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WT. 15 60M-9-25

TELEGRAM

;DERAL RESERVE BANK

OF NEW YORK

WIRE TRANSFER
DIVISION

PRIVATE WIRE-INCOMING

10bBD BO WASHINGTON pc 125P APR 21

16;10,

GOVERNOR STRONG.

RETURNING NEW YORK THIS AFTERNOON.

IN YOUR PLANS.




HARRISON 101P

NO NEED FOR ANY CHANGE

FEDERAL RESERVE BANK

OF NEW YORK

OF F ICE CORRESPONDENCE
To

Governor Strong

FRC

DATE

Jan. 21

1925

192_.

George L. Harrison

SUBJECT:

I have again read your
which we had, and I

things as they

think

are and

last

att.




very

to Mr. Blackett,in view of the discussion
fair presentation of the picture of

not unduly discouraging for some gradual

at sometime in the future.

on the

it is a

letter

accomplishments

I have, however, made a few very minor

page.

41-

suggestions

Misc. 3. 1-5031-8.25

FEDERAL RESERVE BANK
'11

OF NEW YORK

OFFICE CORRESPONDENCE
To

,0,

Governor Strong

DATE

April_24_122&____192__

SUBJECT

George L. Harrison

I am handing you a complete galley proof of your statement before
the House Committee on Banking and Currency.

This proof, as you know, is

a transcript of the record as corrected by yourself, but without the additions,

corrections or modifications which you have delegated to me or some of the
rest of us in the bank.

In order to expedite printing of the galley proof, I returned it

to Mr. Thompson, clerk of the committee, without any of the corrections which
the rest of us plan to make.

In view of the fact that you may very likely care to cable back some
suggestions, amplifications, corrections, eliminations or checks, we might now

agree upon a method of cross reference. jsuggest that reference be made
If
V
(1) to page numbers, (2) to part number

h part introduced by the words

"Mr. Strong" indicating that it is your statement, (3) to paragraph or sentence
or both under each pert.
the statement

For instance:

if you have a suggestion regarding

marked on page 17, you might cable as follows:

"Amplify tcheck

or eliminate) page 17 part 6 paragraph 2."
If the suggestion or correction is on the top of a page in a para-

graph continued from a preceding page, please indicate as though it were
actually on the preceding page.

There is no other way in which you could refer to the appropriate
"part".

GLH.MM
att.



FEDERAL RESERVE BANK

OF NEW YORK
April 30, 192.

Dear Mr. Strong:

I understand that Dr. Burgess is to-day writing you his usual report on
what has been going on at the bank.
I know he will give you.

I shall not, therefore, attempt to cover what

There are one or two things, however, about which I want

to chat with you.

I got your cable saying that the latter part of the record of the
hearings reached you safely, and not having heard anything further from you regarding it,

I am assuming

that you have no very substantial further suggestions to make.

We are having the whole thing carefully checked at the bank, the insertions are
being prepared, and while we have plenty of time to do the thing carefully, I am
hopeful of sending it back to Washington sometime next week.

Miller was called again one day this week and had an opportunity to
tell the committee that he thought our rate reduction na bit premature."

Crissinger

had already told me that when Miller returned to Washington after our rate reduction
he advised the Board that he would have voted against it had he been there.

I have

been reading much of his testimony, and while there are numerous individual statements with which we could properly take issue, I think his whole record might bo
summarized in the generalization that he has tried to build up in the minds of the
committee tin idea of the importance and

influence of

the Federal Reserve Board in

contrast to the power and influence of the individual Reserve banks.

For instance,

he has stated that practically all rate changes in the past have resulted from the
study and suggestion of the Reserve Board, the Board having a much broader perspective than the individual Reserve banks.




He has also made many statements -

FEDERAL RESERVE BANK OF NEW YORK

2.

Benj. Strong, Esq,

April 30, 1926.

some subtle and others more blatant - indicating that heimore than any one else in

the System studies the statistics and charts and records that are made available to

he Board, with a view to building a foundation on wM.h his judgment and decisions
about rate policies and open market operations

is apt to be guided by a more tradi-

tional knowledge of these matters than is possible to others in the System "who do
not use the paraphernalia available as much as he does."

He has really made no

specific charges and no detailed statements that could properly start a fight, but
as I mentioned before, he has rather cleverly made an opportunity to make the committee see the power and influence and the effectiveness of the Federal Reserve
Board.

In some ways this may be fortunate, particularly if it will in any way allay

the fears of the more radical members of Congress who might think that the System is
being run by Wall Street.

I do not think, however, that his testimony will in any

way offset the influence which you yourself had with the majority of the committee
in showing this bank's true relation to the whole System.

I am planning as soon as we finish with the record of the testimony to go
through Miller's statements very much more carefully with a view to recapitulating
those matters concerning which you may want to make some supplementary statements
when you appear before the committee on your return.

In the meantime, I think

there is nothing for you to worry about.
(3)

In this connection, the Stable Money Association is having a dinner

at the Astor on Monday night, May 3, at which Congressman Strong, Governor Harding
and Mr. Miller are all to make speeches.

It was originally planned to have Mc-

Fadden also, but I understand that he has had to back out.

We have arr

a table so that some of us might be present to see what is going on.

The dinner

is announced as a dinner to discuss Congressman Strong's bill and the relation of
the Federal Reserve System to stability.

In the circumstances, I think it is not

in any way harmful for us to show our interest by taking a table.

larly true in view of the fact that both Governor



Harding and

This is particu-

Mr. Miller are to

FEDERAL RESERVE BANK OF NEW YORK

3

Be nj. Strong, Esq.

April 30, 1926

I have reached Congressman Strong on the telephone and have

make speeches.

arranged to meet him for breakfast on Monday morning and to bring him to the bank
o spend the day with us.

I understand that hie wife is coming with him, but am

not sure whether she wants to explore the bank with him.

tive of

He seemed most apprecia-

our interest in calling him up and arranging to take him in for the day.

In connection with the Washington hearing, I am enclosing copies of
Professor Fisher's and Mr. Lombard's letters in reply to yours to Professor Fisher
under date of April 19.
to Mr. Lombard.

I am also sending a copy of a letter that I have written

They are all self-explanatory.

On Monday our executive committee approved of our recommendation to

continue

with the Czechoslovak National Bank all the relations which we have had

with the Banking Office of the Ministry of Finance and formally to appoint the Czechoslovak National Bank as our agent in return for a similar appointment from them.

The Board acted very promptly in approving our recommendations and we are now writing the necessary letters abroad.

In this connection, I have taken particular pains

to provide expressly that our so-called gold credit ($10,500,000 against $11,000,000
of gold deposited with the National Bank of Belgium) is terminable at any time at
our option.

While there was no specific agreement to that effect in the earlier

negotiations, I think that it was fairly implied.

At any rate, we have it definite-

ly covered now.

You may be interested in the movement of gold to Canada.

We laAiaxe had

an import of some $10,000,000 on April 1, but since the 15th of April we have shipped

$16,250,000, not to mention $8,000,000 of gold certificates that have to-day been
earmarked in the First National Bank for account of the Bank of Montreal.

5/32 prem-

ium is really the export point, although it is not very profitable under 6/32.

It

is down to 3/32 to-day and I understand from some of the local representatives of
the Canadian banks that it is unlikely that any more gold will be shipped on this




movement.

