soneemit
repudier se detee
Un argument souvent utilise en Frahoe eat qua l'Allemagne ne payant
pas, la France no petit pre peyer non plus. Ceci eat exact, male pas pour
la raison quo Von, eroit et qui en eppelle h l'opinion publique.
Le moment oppottun pour presenter oette these
oelui qui vit
snrgir ee bloc d'illusioas apeeie le "Elan Dawes",
semble trs natural sax frangais de se dire qua l'Allemagne dolt

etait

payer; zeilheureuseeent, pour des raisons ecoaomiquestrkt simp3es,
l'Allemagne no peut pas payer oe ,4120 l'on attend d'elle. /1 serait plus

jute is dire quo l'AlieLagne petit et veet payer, mais qua nous no pouvans pes regevoir.




Un oomite d'experts neetait pas necessaire pour expliquer que de
lesrgent allemand peut-itre accumale h. Berlin, maia ce memo comite no
fut pea suffieent pour expliquer comment transferor COG richesses.
A ce moment la France aurait du dire h l'Amerive : "Vous no pouvez pas plus regevoir d'areent de nous que nous mimes ne pouvons en
reeevoir d'Allemagne, car votre tarif nous eepeche d'exporter. Vous no
voulez pea de produite atreneers et nous no voulons pas de produits
allemands."
Le rapport des experts donnait h. la France une chance inesperee
pour une esplication fnanahe du problems des dettes.
Le soul arantage du plan Dawes fut de fournir une excellent@ plate-

forme pelitique pour le parti repuhlicain max Etats-Unis. Ue parti event
les darniaros eleetions presidentielles put montrer au peuple emericain

qu'il wait fait pour l'turope quelque chose de constructif

Un politician americain n'est generalement pas un philanthrope et
n'est pas 61u a vie. Autent qu'un homme politique frangais, il desire
gtrl reese. Le perti republicain Tient d'itre reelu sur deux programmss
electoraax parfaitement inoolepatibles, :anis trim allechents pour 15opinion publique : r,- T1 fent proteeer notre thdustrie per un tarif *neve;
20- Les Europeans dolvent nous payer ce qu'iis nous doivent.
Col& a pin et en oonsequence le parti r4publicain eat h la tato du
gouvernemain,

Il se pout qu'en 1928 lo parti democrate reprenne Is dessus, diminue

le tarif et permette ainsi h la France de payer sea dettes. Mais il eat

heureux quo la France n'attende pas ce changement lo main et aleatoire
pour entrer en pourparlers 0:70C sen crediteur.

La situetion financiers de la Franee eat particulidrement diffieile,
l'Amerique s'en rend compte et il sst h es-parer quo lee conditions qui
seront faitss h sa debiteloa seront aussi fsvorables quo possible, &tent
donne surtout les le paieesnt en meechendtmes n'est pas possible, soul
mosan purmw-cantur. tr5nsfert denn peys h un sutra de sommts aussi consi-

ders/gee quo eelles dont ire itgit.

Il et 1 souhe.ter que Le eommission francsise qui we) venir proohai-.
neeeent a SasLington Jolt armee d'une grande quantite de sons commun et
de son des, atTEZ.res. Elle.) en .11.7-"P besoin, cer elle rencontrera la-bas

des muericains Lien di:Nrente de eeur, quo eertains financiers frangais
at:sent tent titer PECASE
La commieslon frangaise devra ee eouvenir que l'Amerique s'est hattue
aux cots do la France parcslu'elle ereyatt clue la France defendeist la
cause du 'eroit, pa a peur autre chese. Foneieremant etAmerique n'est pa a
proefrangaise; elle set pro-businese et considers h raison que la sentimentalite (lane lee affaites eat ridieulc3a
Cott e peetion de e dettes est striotement une question d'affaires.
G.F. DORICT

AAP:RI CAN OPINION ON THE WA.R DEBTS

After five years

delay France is going to send a commission to Washington to

talk over her debts with the American "Debt funding commission".

For whatever reasons these debts were contracted,and whatever was the use to
which this borrowed money was put, these debts exist, whereas in 1918 sentimental arguments might have been effective, now they are to old and have been made to much use of
by the French press.

It was not with the hope of pecuniary or territorial profits that President
Wilson turned his nation to war: it was purely through idealism, for the defense of the
right.

is to do what to him seemed proper.

It

These last words may seem perhaps to ring
ese

FAit

ts, but it is not so.

America

,i1°I..

unlike the other Anglo-Saxon nations is very sentimental and can become enthusiatic for
an ideal, like a child.

But this state

of

mind was not spontaneous, as some American

lovers of France would have us believe.

In France people have never had any idea of the

super human efforts made by

President Wilson during the years 1915-16-17, to prove to more than one hundred million
inhabitants that the cause of the Allies was the one that should be supported.
When the war was ended France erroneously expected that the United States weuli
continue to occupy themselves with European affairs.
The United States had nothing to gain by entering into the war.

By remaining

neutral they would have continued to provide the Allies with important financing aid,
they would have remained lenders.

Because they placed themselves on the French side, be-

cause they became their Allies, must they abandon the money that was lent?
And besides, if France hade set about it in time, it is probable that conditions
preferable to those that she can obtain now would have been granted by the United States
for the repayment of its debts.

But considering the silence of the drench GoVermment

was it not natural that American opinion should have begun to believe that France was
thinking of repudiating her debt.



2

An argument often employed in France is that as Germany doesint pay France does-

nt h e to pay either.

That is true, but not for the reason that is believed and that

appeals to public opinion.

The right moment to present this theory was that which saw

rise of that block of illusions called the "Dawes Plan".
It seems very natural to Frenchmen to say that Germany must pay;

unfortunately

for very simple economic reasons Germany cannot pay what is expected of her. It would
be more just to say that Germany can and wishes to pay, but that we cannot receive.
A committee of experts was not necessary to explain that Germany money may be
accumulated in Berlin, but that same committee was not capable of explaining how to transfer that wealth.

At that moment France should have said to America:"You cannot anymore receive
money from us than we ourselves can receive it from Germany, because your tariff prevents
us from exporting.

You do not wish foreign products and we do not wish German products".

The report of the experts gave France an unhoped for opportunity for a frank
explanation of the debt problem.

The only advantage of the Dawes Plan was to provide an

excellent political platform for the Republican Party in the United States.

That party

previous to the last presidential election was able to show the American people that it
had done fsomething constructive for Europe.
An American politician is not generally a philanthropist and is not elected for
life.

As much as a French political person he wants to be reelected.

The Republican

party has just been reelected on two perfectly incompatable electural programs, but which
are very alluring to public opinions

1..We must protect our industry by a high tariff;
II-The Europeans must pay us what they owe.us.

That pleased people and consequently the Republican party is at the head of the
.

Government.

It may be that in 1928 the Democratic

party will gain the upper hand again,

will deminish the tariff and thus permit France to pay her debts.
France does not wait for that distant and uncertain
with her creditor.



But it is fortunate

change to enter into negotiations

3

The financial situation in France is pecularly difficult, America take that
into account, and it is to be hoped that the conditions which are imposed on its
debtor will be as favorable as possible, taking into consideration above all that payment in merchandise is not possible, that being the only means that permits the transfer
from one country to another of sums as large as those in question.

It is to he hoped that the French Commission that is coming to Washington soon
is provided with a large amount of common sense and of business sense.

need of it for it will meet

It will have

there American who are very different from those whom cer-

tain French financiers like so much to entertain in Paris.

The French Commission must remember that America fought by the side of France
because she believed that France was defending the cause of the right, and nothing
else.

At bottom America is not pro-French; she pro-business and considers rightly that

sentimentally in business is ridiculous.
This question of the debts is strictly a business proposition.

G. Bendelari
Reports Dept.

Set. 11, 1925.




G. F. Doriot.

RE.c-:eivED

FEDERAL RESERVE BANK
OF NEW YORK

,

SEP

9

ur.

London, England,
August 31, 1925.

CONFIDENTIAL:

Dear Mr. Case:

This is to acknowledge the receipt of your two cables
which were received the morning I- left Paris:
"No. 17 (test o. k.)

Confidential Strong:

ONE

Winston advises me confidentially that President
has requested Treasury to furnish him complete
information regarding French financial and economic
conditions. Treasury now working on this. Leanwhile Winston expresses hope you may presently be
sending him information that character.

TWO

He would also welcome particulars as to loan and
credit relationship which existed between Bank- of
England and Bank of France during war."
"No. 18 (test o. k.)

Confidential Strong:

ONE

No answer yet my cable 16

T40

Directors MCGarrah, Reyburn, Treman, Saunders
present today's meeting. Voted to change bill
rate effective Monday as per my cable unless
strong objections by you.

THREE

They all feel action important at this time and
that it will not necessarily force earlier action
Hope you agree."
discount rate.

For lack of time, I was obliged to answer both of these
cables by the following open message:
Considerable information seventeen
"Case:
Answered
Will supplement.
already mailed.
eighteen yesterday."
After reaching London, and having opportunity to see
Governor Norman, I sent the following cable from the Bank to
supplement the foregoing one:



"No. 3

Strictly confidential for Governor Case:

London, England
FEDERAL RESERVE BANK OF NEW YORK ................

hr. Case

(2)

Referring to your telegram 18 see no objection
proposed change bill rates.

)1TE

()

TWO

Referring to your telegram 17 further reports by
mail next week."

On Saturday I got off a note to Winston, explaining that some
time this week I expected to have some figures, and also to have some
thoughts resulting from talks with men intimately informed about French
finances, which I thought would be interesting and helpful in connection
with his studies.
It is the best I can do at the moment, but he will
doubtless already have my earlier letter.
And I have suggested that he
get a copy of the one I wrote you on August 26.
day;

Governor Norman and I are expecting the Polish gentlemen toand my time is pretty well mapped out until sailing time, September

9.

/ily best to all at the Bank,

Sincerely yours,

J. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank,
33 Liberty Street, New York.







FEDERAL RESERVE BANK
OF NEW YORK

London, England,
September 1, 1925.

Dear Mr. Case:

The enclosed copy of my confidential letter to

Winston will serve to keep you informed of what I have, and
may, be able to do in connection with the matter referred
to in your cable No. 17.

Because of the very confidential nature of this
inquiry, I am hopeful that no mention of it will appear in
any of the cables coming through the Bank, which, in the
ordinary course, are decoded before I see them.
Sincerely yours,

j. H. Case, Esq.,
Deputy Governor, Federal Reserve Bank,
33 Liberty Street, New York.

Enc.

RECEIVECD
-f

SEP 1 2 is:r
.P.

c.,

WK. 3. 1-7'

FEDERAL RESERVE BANK

OF NEW YORK

OFrICE CORR
To
FROM

Mr. Case

DATE_ February 10, 19 26

IE

192

SUBJECT.

Miss Bleecker

I um quoting below a part of Governor Norman's confidential letter of
c.

February 2 to

Governor Strong, which covers a matter you have been dealing with

in his absence:




"The cable which Prosser sent me a few days ago makes the
Polish prospects seem rather hopeful, although Hammerling's views
are entirely unofficial and expressed by one who is influenced
by having lived in the United States.
E
good as his word and means to be helpful.
I hope you will t
him, as in a sort of way I did on your behalf as well_ as my own
in the cable sent yesterday through your Bank.
I am now trying to find out, unofficially and privately
and without commitment, what the attitude of the League would be
to such a proposal if it were to come from the Polish Government:
but it is not going to be easy to get anything definite out of
Geneva. "

.1




COPY OF INCOMING CABLEGRAM

S S Majestic

Reed ;,pril 26th 1926.

Feleral Reserve Bank,
New York, N.Y.
Teetword
H Case

Many th nks to the gang who seem to know my bad habit




STRONG

Grand Rot el,
.1nme, litay 23, 192C.

Dear Vr. Case:

It was only the day that we left ;arie for Rome that I vas

finally able to have a laet talk with Gilbert regarding his proposal for
you to join him in Berlin.
la-acted by the idea.

1 can well understand how you would be et-

It would be an exceedingly interecting experience.

You would be associated with a wonderful fellow, and the job le one well
worth doing.

On the other hand, of course, there are disadventages, the

meet cerious one being the uncertainty as to the future after say two years.
Another is possible reelection of income, although comparing living costs
in merlin with those in New York, I should suppose that you might find your-

self rather better off then worse.

And then there is alwaye the uncertainty

or whether you would be suited by the work itcelf and life In a foreign city
where you did not know the language.

1 have tried to weigh all the considerations pro and con, just as
though I were in your shoes and as though there were no selfish considerations involved.

You have done cuch a splendid piece of work at the Bank,

and Cilbert's knowledge of whet you have done is so intimate that 1 em not

at all surprised at his renewing the sugeestion.

In fact, when we talked

it over I felt that he had rather set his heart on it.

Be thinks that

the next two or three years will be the not interesting yearv of all.
T know he feels the need of adequate support during the real test period.
Then again, 1 have E feeling since our last *WA that you have been a little

restless at the plank.




2.

Mr. Case.

May 23, 1926.

Now there are the matters that have been going through my mind

in endeevoring to write you from a disinterested point of view.

I have

made up my mind that I cannot give you n very definite view from here.

In fact, it would be neceesery for me to be at home in order to do so.
One reason in uncertainties in my own plans, which heve been made cleer
to you by Mr. Jay,and the outcome of which might have a bearing upon your

oeu decision.