0

Benj. Strong, Esq.

4

FEDERAL RESERVE BANK OF NEW YORK

April 50, 1926.

In this connection, I am having Crane make a special study to see whether

it might not be possible by some process of earmarking to work out a plan whereby
these frequent and relatively heavy shipments of gold back and forth between Canada

It is an uneconorraperformance and one

and New York might be materially reduced.

that at times substantially threatens our available supply of gold coin.

Our ex-

perience demonstrates that they will take only coin and as a rule

will ship u

if it is possible to do so.

Winston is in New York and plans to sail to-night on the Leviathan.
You will undoubtedly see him before this reaches you and he himself will be able to
tell you more than I can what is the present status about the designation of the
Governor for the Federal Reserve Board.

I telephoned to him early in the week sug-

gesting that he speak to the Secretary about it to be sure that the right fellow is
appointed.

The more I have read of Miller's testimony the more it has appeared how

transparent is his effort to push himself forward.

I have had a real fear that

unless watched,he might possibly have got the designation himself/

Mr. Curtiss of Boston spent Wedneeday at the bank primarily
cuss rates.

to dis-

He was anxious not only to learn the background which prompted our own

decrease, but to ascertain particularly whether there is anything in the situation
which would permit or justify a decrease by Boston.

When he left here he stated

that he saw no occasion or need for any action on their part and I presume that they
will leave their rate as it is.

We all told him that so far as we can see now

there is no reason for their acting at this time.

Indeed ,.I think it would be a

mistake for the others to come down yet.

Everything seems to run along quite smoothly at the bank, although
we all miss you.

Kenzel is in Charleston at a convention of the National Foreign

Trade, but will be back Monday or Tuesday.
on Monday.

So that we will be effectively reenforced next week.

off for a week the
the horizon.



I understand that Sailer lands probably

following

Case plans to go

week, but so far as I know there are no other plans on

FEDERAL RESERVE SANK OF NEW YORK

April 30, 1926.

5

I hope you have had a firstrate Illiperossing, that you have really
made an opportunity of it to get a good rest, and that you are feeling more like
your old self again.

Please be sure to give yourself a fair chance and take it

as easy as you can, and above all, get away from London for your vacation as soon
as possible.

In the meantime, do not worry about us.

vised of everything that goes wrong!

In the absence of any news, therefore, just

assume that we are rocking along easily.
with the best of luck to you always,
Fait4f, ly yours,

Mr. Benj. Strong,
c/0 Bank of England,
London, England.

GLH.MM
Encs.




We promise to keep you ad-

FEDERAL RESERVE BANK

OF NEW YORK
May 7, 1926.

Dear Mr. Strong:

Under separate cover I am sending to you copy of Mr. Miller's testimony
before the House Banking and Currency Committee on April 20, 21, and 27.

While I have not read the latter part of this testimony, which has
just come, I do not think it covers the recommendations for amendments to the
Federal Reserve Act, about which I cabled you in my #2 on May 3.

As I advised you, Congressman Strong spent Monday, May 3, at the
bank.

I met him and Mrs. Strong at the Waldorf for breakfast at 8:30 and

immediately brought him down town to look us over.

He was really most impressed

not only with the building, its simplicity and its businesslike appearance, but
also with the immense amount of work carried on.
opener to him.

As he said, it was an eye-

I kept him for lunch and then took him to the Stock Exchange,

where Mr. Simmons did what was necessary to show him the ropes.

On the whole,

I think he had a most satisfactory day of it, preliminary to his dinner at the
Stable Money League, which met.that night, and at which he gave a short address.

By way of elaboration of my cable, Congressman Strong seemed to
think that the hearings are progressing entirely satisfactorily from his standpoint.

In other words, he feels that there is no thought of introducing any

sort of a bill before the next session, that the committee expects to continue
its hearings more or less indefinitely until every one has had an opportunity
to be heard, and that the committee will have to listen to perhaps representatives of labor, the farmers, and all sorts of other organizations which might
be interested in price stabilization, although he seems sincerely regretful
that this



must be so.

But when all the hearings are over and all the evidence

FEDERAL RESERVE BANK OF NEW YORK

2

Mr. Benj. Strong

May 7, 1926.

in and all the arguments presented on both sides, he hopes to be able, with the
suggestions that have been given, and with your help and the help of a few others,

to draft a bill which will accomplish what he wants without running the risks
which you fear in the present bill.
(4)

He also seems to think that there are some members of the committee

who are sympathetic to Miller's second proposal to put some further restrictive
clause in the law relating to the speculative use of Federal reserve credit.

I

have not seen the record of that part of the testimony, so I am not certain what
is the precise suggestion, but it must be only a statement

oftra

purpose of some

sort because the rest of Miller's testimony indicates that even he feels that
it is impossible definitely to trace the ultimate use of Federal reserve credit.

The point is, therefore, that as long as there are some members of the committee
who think that there might be some profitable amendments to the Act, entirely
apart from price stabilization, the committee should continue to hear everything
about the Act and the operations of the System during the course of these hearings in order that it might introduce in the winter session a complete bill
covering all amendments that might be essential or needed, and then after that

to grant

the

indefinite charter.

In spite of Congressman Strong's feelings in this regard, there
is still a chance, I understand, that the indefinite charter may go through at
this session as a riderto the first McFadden bill.

The Senate is still dis-

cussing the bill periodically and I can not help but think that McFadden may at
the last minute, in conference, agree to the indefinite charter if that is

necessary, in order to procure the enactment of the act to which his name will
be given.

Gold is still moving to Canada, in spite of the fact that a week
ago we thought it would slow down, Canadian exchange having eased off and our
best information being to the effect that the movement was then over.

Indeed,

while $6,000,000 has been exported since May 1, most of it has been with Canadian



FEDERAL RESERVE BANK OF NEW YORK

3

exchange below the export point.

May 7, 1926

Mr. Benj. Strong

I understand very confidentially from the Bank

of Montreal people that the exports this week have been for account of the
Canadian Government, admittedly at a slight loss rather than bid up the exchange
above its present figure.
(7)

At the request of the Reichsbank, we have finally made arrange-

ments with the Treasury Department to ship us $35,000,000 of uncirculated coin
from Philadelphia Et the expense of the Reichsbank, to be substituted in the

Reichsbank's earmark account in lieu of circulated coin now held for them.

This would eeem to indicate fairly clearly that they contemplate withdrawing
the $45,000,000 now held in earmark for export to Germany.

Otherwise, there

would be no purpose in their paying $93.75 per million dollars for a total of
$35,000,000 in order to make all of their gold holdings with us

new coin

rather than circulated coin ($10,000,000 of the $45,000,000 which we hold for
them is already new coin).
(6)

Burgess returned to the bank to-day from hie jaunt in Washington,

where he appeared on three half days before the committee.

Inasmuch, however,

as he will no doubt write you himself about his trip, I will not duplicate.
(9)

One interesting development during the hearing, however, has

been the request of the committee in writing to the Federal Reserve Board for
a memorandum on the legality

of

our repurchase agreement.

Crissinger telephoned

to me the night before last regarding the request, and has asked me to prepare

a memorandum giving a complete story of the development of our repurchase agreement, and to take it to Washington myself sometime next week to go ove

with him.