I think the best advice that I can give you is to talk with

Mr. Jay, Mr. Harrieon, end one or two of our directore whom they nay (lugfJast.

I eould be dreadfully disappointed to eet you leave the Ban!-, but

I would be equally disappointed to have you stay and then suffer any disap-

pointment later, and that is the pert of the eituation which Iam unable to
judge without discussion at home.
You must beer in mind that you have made a position for yourself.

which I-tax, resulted in your having mmny opportunities to better yourself

finer-Jo/ally and which I know you have declined out of loyalty to the Bank.
The same will te true tomorrow or next year or some yearn hence, ane 1 think

it will be true whether you stay with the Bank or join Gilbert.

It may also

be true that if you decided to go to Berlin and the work was pretty well concluded after two years there would still be a first-rate opportunity in the

System, either with us or elsewhere, but as to that we can only guess.
euppoee you know how difficult it has been to advise sore of our
fellowc when these seone questiono came up.

I have felt in the past that I

have been rather selfieh about it, and it may be in some cases that I have
taken too much responsibility, so nv advice is to have the talk as Y suggeet
am to be perfectly mere that, whatever you decide to do, I shall be relieved




3.

Mr. Casa.

May 23, 1926.

1,4

if you decide not to se to Berlin, but I shall not blame you if you do
decide to go.

It would by a big Heince" if you did go and would require

a good doe, el readjustment in the organization.

eort, with all the.

I hate Menges of that

lee, involved, but I hate equally to take the responsi-

bilit of expreseing any urgent views one way or the other which right have
eo considerable an j-afilleneo, on the future if you followed my judgment rather
than your own.

Mr. Gilbert s id that he was not in a hurry, so I hope) this letter
reacher you in ample time.

1 don't like to send you a letter which is non-

ccmmital - in fact, would not do so, were it not that your letter to ma showed
how greatly tempted you were.

My beet to :mu in any event, but take good counsel from the others

at the office.
Sincerely yours,

Mr. J . H .are",
C
c/o Federal Reserve NInk,
Hee York.

35::1




Hotel du Cap d'Antiben,
Antibes, June 8, 1926.

Dear Mr. Case:

I notice in the minutes of the Officers Meeting of May 24th
that we sold 435,400,000. of June maturities of Governments to J. P.

Morgan & Company, delivery on June 14th.

The record does not show

that this transaction was submitted to the members of the Open Market

Committee, of which note should be made in our minutes.

I presume they

were communicated with, but we ought to have a record of it.
Sincerely yours,

Mr. J. H. Case,
c/o Federal aesorve Bank of New York,
New York.
BS:1i




mzer...,INfc-r1
OW /21928

BENJ. STRONG
Hotel du Cap d'Antibes,
Antibes, June 29, 1926.

a,,c)

972-k

Dear Mr. Case:

Thank you for your letter of June 8th with the intereeting account
of the Treasury and money market matters.
both the Street and the Bank.

This was a novel experience for

In fact, I do not suppose we have had a quarter

day now for nine years when we did not have a lot of borrowing to do.

At least,

it will have the effect of increasing our experience and giving us a better technique.

I sometimes feel worried as to what position the Bank may be in when the

time comes for the Government to clean up its floating debt entirely.
Of course the outcome of the Pascagoula case is fine, but I would rather
have had a decision of the Supreme Court on the merits than a decision by the Circuit Court of Appeals on the merits with the Supreme Court simply denying a writ.
I am relieved about your decision, as you certainly must know that I
would be, and will write you more personally about it when I feel moved to do
some handwritten mail.

Mr. Warren has been very helpful.

He is perched in Paris watching what

happens there and keeps me posted from time to time.
today about his recent visit.

T am writing Mr. Harrison

So that you may all have everything that comes to

me, I aM having his letters and memoranda sent on to you as fast as they come in.
They

will

give you atmosphere which will be helpful in considering anything that

develops out of the new Ministry.
Best regards to you and all at the Bank.
Sincerely yours,

Mr. J. H. Case,
c/o Federal Reserve Bank of New York,
New York.




du Cae d1 Abes,

Antibes, Juno 29, 1926.

ar Mr. Case:

Then the reports came in showing a coneiderable Increase in the borrow-

ings of the First National Bank, and at one time a very large increase, I thought
would try my hand at a letter to Jack Reynolds, explaining to him exactly how

felt about it.

I have been holding it eince it was dictated, oo as to watch the

reports and see whether or not borreving justified oending it.

The reports of the

last few weeks indicate that it would not be deeimble to do ao, but I um sending

the letter to you, so that you and the other c may road it, quietly and privately,
and use it as an expression of my viere of what we should say to the First National

in case it is necessary to discusc this matter with Mr. Reynclds.

On tho whole,

think it is better not to send the letter anyway, but I as clear Ls can be that
tbe time ha s came to have a distinct understanding with them that they cannot
lend our money in the way they have in the past.
Sincerely yours,

Jr. J. H. Case,

0/o Federal Reserve Bank of New York,
Now York.




Jul

FEDERAL RESERVE BANK

"

cri.

OF NEW YORK
Hotel du Cap d'Antibes,
Antibes, July 9, 1926.

Dear Mr. Case:

I have read yours of June 24th with the greatest possible interest.
It gives a fine description of the situation, and I think I understand just what
has been doing.

If you succeed in fixing up the inconsistency about the rates charged
and received on the quarter days, it would be a fine thing.

It does not make a

good showing on our books.

Will you also thank Dr. Burgess for his letter of the same date, which
I will not answer separately.

You might tell him that I received an invitation

from Mr. Lombard in rather flowery terms to become a Vice-President of the Stable
Money Association.

He has annoyed me so that I wrote rather curtly, I am afraid,

that I was so out of sympathy with them that I could not accept the invitation.

Also, will you tell Mr. Harrison that I will try and keep him better informed by mail of the way things are going here, but changes from day to day make

a letter out-of-date almost before it is mailed, so I shall not attempt it until
there is an outcome one way or the other.
My best to all at the office.
Sincerely yours,

Mr. J. H. Case,
c/o Federal Reserve Bank of New York,
New York.




04

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WHALEY-EATON SERVICE

10 SQUARE DESNOUETTES

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TELEPHONES:

FRANKLIN

FOUNDED 1918

7679
7727

P4777-:CE:NFIED

American Letter No, 410.

July 10, 1926.

All Rights Reserved.

For Clients Only.

JUL 1 5 1926

Dear Sir:

//- 5.

ViORLD BANKING SOLUTION:

Governors No:man and Strong have formulated a plan

which will be offered to the various Governments as the formula on which the
banks can undertake world stabilization.