Burgess indicates that the committee may want both him and-me to reappear be-

fore the committee to discuss this feature of the repurchase agreement,although
T understand, that Wingo, who made the inquiry, does not himself believe
that they are illegal.
it.




He merely wants to satisfy others who have questioned

FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

4

May 7, 1926

Your hearings begin to-day according to your cable.
to you!

I wish that I could be there to see you in action.

Good luck

I can not do more

than ask that you do as well as you did before our own Congressional Committee!

I have had Rounds and Crane get out all our papers regarding the
Bank of England credit, code words, statements, and all the data which might be
necessary in the event of any possibility of the credit being used.

There have

been a few statements in the papers indicating that the Street thinks there might
be some call on the credit, but sterling exchange seems to be holding fairly
steady still.

I hope that if there is any likelihood of the use of either our

credit or the bankers, credit, that you will tip us off in advance.

It might

be helpful.

Mr. Jay is in Chicago where he made an address before the
Industrial Club yesterday, but will be back at the bank on Monday.
leaves to-night to be absent through next week, - his belated winter vacation.
Sailer is back at the bank on the crest of the wave.
look better or in better spirits.
Everything is running along smoothly.

We are all well and happy,

but of course miss you immensely.

Please give my beet to Governor Norman and the rest of you who are
there.

Faithfully y

Mr. Benj. Strong,
c/o Bunk of ,England,
London, England.
GLH. PIN




I have never see

FEDERAL RESERVE BANK

OF NEW YORK

May 18, 1926.

Dear Mr. Strong:
(1)

As I told you in one of my cables, I went to Washington Wednesday

afternoon (May 12) last week and spent the next day with Governor Crissinger on
the subject of repurchase agreements, their purpose, scope and legality.

We have

all agreed now that the way to handle the problem is to write one memorandum covering all aspects, that memorandum to be inserted in your testimony as originally

agreed and to be an elaboration in some detail of the one which Mr. Kenzel prepared
for you.

I saw McFadden at the Capitol on Thursday.

He said that he does not be-

lieve that any of the members of the committee any longer question the legality of
our repurchase agreements.
profess now to be satisfied.

Wingo and Goldsborough had some doubt about it, but

The committee's letter to the Board, however, must

be answered if only as a matter of record;

so as it expressly concerns the legal-

ity of the New York bank's procedure, Crissinger has agreed merely to transmit
a copy of our memorandum to the committee as covering the whole matter.
(2) Owing to the fact that so many of the members of the House Committee
are engaged in one way or another working on farm legislation at the present time,
the committee has not had any hearings whatever since Burgess appeared.

McFadden

tells me, however, that he still plans to call each member of the Board "to see
what they all know."

Some of the newspapers have rumored the fact that Senator

Reed of Pennsylvania is backing McFadden for Hamlin's job.

It may be.

But I

wonder if McFadden'e purpose in the hearings may not be more to embarrass some of
the present members with questions which will evidence their ignorance or incompetence rather than to procure any helpful testimony.



Heaven forbid that he

FEDERAL RESERVE BANK OF NEW YORK

should be appointed;

Mr. Benj. Strong

2

May 18, 1926.

but I doubt that he has any chance.

(3) The McFadden bill - H. R. 2 - passed the Senate the day I was in Washington.

It includes the indefinite charter and lacks the Hull amendments.

I came up on the

train the following morning with Senator McLean and he told me that there was not
only no debate, but no opposition concerning the indefinite charter.

The vote in the

Senate which eliminated the Hull amendments was 60 to 17, so that McLean feels that
his conferees - Glass, Edge and himself - should stand out indefinitely for the bill
as it passed the Senate.

He says that they will persist in this attitude even if

it delays final passage of the bill until next session.

The House conferees are

McFadden, Wingo and King, and while I am confident from all that I hear that McFadden
will vote for anything that will get his bill through (he cares very little for
what is in it), nevertheless an agreement must be reached by two-thirds of the conferees of each House.

In the circumstances, it will be necessary to get either

King undoubtedly will insist on the Hull amend-

Wing° or King to vote with McFadden.
ments, being from Illinois.

That leaves Wingo, the only hope, as I see it.

He has

always been against branch banking and voted for the House bill only reluctantly.

But even so, I should think he may yield because of his persistent desire to preserve the national banking system.

And so it stands!

You may be interested to know that Mr. Thompson, who is Clerk of the
House Committee on Banking and Currency, told me, incidentally, that they understand
that the present Senate bill Was devised by Glass and Mellon and that some of the
a

members are a little put out about it.

He then added "ittgfunny thing the way

Mellon has been able to win over so many of these Democrats."

I was much interested

but said nothing.

I returned to the bank late Friday and having received your short
cable that a long one was on the way, I waited for Windbnys message to Secretary
Mellon on the foreign situation.

It was finally decoded just a little before mid-

night, so that I got it off in time to reach him on Saturday.




A good part of what

FEDERAL RESERVE BANK OF NEW YORK

5

Mr. Benj. Strong

May 18, 1926.

was in the cable I had already heard confidentially from Leffingwell.

It was a

realization of the seriousness of the situation over there that prompted both Mellon
and our Executive Committee to indicate (cable No. 5, May 10) that while they were
opposed to our granting any loan before debt ratification, nevertheless they are
glad you are there informally to consider plans that may be made if and when a satisfactory program is formulated.

We all feel, I think, that in the case of France,

a necessary incident to any such program is ratification of the debt settlement,

but as Mellon said, you are at least in a position to talk about what you might be
willing to do in the event that the debt is ratified and a comprehensive and satisfactory program set up.

All the papers (from which I understand you are getting clippings)

are referring to the French situation in some detail and to your presence there
with Lamont.

I take it, however, that there is nothing whatever that we can do

li until we get some sort of report from you.
,

Your cable (No, 10) just received

states you have nothing special to report now.

The Polish situation is most acute at the moment and has raised
some question as to precisely what our position is in regard to the Bank Polski.

So far as we can gather now, some sort of effective government will be set up but,
in any event, as I see it, there is no way we can take any greater precautionthan
we are already taking in our relations with the Bank Polski.

Their $10,000,000

gold credit for one year expires on August 25.
with three renewals which we are obligated to make.

It comprises
I had thought the original

agreement made it possible for us in extreme circumstances to terminate the credit.

at the end of any quarter, but I find that that is not the case and the only thing
to be considered by our directors on Thursday is the rate for the next and final
quarter of the credit which begins May 25.

The rate to date

and although our discount rate has been reduced, I see no occasion whatever for




0

Mr. Benj. Strong

4

FEDERAL RESERVE BANK OF NEW YORK

reducing our charge for this last quarter.

May 18, 1926.

Conceivably, we might increase it, but

while conditions in Poland seem most unsatisfactory, I do not thidcwe should do so,

and the officers will likely recommend that our directors continue the 4 1/2% rate
which has been in effect since the beginning of the credit.
by gold deposited in the Bank of England.

The loan is secured

The real question will be whether we care

to renew the credit when it expires in August.

They will undoubtedly ask for it

and I feel, as I think you do, that in principle there is little reason for our making
gold loans which are in no way a part of any very definite or constructive program.

There was some justification for this particular loan when negotiated, but if we had
to consider it de novo we would not grant it with things as they are.

I hope you

may have a chance to consider this some time before August when the picture may be
much clearer.

But conditions seem now to be so muddled that it is impossible even

to anticipate what it may be at that time.

It has been a great satisfaction to all of us to know that the Indian
plan has been so effectively killed.

We are all delighted, and Tinston's cable to

Mellon confirms what we had all guessed, that you and the Professors did the trick!
We are most anxious to hear all about it.

I had previously advised both Mellon

and Crissinger of your own cable, that you considered the plan satisfactorily dis-

posed of, but I do not know whether any of the rest of the Board knows anything
about it.

The Wall Street News clipping which I cabled you, was not, taken up by

any other paper that I know BUT our own little blue newspaper review quoted it
and before we realized that it was customary to send it to the Board, six copies
had been mailed to Washington.
or another.

So far as I know, it caused no comment one way

Perhaps that blue sheet is another one of the unused reports that we

send to Washington!

When with Crissinger on Thursday, we got hold of Herson and tentatively outlined a procedure for opening Reserve Bank examinations, which I think will be
sufficiently satisfactory.

Sailer and Rounds are now working on the details.

Herson rather opposed the special letter from the Board at the time of each examin


Mr. Benj. Strong

5

FEDERAL RESERVE SANK OF NEW YORK

May 18, 1926.

ation, but admitted that there was no very good ground for his objection other than
it was "unusual", and that no other Reserve Bank had asked for it.

thought we had had

a number

of

I told him I

good ideas in New York and that the failure of

others to think of them first did not necessarily prove that they were not sound.
Crissinger laughed and agreed upon the letter!
(10)

Now about Case.

Leffingwell reached me in Washington over the

outside wire to read your cable on Thursday night, and realizing that Jay was leaving next morning for Atlantic City, I telephoned him the substance of it, particularly your suggestion about talking with Reyburn.

He agreed with

nothing that could be done over the week-end, in any event, and that we should talk
it over on Monday when Jay returned.

That we have now done and agreed in the cir-

cumstances that it mould be unnecessary to call in Reyburn
of the

contingency

since

Case already knew

to which you referred and was entirely familiar with all the

substantial facts upon which he might base his own decision.

Not being certain,

however, whether you may have had some other reason, which I could not foresee,

for having suggested the particular conference, I sent you a cable over the outside
wire, a copy of which I am enclosing.

Your reply of to-day through Leffingwell

is quite clear and from what Jay says I am certain Case now has the whole picture
before him.

Case was away all last week, but he has had a number of talks with

Jay and McGarrah, and yesterday

a long talk with Leffingwell.

He is anxious to

talk with Owen Young, but as he is out of town until the end of this week, that
will have to be delayed.

My own feeling is that Case is strongly inclined to

accept, but that he has delayed a final decision to get all possible points of
view.

Your cable (No. 9) to him yesterday afternoon indicates that you are

writing him and he has said that before making a final decision he will wait
until your letter reaches him.

I told Jay that I thought it might be ve

for you to advise one way or another without implying a guess on your part as to
what might happen at the bank.

I think Case realizes that difficulty too, but

hopes to have an expression of your personal opinion about the proposed job itself.



FEDERAL RESERVE BANK OF NEW YORK

6

Mr. Benj. Strong

May 18, 1.926-.

I think Gilbert has given him plenty of time and he now has before him all the
facts (as far as it is possible to see them at this time) on which he may make
his own decision.

I havehno doubt also that after talking to Young he may dis-

cuss it personally with other members of our board, and Jay feels, I think,that he
(Jay) must at least acquaint the directors with Gilbert's offer.
Everything is running along very smoothly here.

We, of course, ml SS

you as we always do, but there is nothing for you to worry about.

My own biggest

worry just now is the foreign situation with regard to which we shall necessarily
be somewhat in the dark until we hear further from you.

It certainly is fortunate

that you are abroad at this time, although I hope that the situation on the Continent
will not in any way delay or interrupt your needed vacation.

That is

most important job, and I hope you go at it with a vengeance!

I forgot to mention thatall of the newspapers are commenting favor
ably on the fact that sterling crossed par on Saturday, and contrasting it with

/ Continental exchanges which on the same day reached their lowest point.
even worse to-day.

They are

I am sending Governor Norman some of the clippings, which

I think might interest him.

I assume that you are getting t

Bleecker.

Goodby, take care of yourself, and the best from all of us at the bank.
Faithf lly yours,

Mr. Benj. Strong,
c/o Bank of England,
London, England.
Enc.




0

FEDERAL RESERVE BANK

OF NEW YORK
PERSONAL

May 21, 1926.

My dear Governor:

I find that I have only a very few minutes in which to get off a letter
in to-night's mail.
(1)

I wrote you at-length on the 18th for the Wednesday boat.

This will merely supplement paragraph 7 of that letter concerning

the Bank Polski.

An article appeared in the Evening Sun of the 18th to the

effect that the military forces had appropriated some 3,500,000 zlotys from the
Bank Polski.

While we have been unable to confirm the report in any particular,

nevertheless it was sufficient to put us on notice that perhaps conditions in
Warsaw were so serious as to jeopardize control of the bank in some way or another.

That being so, we have felt that regardless of the letter of our contract, we
might be on notice of facts which would not only justify but require us in the
interest of both institutions not to make further advances which might be misappropriated by some illegal authority.

In order to ascertain all possible facts

related to the situation, I,called Leland Harrison and asked him for the latest
information on the status of the Government in Poland,

I telegraphed the Bank

of England asking for any information which they might have relative to the control of the bank's operations, and I have also had the State Department, without
any reference whatever to us, cable their Minister in Warsaw to make very discreet inquiries as to whether there is any change in the status of the bank or
its principal officers.

(t)

Leland Harrison has told me that so far as the State Department

is concerned, there is an effective legal government in Warsaw and that they
have not been put on notice of any facts to indicate the necessity of considering



FEDERAL RESERVE BANK OF NEW YORK

2

Mr. Benj . Strong

May 21, 1926

the q uestion of recognizing any other sort of government. The Bank of England has
replied that news from Poland is strictly censored and no trustworthy information
,

available, although they have heard rumors of a change in the management of the
Bank Polski.

We have not yet received any information from the American Minister.

Incidentally, I may mention that the cable to

him was prepared here in the bank

and transmitted in State Department code.
(3)

At the meeting of our directors on Thursday we had a very long

discussion of what should be our attitude (1) as to a renewal on the 25th when the
present quarterly credit expires, and (2) as to what we should do about honoring
mail and cable drafts on the bank's balance with us.

As to the renewal, it was

understood that we should have a full meeting of the board on Monday to take final
action in the light of all the facts as we may have them then.

In the meantime,

we are watching the account closely, paying all mail drafts, and hoping that we
will have no cable transfers to make!
involved:

In a word, there are only two questions

(1) to comply strictly with the letter of our contract; assuming that

the control of the bank is entirely legal;

the only possibility of loss in that

case is in honoring drafts or cable transfers properly attested when we are on
notice that the bank might conceivably be in illegal hands.

(2) To abrogate our

contract on the theory that our contractee no longer exists; but in this case run

the immense danger that might result from our failure to live up to our obligation

tf,

merely because we fear some liability from honoring anfjegal draft.

I think all

the officers and all the directors have these two positions clearly in mind and
without
will certainly do nothing tkat the clearest and most unequivocal evidence that the

bank is in illegal hands.