It involves:

Revision of the Dawes Plan so as to make the Davies Annuities,
in their reduced amounts, well within the capacity of Germany
to pay, thus reading value into the Dawes Bonds.

Clearance of all war debt payments through the institution to
This
be formed to receive the Dawes nayments and securities.
at once settles the whole question of a safeguarding clause
in the French Debt Settlement, for the new institution automatIt means, whatever the techically would safeguard transfers.
nical explanations, the close tying-together of Debts and Reparations, which is what Europe all along has urged.
Modification of the Debt Settlements, including the British
Settlement,
Governors Norman and Strong are not authorized, nor do they wish, to
make political settlements.
achieve results.

tamed.

Commerce


n-

.Ney

They can state the-terms on which bankers can

An undertaking so momentous as this cannot promptly be oh-

experts are being detached from the Treasury and the State and

Departments, under the guise of going to Europe for their vacations.'

;3.JAN yg

ED!,..0

nwitO

BZTTBB.0 BCIALIRa 1)1
tiTt,r3L t,IVT/S.:YODV
T aka,

7/10/26.

4.

While Mr. Mellon is in Europe the situation will be ready for him.

3_IB

Our inform-

ation is that the scope of the plan has become so far-reaching that Congressional action may be required.
seen to require.

A special session would be summoned, if events

Er. Gilbert's decision as to Germany's capacity to pay will

fM,1/17,3

be taken at virtually face value.

The time now set for the big things to hap-

.,-5pr7s.c,f1.1101111




pen is September.

.1.Tta Ifna
-

9.

COMMENT:

The plan, so far as our information goes, does not involve extensive

Federal Reserve credits, except as they may incidentally arise in commerce.
Gold backing for the new institution will be requisite, but it can be accomplished largely by earmarking.

The best authorities in Washington have slowly

reached the conclusion that the simplest and fairest course for the present
franc would be for it to follow the course of the mark, and they suspect that
has been Briandls only hope of bringing the French public to a realization of
conditions.

war par.

The new plan will probably call for a new gold franc, at the pre-

It will be surprising if France is immediately ready to act.

cal advice is that the situation in Paris is not yet quite ripe.

Politi-

It will be

noted that when the plan is announced it will mean that all conditions have
been accepted, whatever the politicians publicly say, and that it is going to
work successfully, if the judgment of non-political banking experts means anything.

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Hotel du Cap d'Antibes,
Antibes, July 13, 1926.

PERSONAL
Dear Mr. Case:

Many thanks for your very

nice

I found a great

letter of June 28th.

deal of difficulty in writing you, as you may well imagine, partly because I
was not able to talk things over with you and get a

thorough understanding of

what was in your mind, as one does by question and answer, and partly because
was torn between considerations applying particularly to myself and to the
Bank and those which applied to you and your own desires.
portant thing is

for your decision

Of

course, the im-

to satisfy you, and the relief which you felt

yourself when you had decided is probably the best evidence that you have decided wisely.

Mr. Gilbert has

written me about it, and he

and his wife were on their

way here to join us for a couple of weeks, but unfortunately

suddenly taken ill in Paris and

they are

him in Paris.

I will write

Don't you worry about the "gray" days.

more

frequently black

you after I talk

with him.

We all have them.

My own are

disturbs me very much.

If it

than gray.

Now the news you send about

turns out

see whether she must

I shall be leaving here in about a week and

have an operation for appendicitis.

of course will see

now waiting to

Mrs. Gilbert was

Mrs. Case

to be malaria, then I don't believe you need have

Is one of our ailments which is gradually succumbing to

any anxiety,

scientific

for it

treatment.

I shall write Mr. Jefferson today and certainly hope that he will do
well with the new organization.




2.

July 13, 1926.

Mr. Case.

Again, many thanks for your letter.

I so appreciate your writing

me fully and frankly.

Best regards to you and all at the office.
Sincerely yours,

Mr. J. H. Case,

c/o Federal Reserve Bank of New York,
New York.
DS:il




FEDERAL RESERVE BANK

OF NEW YORK
Hotel du Cap d'Antibes,
Antibes, July 16, 1926.
Dear Mr. Case:

)4,

Referring to the enclosed letter, X-4629, giving the Board approval of

a recommendation by the Open Market Investment Committee that Third Liberty Loan
bonds be included in those covered by the repurchase agreement practice, it sug011.0

gests that this was submitted by the Committee to the Board for its approval.
w,

No such procedure on the part of the Committee is necessary or desirable.

If the

Federal Reserve Banks have the right to make contracts of repurchase such as we do,
it naturally extends to all types of Government securities.

I sincerely trust

that the Committee has made no such recommendation to the Board.

It confirms the

impression in the minds of the Board that the Federal Reserve Banks must first gain

their permission before it is possible for them to exercise their statutory powers,

tactical mistake

and I have always felt that it was a

to ask permission from

the

Board to do things which the statute expressly permits us to do without their
authority.

just

Won't you talk this over

with the

officers of the Bank and write me

what the situation is.

I have been having a'delightful time here the last few days, because I
have been feeling so much better.

Governor Norman unfortunately has to leave to-

morrow, and were it not for that I would be tempted to extend my stay for another
few days, but as I am planning to be in Switzerland the first of August to meet Mr.
Mellon, I shall leave on Monday, the 19th, anyway.

This will probably enable me

to go to Switzerland some days in advance of his arrival, so as to have our visit

with the officers of the Swiss National Bank.




BANK OF NEW YORK

July 16, 1926.

Mr. Case.

2..

I was surprised the other morning, at about 11:30, to have Treman's
card brought up to me.

That is the hour that I am usually dressing in the

morning, so I had to keep him waiting and had a

he was on

his way

to Nice and Monte Carlo.

at the Bank, and I was glad to hear that you

very short visit

But he gave me a good report of all

were all well

onably quiet.

Please give my best to everybody.
Sincerely yours,

Mr. J. H. Case,
cio Federal Reserve Bank of New York,
New York.




with him, as

and things were reas-

''Li
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Hotel de l'EUrope,
Amsterdam, August 3, 1926.

Dear Mr. Case:

I was amused by the comment in the minutes of the Officers' Council

of 'u1y 12th in regard to Mr. Max Radt.

If he wishes to take the matter up

with Governor Crissinger, Col. Mac Intosh and President Coolidge, let him do so,
but I think he

should be

warned that such

a proceeding will

do no good and might

result in our having instructions to be a great deal more particular in regard
to his borrowings, etc. than we have been upon our own initiative alone.
Sincerely yours,

Mr. J. H. Case,
cio Federal Reserve rank of New York,
New York.

BS:M




Hotel de l'Ehrope,

Amsterdam, August 3, 1926.
PERSONAL

Dear Mr. Case:

You may have learned that while Mr. and Mrs. Gilbert expected to

come

to Antibes for a visit, Mrs. Gilbert was suddenly stricken with appendicitis, had
to have an operation, and this was done last week and was entirely successful.