The papers tonight are much more encouraging and we

have every reason to believe that the situation is improving.

I am m

the matter only because our directors and officers have taken it so very seriously
and because it may develop the wrong way.

In that event, you would not understand

my having failed to call it to your attention.
favor erring by complying with our contract than by breaking it.



As for mysel

FEDERAL RESERVE BANK OF NEW YORK

5

Mr. Benj. Strong

May 21, 1926.

There is no news about the McFadden bill except that I have talked
to McFadden two or three times on the telephone concerning the appointment of the
House conferees.

It appears that Wingo ie at home on account of the illness of his

father and that very likely he will not be back in time to serve as a conferee.
In that event, the House would have to appoint a third member to represent it.

McFadden himself is definitely determined to fight against instructions by the
House, to that the conferees may be entirely free in conference.

He himself

will undoubtedly vote for the Senate bill if that action is necessary in order to
procure its passage.

McFadden also told me that he had received communications

from bankers in Wingo's own district strongly urging that the conferees approve
the Senate bill rather than the House bill.

If that is true, Wingo may very likely

be the one to yield on the Hull amendments and allow the bill to go through.
There is relatively little talk about the indefinite charter.

The main issue is

the Hull amendments.

Jay tells me that he has himself written you to-day concerning the
status of Gilbert's offer to Case, and I am cabling you to-morrow morning to
indicate that Case has himself taken the matter up with the directors informally.

Jay tells me, however, that he has told you that whole story so that I shall not
elaborate.

I think there is no doubt that Cases the complete picture before

him and that the responsibility is on him to make hiw on decision. I can understand his desire to await a letter from you before he finally makes up his mind,

although I have intimated to him that it might be difficult for you to say anything
whatever concerning the matter except what you may think of the merits of Sterrett's
job.

Inasmuch as he is expecting a letter from you in view of your cable No. 9,

to him, I hope that you may have had a chance to dictate it after having seen
Gilbert in Paris.

Your long cable No. 12 which you transmitted through Morgan's, concerning the Continental situation, particularly the French situation, is a masterpiece.
It arrived late yesterday afternoon and I sent it by hand to Mr. Mellon last night.



FEDERAL RESERVE BANK OF NEW YORK

4

Mr. Benj. Strong

May 21, 1926

He got it early this morning and I have talked to him to-day on the telephone and
cabled you (No. 8) the substance of what he said.
1( C. crvistr,,,,,.
szA 4, 1'0.4 )

The pictures looks very gloomy,

but we all feel as you do that there is nothing whatever that we can do now in the
absence of a definite program that appears to have some more prospect of success
than anything that has as yet been advanced.

The most discouraging feature of the

whole situation seems to be the lack of leadership without which it is difficult to
foresee any early settlement.
(7)

Your friend Senator Owen this afternoon called with no object in

view whatever except to find out what he could about your visit to Europe and what
you and Governor Norman are planning. He got no news whatever from me.

I think no

more of him than you do!
(8)

We are all very busy at the bank, but other than the Bank Polski, we have

nothing very serious bothering us and there is nothing for you to concernttk yourself about.

I am only hopeful that the European situation will begin to straighten

itself out so that we can really accomplish something in the way that I know you
have always felt we should accomplish things.

But all the officers and all the

directors, Mr. Mellon, and as far as I know, everyone else, are agreed that there
is nothing for us to do unless and until those fellows over there do something for
themselves.

I am sending you a clipping from to-night's Sun which may be of

interest to you.

I have not yet had a chance myself to read it in full, but I

have already written so much that it is going to be

difficult for Miss McCarrick

to get this off to-night, so I must stop.

But most important of all is it that you must take good care of yourself, get a good rest and come back with all your old pep and enthusiasm.
Affectionately yours,

Mr. Benj. Strong,
c/o Bank of England.
London, England.

GLH.MM
Encs.



nCA7c744-'61'"-^
(dictated but not read)

FEDERAL RESERVE BANK

OF NEW YORK
May 27, 1926.

Dear Mr. Strong:
(1)

I am enclosing a copy of the John Steele article which appeared in the

Chicago Tribune I think under date of May 14 (possibly under date of May 15).

This article, to which I referred in my cable #10, explains pretty clearly that
the Carroll article which appeared in the New York Evening Post under date of
May 17 was in the nature of a rebuttal rather than in the nature of a charge. At
least that is the way they might properly argue, although I agree with you that

there may be something in the fact that Carroll was glad to take this matter up
again in view of our action concerning his previous article.

In any event, there

has been so much discussion in all of the newspapers concerning your conferences
abroad, and so many references to the meeting which you held in London and the
possible subjects covered at that meeting, that it would be wholly futile at this
time to attempt to single out any one reporter for correction.

My own feeling is,

and I am sure that Mr. Jay (and also Mr. Leffingwell) agreeE, that we had better
leave well enough alone and not attempt at this time to get into a controversy with
the papers concerning their reports from abroad.

They are their own best answers,

since the reports have been so conflicting and so obviously based on rumor that
there is little we could accomplish short of a press statement issued by the bank.
That I think would be a mistake.
(2)

For the moment the Bank Polski situation has cleared up.

The

American Minister finally cabled to the State Department on Sunday afternoon, May
23, that there was no truth in the reports that funds had been abstracted from the
Bank Polski by the military forces, and unqualifiedly stated that there has been




FEDERAL RESERVE BANK OF NEW YORK

2

no change in the personnel of the bank.

Mr. Benj. Strong

May 27, 1926.

The cable was a very satisfactory report

*upon conditions as they relate to the bank.

It so happens that on Saturday after-

noon, after the close of bUblness and before the cable came back from the American
Minister, we got an order to transfer approximately $2,000,000 to Dillon, Read & Co.
value of May 31.

This had to be acted upon the first thing Monday morning, and at

a special meeting of the executive committee, the officers recommended that ve be
permitted to renew the credit , the second renewal of which matured that day, and
to advise Dillon, Read & Co. of the message from the Bank Bolski.

We felt that

in view of the report of the American Minister we would be justified in taking that
action.

The directors suggested, however, that we take one more step, that is,

cable the Bank Polski direct, not with a view to confirming the report of the
American Minister, but merely to complete our record of precaution.

This we did

ot
and late Tuesday night /a satisfactory reply cable, although it lacked a number and

the proper test word.

That was supplied later and a new cable requested us to make

immediate payment to Dillon, Read & Co. rather than as of the 31st.

This has been

done and the whole matter now is on a normal basis with the understanding, of course,

that we shall exercise every possible precaution in scrutinizing every transaction
in the account.

I also have an arrangement with the State Department that they are

to keep me posted generally on conditions in Poland and more particularly as they
may concern the Bank Polski.

Mr. Jay tells me that he is writing to you personally concerning
Mr. Alexander's report on the Advisory Council meeting in Washington on the 21st.
AS long as he has undertaking to cover that fully, I shall say nothing about it

now.

Your last cable advice was that you were to leave Rome last night,

but as we have received no new cable address, I am not sending anything over the
wire to-day.

Yesterday I received at the Yale Club your cable of May 26 saying
that you have written Case fully but that you were obliged to be rather non-commital



FEDERAL RESERVE BANK OF NEW YORK

3

Mr. Benj. Strong

not knowing what advice he would receive from the directors.