Dut I did not see Mr. Gilb::.rt until reaching Paris, and then vie left almost at
once to meet Mr. Mellon.

He was terribly disappointed at the answer he got from you, and I

am

not writing to suggest any change in your decision, but I thought you ought to
know how disappointed he was and apparently how earnest he was in his desire to
have you join him.

There was not much that I could say, for your cable and letter to me
indicated how final your answer had been.

I told him that I did not think a

leave of absence could be expected; the time is too indefinite, and when a man

left an organization like ours, the ranks closed in and it was very difficult to
rearrange matters a year or two later so as to avoid injustice and disappointment.

I did think that, were I to resign, it might be that the Directors would feel that
this did not necessarily terminate the possibility of your becoming my successor,

although it would likely reduce it.

It would depend upon whether they felt that

you were the one for the job, in the first place, and next upon whether a long
absence might not have created a situation where someone else would be entitled
to the promotion.

/ am writing this because I think you ought to know exactly what trans-

pired and especially to know how Mr. Gilbert felt, as that is indeed a bit of a



Mr. Case.

2.

August 3, 1926.

satisfaction in itself. This business of being away from home is not all
that it is "cracked up" to be. Imiss the Bank and would like to be back
there right now.

lith best regards,
Sincerely yours,

Ur. J. R. Case,

c/o Federal Reserve Bank of New York,
New York.




November 8, 1926.
this mo7.ning
The following message came/from Governor Strong, pencilled

on one of his personal cards:




H. A. Burke.

"Dear Mr. Case:

The flowers are wonderful but the message is the best

of all.

My love to everybody. See you all soon.

Si,

W. 1.11.1 SUM t-zu

iEDERAL RESERVE BANK
OF NEW YORK

DIVISION

TEL EGR A M
DECODED

COMMERCIAL WIRE-INCOMING

CHECKED

TRANSLATION COPY

ATTENTION

COMPANY

16-0MJ M 17
ASHEVILLE NCAR 155P JAN 5H927

H CASE
F

B NE_YORK NY
-7

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:Y TELEPHONE IS ASHEVILLE SEVEN NAUGHT NINE FIVE
i)T ONE EIGHT THREE SEVEN AS FIRST ADVISED




212P

AND

VV . 1. 11.1

OV 111

1-LO

DIVISION

TELEGRAM

FEDERAL RESERVE BANK
OF NEW YORK

DECODED

COMMERCIAL WIRE-INCOMING

44V111 M 31

CHECKED

TRANSLATION COPY

ATTENTION_

COMPANY

BM B I LTMORE NeAR 1 027A JAN 5 1927

HERBERT CASE
NY

FOR OBVIOUS REASONS AM REPLYING YOUR ..IRE DIRECTLY
TO OWL: FROM ..HT.1
NUMBER




I

SUGGEST YOU GET A COPY/MY TELEPHONE

CASE OF NEED IS ASFIEV I LLE
STRONG

1 116A

70 73--

J
Biltmore, N. C.,
February 13, 1927.

Deer Mr. Case:

Recent discussion of a possible change in our rata has led me to
go over the data which has been sent me by Dr. Burgess, with a view to writing

you this letter as soon as Mr. Wore arrived.
The object sought to be accomplished by the rate policy, and even
more by our open market policy, of the past few years must be kept In mind in
connection with any proposal just now to reduce rates.

In

I am mistaken, changeein our rate-0 just now must be 'viewed from a secular rather

than a seasonal point of view.

After the liquidation of 1921, the various Reserve Banks, with the
possible exception of New York, purcheeed large ameunts of Government securities
in

order

to make earnings.

The motive of the Vow York Bank was quite different

from thin and was designed, as you know, in order to give us a better hold when

later needed upon the credit situation as a whole, and especially

to enable us

to offset the quite probable menace of excessive gold imports by later sales.

These purchases resulted in a period of considerable ease of money and, whether
by coincidence or otherwise, there was a considerable business revival at about

the ewe time.

In fact, late in 1922 and in the early Spring of 1923 it looked

as though we were to have a runaway speculation both in securities and in commodities.

At that time the Reserve Banks liquidated almost all of their secur-

ities, so that by early 1923 rates had stiffened a great deal;
rate was than at




41- f,

our discount

market rates were 5% to 6%, and there wPs quite a bit of

2.

Mr. Case.

2/13/27.

llenidation in the stock martst and considerable pressure for hods from
time to time, although nothing panicky.

Throughout that year, and especially

by the late Tall, there developed a good deal of uneasiness about the general
banking situation in the Test, equally Beane uneesinese about the condition of

the foreign exchanges, and you will recoil that there were all the evidences

of an approaching setback to business, that appearing especially in the steel
and iron business, in the Now XMIlland textile mills and in automobile manufac-

turing.
In the late 'Phil and Winter of 1923 we undertook large purchases of
securities under the more organized control of the Open narket Committee, and

the objects then to be accomplished were definitely the following:

To take the pressure off the banking situation for the relied of
the distress which was developing, by creating sere of a borrowers' market in
place of what had been continuously a lenders' market;

To lay the foundation for reducing rates and giving some stimulus
to domestic business;
To open our investment markets to foreign borrowers and by so do-

ing arrest the flood of gold imports which we were then experiencing,a ad if
possible lay the foundation for resumption of specie payment in ZUrops.

There were other considerations at first, but these were the principal
ones.

It resulted - or else simply by coincidence, as is claimed by some,-there

developed a rather happy outcome in all three of theme respects.

I have been

inclined to attribute the arrest of bank failures, the business recovery and the
distinct progress towards resumption of specie payment abroad more definitely to

our policy than others have been willing to admit, but at the least, I think it
lust be conceded that, had we not adopted this policy, despite everything that




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Mr. ans.

3.

might have occurred, no such outcome would have been poseible.

ceeded in getting our discount rate ae low

Ge

2/14/27.

%e suc-

3r., and since that time, in

fact 'ARCO 1923, we have been lendine over a billion dollars a year to foreign

borrowers and all but three important countries - France, Italy and Poland have resumed In greater or less degree specie payment.
There have been ups and downs in businees lame changes in our dis-

eount rate, and considermble open aorket operations since the low point in int-

erest rates in 1924.

In fact these changes, which have been largely attrib-

uted to the fluctuations of speculation in stocks, real estate ad building,
are erotebly the oscillations, to borrow an expression of Malthus, which are

characteristic of business at any time, but the main point is that we have had
period of stability such as has not been experienced in this country since
the coenseeenent of the ler.

But with the changes above described, from a per-

iod of some hazard and uncertainty to those which now prevail, the queetion is

whether the outlook justifies e rate change at the present time and what is to
be aemeeplished by such a chance.

As to dmaestic conditions, all the figures that have been submitted
to me and even allowing for the inevitable lag between the facts at the monist

and those exhibited by statistics, T. cannot believe that there is cnything
alarming or even doubtful at the moment in the business outlook, except that

Which is &halted by the considerable decline in the value of farm products.
A reduction in our rate, in my opinion, would have no influence whatever upon

these prices.

*weals are busy, labor is fully eeployed, and money is

neither unduly easy nor dangerously tight.

At the present level of interest
rates, we are continuing to lend largely to !mope, but there is not an ertinein market stimulating an unhealthy development of such loans.

The active

and rather dangeroue speculation of a few months ago on the Stock nechange




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4.

0

Mr. Case.

seem to have been arrested for the moment.

2/11/27.

Mile we are getting some gold,

it has not yet developed any strain upon the foreign banks of issue, certainly
not enough to justify a change In our rate policy.

Sterling In fact has been

somewhat etrafter the last few days and only under most favorable conditions
can any gold come to us except that which is described by Governor Norman as

"the fugitive gold which nobody warts".

The fears apprehended by our British

friends that the period of payment for cotton, foodstuffs etc. by gngland would

prove to be a serious strain upon the exchanges this Spring have so far not
Materialized.

of lower rates.

rn other words, I see no definite, effective argument in favor
There pre, however, same rather etrone arguments for not ivo-

ducing.

First among these, I would put the quection of foreign loans.

Our

computatione at the lank indicate that the service of private loans placed with
our investors dUring the last few years calls for remittances to this country

of about 750 mIllion dollars a year, that is, interest and amortization.

Add

to this payments being mule to our Government by fa...sign Governments and it

brings the total to near a billion dollars. There might have been considerable
strain on the exchanges at this time in order to meet this burden, had it not
been that during the last slx months there has been a very heavy return flight
of capital from this country to Europe which has furnished dollars to foreign
Goveraments and doubtless to may primate borrowers in this country to meet

the charges on these loses.

That movement will of course stop In time - that

is, it will exhaust itself and no longer furniSh the weans of making dollar
payments.

If we should now reduce OUT discount rate,

at pressure now ex-

ists to repay the rather large amount now awing to the Reserve Banks will be

relieved until money ratee ease off, as in time they may, and I would fear
that the surplus bank funds which are likely to accumulDte from now on, in


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5.

0

er. Case.

2/13/27.

stead of being Replied to repaying the Reserve Benks, would seek an outlet

in these new loans and the tendency for the banks of the country to invest
their money would be uneholeoomely stimulated.

lin must not overlook that

during the last few years investmemte by the banks of the country have in-

creased by a good many billion dollars, end this is not always a healthy sign.

The high rates of interest paid by foreign loans present a strong inducelent
for member banks to buy 0,1,

and 8% securities end borrow from us at 4%.

(2) The inducement of low rates to accomplish the impertant purposes

we had in mind in 1924 involved, as we then realised, considerable risk in

bringing on speculation in recurities and other things.

The risk was justified

by the great objects to be attained, and I co not for a moment regret thet we
took them.

On the other bend, as to specie paymeet ()broad, those objects heve

been accoopliahed except as to France. Italy and Poland.

With the exception of

Poland, no large Oevernment loans will now be required for the resumption of
specie eeyment.

Dank credits will probably be sufficient, except for possibly

a t50,00C,003 loan for round.

Sc there is no particular object to be eccom-

plished by low rates as to Deropean reetoretion.

(2) If, as eseas to be the ease, the conduct of the country's business
at its present volume and at the present level of prices is adequately supplied
with all the credit and all the currency needed, I can see great advantages to
be gained by going into the period of easy mow this summer with a 4% rate and
with ample inducement to the banks to use surplus funds to reduce the amount

borrowed from us, that is, from all Reserve nanks.

11th our earning assets at

a billion dollars and with a considerable recent addition to our gold, it
stridme ma that we may indeed have a surplus of credit in the country now, or

at least a surplus ever Viet would be required during the dull suer period,
and certainly that surplus Is better used in repayments to Reserve Banks than



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Ur. Case.

2/13/27.

in inducing any Stock Exchange speculation.

Then Ur. Woolley and Ur. Heyourn were here, we had a little discus-

sion along those lines, and I took the position that wy mind was open until I
knew more of the facts, but I thought at the time that a rate reduction would
not arrive until a considerable amount, possibly 200 millions or more, bed
been applied to reducing aseerve Bank ascots.
co:AU to ma confirm this view.

The figures which have recently

While' would not advocate doing so at the pres-

ent time, 1 think later on, if we find that the New York banks get out at debt
to us almost entirely, 1 would then recommend selling just enough of the Sys-

tem's holdings of securities to keep the market for the surplus funds of the
Street from getting much if any below 4%, but I would not do this until rates
got down to a point where every bank that is borrowing from Us will be induced

to repay us rather than to maintain a Stock Exchenge loan account.

1 have a feeling from loiters now in hand that you and Harrison and

Lurgess also foal this way.

The Lportant thing now is to present the picture

to our directors in graphic form,which I believe has been done, as well es in
argumentative form, concerniag which 1 have no advices.

Won't you let me know

'hat the outcome of the next diocussion is, as I or now prepared definitely to
recomo&end that no change be mode at prosett.

Best regards to you and all the others at the Bank.
Sincerely youre,

Ur. J. H. Case,
33 Liberty Street,
Nee York City.
AS:11




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Mr. Case.

2/13/27.

*SW

7n reading over the zecond page of this letter, I notice
what I omitted to refer tc a vary Important object of our policy of 1923,
namely to seek to protect our export trede by opening our =rkete to foreign
borrowers.

This was in fact one of the principal arguments used in Wasbiog-

ton, vibere itMB effective because the class most seriously affected by
inability of E4rope to buy our exports was the tamers.,




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Stuyvesant Road,
B41tmore Forest,

Biltmore, N.C., February 20, 1927.
Dear Mr. Case!

Yours of the 17th reached ma yesterday and I am delighted that

there is a prospect of having a visit with you.The last of this week or
I am expecting Mr. Harrison and Mr. Monnet to be here with me,

next week,

and probably the Polish Ambassador, together with Mlynarski and his compan-

ion, will be here stopping at the Country Club all for the purpose of discussing Polish finance.

I have been looking over the map to see What sort of a trip you
would have by motor.

It looks although it would be about 250 miles.

The

roads are indicated as improved but not paved, and of course they are very

hilly.

T do not know about the train service; that you would have to look

Up.