May 27, 1926

I had already in-

dicated to him that I could not see how you could very well write otherwise, and I
()have to-day told him that a letter from you is on the way.

I do not think he has

as yet made up his mind one way or another what he shall do. I rather feel that he
would like to have the experience and thrill of a job with the Transfer Committee.
It would be an adventure in his life.

But I feel also that he is naturally cautious

as to the future, and notbeing adequately independent is a little hesitant to
assume the risk of having to hunt for a job when his tour abroad might end.

I

think his decision will depend largely upon what he is able to read between the
lines of your letter.

I am off for Washington to-morrow morning for a couple of days, but
will be back at the bank Tuesday morning (Monday is a holiday).
Crissinger has not been at all well.

In fact,

stant care of a doctor and as a result has not been able to visit us at the bank
as he has promised to do.

There are a number of things I have to talk over with

him, so shall do that to-morrow or next day when I am at the Treasury.

Dewey was here last week and we commenced discussions for a program
of handling gold at the Assay Office.

I am to take that up with him in

He is most interested and I think cooperative.

We ought to be able to work out

some sort of an arrangement which will enable us to control the gold market in
New York in a monetary sense without interfering with the Assay Office's job as a
manufacturer of gold bars.

I do not see how this

ever, since it will have to involve an elimination or at least a reduction in the
bar charge below the cost of manufacture.

Even so, the Treasury would gain if

we could encourage the use of bars in place of coin which is a much more expensive
product to manufacture.

This is all the news for the moment, and as I am anxious to put
this in the mail to-night I shall close.




I cannot tell you how vigorously I hope

FEDERAL RESERVE SANK OF NEW YORK

Mr. Benj. Strong

4

you are now beginning to get a real rest.

May 27, 1926.

Rome could not have been very helpful

to you, and if the lack of a cable address at the moment means that you are really

0 in seclusion some where - all the better.

The important thing, however, is for

you to make your rest long enough to obtain some real good from it.
(10)1 miss you dreadfully but manage to rock along all right.
the bank generally seem to be in pretty good shape.

Things at

We rather expect that the

examiner will be here over Decoration Day,

and while I think our proc

geared up pretty well, the Board has just reached a foolish compromise on the
question of the letter which we asked them to have the examiner present when he
first appears to examine us!
Allays faithfully yours,

(kier- km
Mr. Benj. Strong,
c/o Bank of England,
London, England.

m4,4

fati

1,zo

GLH.MM
Encs.




cwA taila,d7 0;9-6c__
at",/

har-47..

koudho

16p). 4.6&

FEDERAL RESERVE SANK

OF NEW YORK
June 8, 1926

My dear Governor:
(1)

I forgot when last I wrote you to enclose a copy of Congressman

Strong's circular letter which he has apparently broadcast quite extensively.
I am enclosing it now with a copy of my reply.

Various persons who have re-

ceived the circular letter have communicated with us one way or another to ask

how they should reply, but we have rather consistently avoided indicating what they
should or should not say.

In the circumstances, I think thatAwould be impolitic

to do so; although when our inquirers have made it possible, we have referred them
to George Fobertte article in the National City Bulletin for June, a copy of which
Burgess has already sent you.

It pretty well summarizes your testimony before the

Committee.

Governor Seay, who got cne of Congressman Strong's circular letters, has
sent us a copy of his reply.

It is long, somewhat tedious, and I think not very

helpful, knowing as we do what is Congressman Strong's point of view.

On the whole, I thibk it is too bad that Mr. Strong has taken this means
of procuring suggestions about a bill which is still technically in the hands of
the committee.

Indeed, the new proposal is so much more comprehensive and so

much more far-reaching than the original one that I cannot but feel that he will
only confuse his picture with a lot of haphazard or ill-considered replies from
people all over the country.

In all the circumstances (that is, in view of the fact that the letter
is a general circular letter, and particularly since you have already given your




FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

June 8, 1928.

views most extensively before the committee), i felt justified in writing Congressman Strong as indicated in the enclosed letter.

Ihis is especially true in view

of what he said when he was last in New York, that is, that he wanted to see you to
get your help after the hearings had been completed and after all the other suggestions had been received, as stated in my cable No. 2.

The Supreme Court yesterday denied the writ of certiorari in the
Pascagoula case, so that is ended now quite finally.

While it is, of course, a

victory for the Reserve banks, I cannot but regret the fact that the issue has not
been disposed of once and for all by the Supreme Court rather than by a lower court.

As some of the others are no doubt writing you, the Treasury late
yesterday announced that there will be no ner issue of certificates on June 15.
In consequence, all the Government securities are very strong to-day.

The advance

estimates as to the amount of the likely issue had varied a great deal, but I think
no one anticipated that there would be no issue at all.

It tas quite a surprise

to the Street.

The newspapers continue to discuss various reports of a possible

French loan in this country, varCe in amounts as high as $500,000,000.

Most of

the articles refer to Paris dispatches which indicate that efforts are still being
made or conversations still in prqgress looking toward some sort of a credit.

They

emphasized this morning, however, the recent published decision of the Bank of

France not to use its own gold,and quoted Peret as saying that the American Government will not permit a French loan in New York until the Question of the debt is
settled.

But this is somewhat qualified by to-day's papers which also discuss

the alleged statement of Secretary Kellogg to the effect that the French Government hae made no official inquiry as to what would be the State Department's
attitude on another French loan in this country, and that until the question is
asked specifically, this Government cannot signify what its attitude would be.

In this connection, Leffingwell told me yesterday afternoon that a loan by them




FEDERAL RESERVE BANK OF NEW YORK

3

Mr. Benj. Strong

to the Bank of France is not in the wind just now.
this seemed a possibility, but I presume the decision

June 8, 1926

When I talked to him last week

of

the Bank of France respect-

ing the use of its gold might well settle the question of their approaching Morgan
at the present moment, although it is true that Morgan did not contemplate asking
that gold actually be hypothecated.
(5)

The conferees on the McFadden bill adjourned last week in what seem-

ed to be hopeless disagreement without setting any date

for

reconvening, but this

morning the papers indicate that they are having another meeting to-day, so that
perhaps something has happened over the week-end to make an agreement possible.
I cannot understand what it is because Wing() seems to have committed himself quite

definitely against the bill unless it includes the Hull amendments.
you if anything

I shall cable

definite eventualizes.

This is all the news there is at the moment, but I shall write you my

regular letter on Friday.
Faithfully yours,

Mr. Benj. Strong,
c/o Bank of England,
London, England.
Fries.




FEDERAL RESERVE BANK

OF NEW YORK
11.

June 11, 1926.

My dear Governor:

I wrote you three days ago under date of June 8 and have very little
of moment to tell you now.

By way of supplementing my last letter,'however, you may be
interested in the attached letter Mr. Redfield has sent to Congressman Strong.
Nothing further has happened regarding the McFadden bill.

The

meeting which they were supposed to have had on Tuesday did not eventuali2e and
there is no indication now as to what are their plans.

The press, however,

seems to regard the outlook as fairly hopeless for this session.

Yesterday morning I had another long talk with Leffingwell concerning the French situation.

He told me again that the Bank of France had not

renewed their request for a loan, and while I think he was surprised at this
and somewhat impatient over the failure of the Bank of France to make some progress, nevertheless, as he expressed it, the' were selfishly just as glad they

had not asked for the loan:

I think he personally believes that the bank is a

little weak-kneed about it all, especially as he indicated they would not ask
for the hypothecation of the gold.

I told him I presumed the bank itself might

properly hesitate about a loan until the Government or the Government's committee
had progressed a little further with their own program.

But he seemed to think

they might well have asked for the loan for a period of six months regardless

of the fact that a complete and comprehensive program has not as yet been formulated.




I told him that you had indicated in your cable of June 9 that such a

FEDERAL RESERVE

AN

OF NEW YORK

2

Mr. Benj. Strong

June 11, 1926

credit is desirable "only as part of a more comprehensive plan not yet developed."

He was interested in that point of view, but I am not certain that he wholly agreed

c

with it.

Yesterday afternoon after my talk with Leffingwell, he sent me a copy
of your cable of June 10 to Lamont in which you indicate that the pressure of

events is undoubtedly brin6he situation nearer to a solution.

I hope so.

But

it seems to me from all that you have written that they cannot expect a satisfactory solution unless or until they find some one leader whohas more imagination
and courage than any that has yet appeared to be available.

Leffingwell also told me quite confidentially that they are again renewing discussions about Belgium, although quite sketchily.

I am wondering myself

whether any one of the three countries, possibly excepting Italy, can now handle
the matter entirely independently of the others.
(4)

Your letter of May 23 from Rome supplementing your letter of May 15

on the subject of France was received only yesterday morning.
fascinating story that you tell and has interested us all.

It is a most

I think you handled

a very delicate job with great tact, although in the circumstances I wish it had
been possible for you to have avoided entirely any meeting with Peret.

At the

directors meeting yesterday, I gave them a summary of your story, not only because of their interest in the situation itself, but more particularly to let

them visualize the difficulties which you have had in keeping out of the thing
politically.

/

I felt it wise to handle the matter that Aas the most effective

method of explaining various newspaper. stories that have
you and Winston landed there.

one about ever since

I had already told them of your cable

you warned us not to take seriously newspaper reports about your doings abroad.
I am wondering, however, what the Federal Reserve Board might possibly be thinking.

Normally, I would discuss it all with Crissinger, but he has been sick for the




Mr. Benj. Strong

3

June 13, 1926.

FEDERAL RESERVE BANK OF NEW YORK

past ten days and will not be back in lashington until early next week.

I may

possibly go down there soon after he returns in order to make a chance to let

0

him know how little there is in some of the newspaper stories that are going
They are so grotesque, however, and so varied that I do not think the

about.

Board can be taking them too seriously.

Winston is supposed to land to-day

and I shall try to have a chat with him on this subject.

He may have some help-

ful ideas.

Case cabled you yesterday of his decision not to accept Gilbert's
offer.

He cabled Gilbert at the same time.

Your letter to him from Rome came

the day before yesterday and he was much pleased.
whole inclination was to take the job.

At first I think that his

But so many people discouraged him as

to the prospect after he might return from abroad that he lost heart a little

and then drifted along pending the receipt of your letter which was very happily
done.

In any event, he seems much pleased now that he has made his decision

to stay.

Your cable No.

saying that you have not received my No. 12 has

greatly perturbed me, not so much because of its contents as because of the uncertanity it indicates of all our cables to you.

As I wrote you sometime ago,

I have been quite hesitant about cabling in any event since you left the Bank
of England, largely because of the fact that the code that we use is so generally
known.

Your failure to receive No. 12 only exaggerates my feeling about cabling

anything but the most trite messages.

I hope you will remember that as my

cables reach you.

Mr. Jay was not feeling particularly well yesterday and did not
come to the bank, and a little fever has persuaded him to stay away over the weekend as well.

I understand it is nothing serious, but mention it in case you

might otherwise miss a letter from him in this mail.




FEDERAL RESERVE BANK OF NEW YORK

4

June 11. 1926

Mr. Benj. Strong

All the rest of us are on the job and feeling tip-top.

The bank as

a whole seems to be running along quite smoothly, and although Herson is still

in the process of examining the bank, we have had very little but the most
routine contact with the Board in Washington.

I made reference to your apartment and the relations with the
Board in my cable No. 12 and also in my cable No. 16.

I have not gone into

-.7-'

any detail about it merely because Mr. Jay told me specifically that he would
cover that subject in a letter that he wrote you.

I rather think myself that

you may eventually get more from Winston after he has returned to Washington than
in any other way.

But unless there is a vacancy by resignation, I do not think

there is any change in the curds as they are stacked at present.

I want to thank you particularly for your personal letter of May
22 from Borne telling me about yourself and how you are feeling.

I rather gather-

ed that you had a tough time on the way across, and Governor Norman wrote me that
you were not at all well in London.
mend now.

I hope, however, that you are really on the

That temperature must have been a source of real worry to you and

without the opportunity to take care of yourself, it seems all the more extraordinary that you got rid of it as quickly as you did.
you are getting the real rest that you need.

I do hope though

that

i did talk to Dr. Miller about you

because after I got your first. letter written from the steamer I was frankly

worried and thought that possibly your plan to go to the Riviera might be the
wrong one in the circumstances.
made no difference whatever.

Dr. Miller, however, was certain that that
The only injunction which he issued was that you

should be quiet and I hope that is what you are doing now.

Even after you leave

there, I should think you would try to take it pretty easy.
Miss Bleecker has just poked her head in the door to say that Mr.
Alexander's office has just telephoned over here asking to speak to Adolph Miller,




FEDERAL RESERVE SANK OF NEW YORK

5

.

Mr. Benj. Strong

who they said is on his way over here!

This is all I know about it. I may

have something more to write you next time!

o

Goodby and the best to you from all of us.
Faithfu y yours,

6ke

Mr. Benj. Strong,
c/o Bank of England,
London, England.
Encs.




June 11, 1926

2e ffeA

FEDERAL RESERVE BANK

OF NEW YORK

June 11, 1926

Dear Mr. Strong:

In my longer letter of to-day's date, there was enclosed a
copy of some correspondence with Mr. Redfield concerning Congressman
Strong's bill.

Inadvertently, we enclosed a copy of a letter which

I dictated to Mr. Redfield under date of June 11.

I had not read it

and just want to let you know that it has not been sent;
sending him an

acknowledgment with thanks.

I am merely

Will you, therefore,

please destroy the copy that was enclosed with my other letter.
Very sincerely yours,

Mr. Benj. Strong,
c/o Bank of England,
London, England.




Don't be surprised if this reaches you before
the one to which it refers because they are
leaving on different boats.




...

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414,

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u4.40",41

COPY of handwritten letter




June 18th, 1926.

Dear Mr. Strong:

I received your handwritten letter (in re Case) of
June 6th just before I left for Washington on the 16th. I
showed it to Jay who has understood anyway why you have communicated through me rather than him on that subject. I had
been quite frank with him about all your cable messages. We
both caught your points I think and gave Case all the dope he
wanted. Your letter to him, contrary to your fears, was most
gratefully and happily received and was the final element in
his decision to stay. Your congratulatory cable also pleased
him a lot so that you can be assured he has no feeling whatever that you were not frank or helpful or that you were
"unappreciative." You hit just the right note and did it
beautifully!! So the thing is closed now with complete satisfaction to him in the present and no delusions at all as to
the future.
This is in a great rush to go with my other long
letter.