1;eould be delighted to have a visit with you, and if you cannot

make it on'this trip, possibly you could make a special trip down later.
I will leave it entirely to you, but won't you let me know by telegraph on

receipt of this, so that I can make plans?
I am writing you at the Bank about the organization matter, which

oesms all right.

It certainly is time you had a rest, and I am delighted

that you can arrange to get it.

I always feel guilty when I am away myself

and interfere with a reasonable amount of leisure for those who are doing most
of the work.
se3140.

Just now it is particularly hard on account of Mr. Jay's ab-

I would like awfully well to talk over all these matters with

gutsily at the first opportunity.
Sincerely yours,

Mr. J. H. Case,
c/o Carolina Haiel,

Pinehurst,



you

HECEIVED

FEDERAL RESERVE BANK

ivIAR 1

OF NEW YORK

J.

1927

H. C.

Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 27, 1927.

Dear Mr. Case:
V/

Yours of February 25th just readhei me.
a good rest.

I am so glad you had

It would have been too mu # a sacrifice of time to have

made the trip to Asheville, as I now re lize, although I did not when
I wrote you.

The plans for my week-Ad visitors changed almost every

day, and finally they are not reach /g here until tomorrow, so we would

have had room enough at the house

or you to stay.

But I wanted to make

sure you understood that, when I Irote you, the plan was for them to come
down at the end of last week.

There is no news to s

d you from here, except that I am getting

along about as expected, and daj before yesterday had my first walk.
was not very long but

It

re me a,feeling of satisfaction that, at any rate,

I had not forgotten how!

Just as soon as Ir

ertain about my other visitors, which may

include Mr. Reyburn, who is thibking of coming down for about a week, I
will let you know and see if we cannot arrange for a little visit here.
I am very anxious to have the opportunity, if you can make it.
Sincerely yours,

Mr. J. H. Case,
33 Liberty Street,
New York City.







C.;

Cr. C!:.

7.30
7.7.

7,6 "

s.

,'

r

C.

:oh 14, 1927.
Dear Mr. Caee:

Mr. Harrison hae eent me a copy of hie memorandum to you

of March 9 with regard to our visitore from abroad. You may explain
that everyone of theee gentlemen are warm friende of mine, and ae to
Dr. Viseering and Preeident Bachmann, I am under a good deal of
obligation to them becauee of many courteeiee and much hospitality
which they have shown me when Z have been abroad. Dr. Vieeering
speaks Englieh very
Mr. Sackmamm,fairly well. They are both
anxious to get a thorough acquaintance with the Reserve bank.
really hope we can give them a good reception and make them feel at
home, and that we have made eomething of a fuse over them. Confi-

dentidilly, I have a feeling that Dr. Viesering ie getting a bit old.
He hae recently married a eecond time and I imagine is here partly
to male ue a vieit and partly as a wedding trip. TUE wife you will
find very 'charming indeed. I met her in Holland laet eummer before
they were engaged. Of couree, Dr. Viestring hae a very high position
in Europe. President Bachmann, however, I rank very high in ability.
He 1.8 a quiet, conservative SViee, from the German eide of twitzerland,
ac distinguiehed from the French side. He hae had a splendid record
in the bank since hie election two yeare ago, and I believe is one of
the coming men in Europe in central banking.
Mann, of the sank of England, is a fellow to turn loose
in the bank, show it to him from top to bottom, get him intereeted,
and give him a good time. He i an Iriehman, and I gueee he would
enjoy it. Gpenuere8mith iE a quiet fellow who has been doing at timee
special work for Governor Norman in conection with European mattere.




Mr. J. H. Case

2

He is one of the young directors of the bank, but a fellow of considerable ability, and his influence in the bank is growing.
/ am sorry not to be there to give you a hand uith all of
these visitors. If my plans are approved by Dr. Miller, to whom I
am writing, I shall be in New York for a day or two about April 1.
Then I want to spend a couple of weeks in AtIntic City, and after
that go back to New York for a very gentle introduction to work again.
This is the best I can forecast before I hear from the
doctor.

Sincerely yours,

Mr. :. Herbert Case,

Federal ReLerve Bank,
,7)3 Liberty Ftreet, New York.




-118c. 4 A

FEDERAL RESERVE BANK
OF NEW YORK

18Q M 1-26

OFFICE CORRESPONDENCE
To

Mr. Case

DATE

March 15,

SU BJECT

FRomGovernor Strong

I am enclosing copies of some memoranda sent me

by Mr. Snyder, which I think you and Mr. Harrison may like to
0

read.




1927




March 16, 1927.

Dear ,

Case7

Be sure to get
off the train at niltmore, vhich Is juet before Aeheville.
Phil and I will it you on arrival Saturday mornind at
Your telegram has juet come.

10:10.

Sincerey yours,

Mr. J. Herbert 0aat

Federal Reserve Pank,
33 Liberty ;Areet, New York.

DIVISION

DEAL RESERVE BANK
OF NEW YORK

COMMERCIAL WIRE-INCOMING

TRANSLATION COPY

DECODED

CHECKED
COMPANY

5WU C 19 ASHEVILLa NC MAR 22 605P
J

H CASE FRB NY

SORRY

I

OVERLOOKED THE DATE

VISIT AND

I




CAN SEE

VISSERING HAD BETTER DEFER

HIM EITHER NEWYORK OR ATLANTICCITY

STRONG

844A MAR 23RD

FitCQEvro
MAR 2 3 1927

TELEGRAM

FEDERAL RESERVE BANK
OF NEW YORK

COMMERCIAL WIRE-INCOMiNG
ATTENTION

DIVISION

MAR 2 4iipi
DECODED

.

TRANSLATION COPY

COMPANY

6WU M 54 COLLECT NL ASHEV 1 LLE NC MAR 23

J H CASE FRB NYK
THE TIME SUGGESTED WI LL SUIT ME ALL RIGHT PLANNING
ARRIVE NEWYORK APR IL FIRST SEE DR MILLER THEN IMMEDIATELY
TO AT LANT ICC I TY IF MISS BLEECKER HAS ARRANGED ACCOMMODAT-

IONS SUGGEST THAT THIS BE PROMPTLY ATTENDED 70 WOULD NOT
OBJECT

IF BOTH WERE THERE TOGETHER OR SEPARATELY AS THEY

PREFER TWO OR THREE DAYS WI LL BE SUFFICIENT




STRONG

910A MAR 24




Misc. 4 A

FEDERA0E9,
eNEW Y

180 M 1-26

OFFICE CORRESPON
To
FROM

DATE

MrCase

March 23,

192 .2

SUBJECT:

Governor Strong
t4ils

I am returning the report on foreign developments, and
wish you to note the underlined figures relating to France and
those relating to Hungary, which are obviously incorrect. I have
a feeling sometimes that figures of thi, sort are prepared by hand,
turned over to the typists, and then sent out without comparison,
and typographical errors occur which render the reports either
misleading or useless.

You can well see how the omission or the addition of
three cyphers such as those relating to French foreign trade make
a report very puzzling.

W =calnm mind speaking
cannot make
1.




careful

.

about

and ask if they

0-4E-OCivE

FEDERAL RESERVE BANK

J. H., C.

OF NEW YORK

Royal Hotel,
Evian-les-Bains, July 3, 1928.

PERSONAL
Dear Mr. Case:

This is a very belated reply to your fine letter of June 7th.
Thank you very much for the full and interesting reports.
gratified by your interest in the Princeton Collection.

I am especially
It is better for

me to discuss the matter with you on my return than/to attempt to cover it
by correspondence.

Your letter is now so old that there is nothing especially that
I can comment upon, beyond what I have written in a personal letter to Dr.
Burgess, which I hope you will read, and one other matter not directly mentioned.

The report of the Federal Advisory Council includes a recommenda-

tion to turn over all holging

of Government securities by Reserve Banks to

\
Apparently the Com-

the control of the Open Market Investment Committee.
mittee has taken no action.

'My view is that, as to any general investment

account by the Reserve Banks, that would be a wise thing to do.

On the

other hand, it would be most unwise if it appeared to be defeating the

purpose of the Federal Reserve Act expressly providing that the Reserve
Banks are authorized to deal in Government obligations.

Dealing in Gov-

ernment obligations is one thing quite different from accumulating a large
investment account which has an effect upon the money market and cannot but
affect the general policy of the System as a whole.
are three possible ways of dealing with the subject:-




It seems to me there

FEDERAL RESERVE BANK OF NEW YORK

7/3/28.

Mr. Case.

2

The most extreme method would be to have all transactions in
Government securities conducted for account of the Committee and all
holdings subject to the Committee's general jurisdiction.

7147,

This I would

not favor.

A second method would be to endeavor to compensate purchases or
sales made by Reserve Banks individually, by offsetting sales or purchases

*714
.4.1

made by the Committee account, an

to include those private holding

1 Aar
the apportionment in some way, so that no Reserve Bank would gain any par70.014NA".
ti ular advantage by a separate investment account.

This is difficult to

do and might result in conflict of opinion within the System.

A third plan might be to leave the Reserve Banks quite free to
deal in Government securities by themselves with their

member

banks,

with the definite understanding that any permanent holdings would only be
acquired through the Committee and be part of the Committee's regular account, such other dealings as were conducted by

individual

being purely temporary in the interest of members.

Reserve Banks

This last suggestion

I like the best.

While I had a rather hal time for a while, since arriving here,
as Mr. Harrison doubtless explainkl, there has been a marked improrement in
the last week or so, especially 4ince Dr, Edouard Hist in Paris gave me some
very good advice, and I fe
1st I will have a good repor

encuraged that when I sail for home on August
to make.

Please give my best\o everybody at the Bank.
and not write regularly, but this time could not avoid it.
you for your fine letter.
Sincerely yours,

Mr. J. H. Case,
33 Liberty Street,
New York.




,

I hate to be away
And again, thank

FEDERAL RESERVE BANK
OF NEW YORK
Royal Hotel,
Evian-les-Bains, July 19, 1928.

PERSONAL
Dear Mr. Case:

I was delighted to have your letter of July 6th, which came
yesterday and which gave me a fine budget of news, all of which I enjoyed
reading.

It is deplorable that Chicago is unwilling to take a more "System"
point of view about rate changes and our policy generally, and it would
have been far better had they and we exchanged views before they made the
increase.

Mr. Harrison's cable gave me so little up-to-date information

that I could only have a snap judgment as to our own proposed increase.

After reading the material you now send me, although still feeling the
need for more of the atmosphere of things at home, I have the impression
that it might have been a little better for us to have delayed the change
until other Reserve Banks had increased to 55 and the pressure of borrowing
from us in New York had further increased.

This view, however, might be

quite different if I found that Government financing and other like matters
would have tied our hands for a considerable period.
I have sent for the copy of the "Statist" containing Dr. Miller's
article.

If it is as I surmise, it is a most unfortunate development and

indicates his unwillingness to cooperate in executing the views of the
majority of those who run the Federal Reserve System.

If each of us rushed

into print with criticisms of the decisions of our associate's in that fash-

ion, it would not be long before Congress would rip the Federal Reserve




FEDERAL RESERVE SANK OF NEW YORK

2.

7/19/28.

Mr. Case.

0
System all to pieces, and frankly, it strikes me as disloyal and dangerous
in the extreme.

What you write about the Bancitaly Corporation affords me the
opportunity of being really unpleasant and saying "I told you so".

I

would not incline to be lenient in the matter of distribution of the stock
of the Bank of America.

Those folks had ample warning of our views, they

took no steps such as prudent people might have taken, and now with Gianninii
1
I am glad the bubble
ill it is not a situation to regard with equanimity.
has been reduced without any calamity resulting.

The best thing they can

do is to strengthen their cash position, even though it involves taking
some losses.

They ought to convert some of their securities and buy Gov-

ernment short obligations, and be ready for any stormy weather that arises.
I was

If they do not do that, then they may indeed face a serious time.

so emphatic about this at the time the Bank of America matter arose, and
in fact in the earliest interview with some of our friends who called to

discuss the proposed trade with the Jonases, that it is hardly necessary
for me to reiterate now.

We don't want that outfit in New York, and what

we do want, and as promptly as possible, is to see the Bank of America
owned by actual bona fide. stockholders and entirely detached in the public

mind from being complicated with the affairs of the Bancitaly.

I do hope

we are firm with them in dealing with the situation.
It was a great shock to learn of Arthur Salomon's death.

He

has been a loyal friend of the Bank's from the beginning, and now you will
need to review the situation and make certain that your contacts and arrangements are as satisfactory as can be made with someone in his




place.

What you write about the Princeton Library Fund is most inter-

RESERVE BANK OF NEW YORK

esting.

7/19/28.

Mr. Case.

3.

I will talk it all over with you when I get back.

You cert-

ainly outstrip me handsomely as a money-raiser, for I am a mighty poor
hand at it.

I am sorry to be away while all these interesting developments
are occurring, but I have been having a rather interesting time myself,
with various visitors which so far have included:

Dr. Schacht, Dr. and

Mrs. Vissering, Dr. Bachmann, Mr. Dewey, one long visit with Sir Arthur
Salter and his associates in Geneva, and today I expect Governor Franck
and tomorrow or day after Governor Stringher and his son.
Please give my best to all at the office.

now very soon.
Very sincerely yours,

efccu:t. Ita /210% ittiv 7Thac4
641(14---

Mr. J. H. Case,
33 Liberty Street,
New York.




711.40D

.

I will be

seeing you

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