G. L. H.

FEDERAL RESERVE BANK

OF NEW YORK
June 18, 1926

Dear Mr. Strong:

My last letter to you was June 11.
(1)

Late that afternoon Winston arrived and brought me your

etter of

Jr,

May 29 concerning Italy, together with a copy of your letter of May 26 on the same
subject, the original of which arrived this morning.

It was most satisfactory to see him and hear first-hand about you and your
trip, - most of all that you seemed so much better before he left.

He told me in

some detail about your visit to Paris, and more particularly about your stay in Rome.

Before he left, I told him that I thought that now that I had received your final
letters on Italy, and now that you are off on your vacation for a few weeks, it would
be most opportune for me to report to the Board the substance of what you have seen
and heard since you have left here.

I told him that the newspapers, and more par-

ticulerly the various Washington information services, have related in some detail

all sorts of stories about your visit, what you are doing, and more particularly
what you are not doing.

Many of these stories have been obviously erroneous; others

with some color of truth - but all colorful rumors that might be misleading.
heard nothing whatever from the Board, no questions, no inquiries of any kind;
I think that they must have been wondering about what you are doing.
gestion to Winston and my cable No. 17 to you.

but

Hence my sug-

I was particularly pleased with your

cable No. 25 in reply, and immediately called Platt (Crissinger has been and still
is out of town quite sick), told him that only on Saturday I had received your final

letters through Winston, and that I would be glad of an opportunity to tell the
Board the substance of what you have written us, if they cared to have me do so.




2

FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

Platt said that he thought it would be most interesting, an

June 18, 1926

when I asked him to eug-

ibiest a date he said that he would confer with the Board and call me back.

Finally,

he fixed yesterday (Thursday) the 17th, saying that the Board would be delighted to
1:0have me come and tell them whatever I cared to.

He mentioned on the telephone (that

was Tuesday the 15th) that Governor Crissinaer was out of tom, that he would not be
back for sometime, and that Mr. Miller had sailed on Saturday on the Leviathan. It
so happens that I heard only on Tuesday morning that Miller had left (this was after
I had cabled you about reporting to the Board) but as Platt suggested, there was no
occasion to await either his return or Crissinger's return.
So yesterday Winston and I both appeared before the Board.

Winston open-

ed the meeting by telling them rather briefly of some of the general aspects of the
foreign situation, referred to the difficulties being experienced in Belgium, France
and Italy, and explained that his trip abroad was primarily a vacation, and secondarily an opportunity with you to learn something about conditions in France and Italy.

I then told the Board that I had wanted for sometime,particularly in view of press
reports, to tell them about your trip, but that while we had received cables from
you they were necessarily cryptic and that I wanted to await the receipt of your
letters on both France and Italy before going before them.

I explained that those

letters had only arrived on Saturday and that, therefore, I availed myself of the
first opportunity to suggest a talk with them.

I comwenced the discussion by emphasizing that this trip was merely one
of your annual visits to the Central Banks abroad, that you felt, as our directors
feel, that it is essential for this bank, through you, to maintain its contacts
with our foreign correspondents not merely in an effort to maintain personal relationships with them, but also because, as you had explained to the Banking and Currency
Committee of the House, we regard our relation to mcnetary stability and a return

to the gold standard in Europe as one of our chief functions and one of our best
opportunities to assist the country as a whole by maintaining our foreign markets
abroad.




FEDERAL RESERVE BANK OF NEW YORK

3

Mr. Benj. Strong

June 18, 1926.

I could see that this preface struck the right note with the Board, and I
then told them that while your letters necessarily contain some information that had
been given to you in confidence and that I hesitated to pass on to anyone, neverthe-

0 lees I would be glad to read parts of or talk from,your four main letters, that is,
the ones of May 15 and 23 on France and May 26 and 29 on Italy.

The Board said that

they would like to have me read as much of the letters as I cared to.

So with care-

ful expurgations and some deletions, I read extracts involving the better part of
these four letters, discussing various points as they came up and answering questions as they occurred.

Winston was a great help and interpolated ideas and vivid

pictures of first-hand impressions that interested the Board immensely.

On the whole,

I think that our meeting went off in first-rate shape, and I concluded with the state-

ment that I wanted to leave feeling sure that the Board realized: (1)that you had
been most meticulously careful to have no negotiations or discussions with anyone
except the central banks abroad, or when unavoidable only in the presence of the
Governors of those banks, to report what you and those Governors may have discussed
or agreed upon.

This I pointed out was carefully emphasized in all your letters.

That you had not negotiated any loan with France or Italy or any one
else, and that according to your latest advice, no such negotiations of any kind
were in progress.

That you would not enter into any such negotiations with any Central

Bank abroad unless or until those countries interested had ironed out their own
differences and agreed upon a comprehensive program of stabilization with some
reasonable possibility of successful accomplishment.

That while you view the situation as being most confused and even
gloomy, nevertheless you feel that for the first time they are beginning to see
that they cannot expect American help or Federal reserve help unless or until they
help themselves first, and that with this realization you are hopeful that they
may soon see the necessity of doing something for themselves rather than temporizing




FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

4

June 18, 1926

with makeshift credits from abroad.
The only members of the Board present were Platt, Hamlin, Cunningham,
James and McIntosh.

Eddy and McClelland were at the meeting when it first opened,

but after my preliminary statement withdrew, so that at the time of our discussion
the only persons present were the five members of the Board, Winston, Dewey and myself.

After the meeting, each one of the members of the Board told me how much

interested they had been in the whole discussion, how satisfactory it was to have
me report as I did, and that they think the whole matter had been handled in the
moat helpful and satisfactory fashion.

I think it is the first time that I have

dfqktoe
been in Washington for sometime when each member of the fouf,imembers of the Board,

unknown to each other, gave me an invitation to lunch(

I went with none of them.

The only "out" about the whole meeting was a misunderstanding which Winston
and I had between ourselves.

Before the meeting we had mapped out a program of pro-

cedure which involved, as I thought, Winston's reporting in behalf of the Secretary
that you and the experts had testified before the Indian Currency Commission in
London.

In other words, accepting the theory that you had employed experts, prepared

data and made an appearance before the Commission, acting as Fiscal Agent of the
Treasury upon the confidential request of the Secretary, I thought it would be better
to have him make the first reference to this subject, especially as we had never
received any authority from the Secretary to report the matter to the Board.

Somehow

or other, however, Winston failed to mention the question at all and I would have done
so except for the fact that Winston stopped in to see the Secretary on his way to
the meeting and I was afraid that perhaps unknown to me the Secretary had advised him
not to talk the matter over with the Board at all.

Immediately after the meeting,

I tried to get hold of Winston but he was tied up with the Secretary, so that I did
not see him until after lunch.

He then mentioned that he had thought that I was

going to discuss the subject.

So between us, no mention of it was made whatever.

I suggested, however, that he take the first occasion to take it up with the Board




XFEDERAL RESERVE BANK CF NEW YORK

Mr. Benj. Strong

5

June 18, 1926

and explain that he is reporting in behalf of the Secretary regarding a matter which
the Secretary had

confidentially asked

you to undertake.

I am sending you a copy of

a letter which I am to-day writing Winston as a matter of record.
I understand that at yesterday's meeting (at which I was not present,
being in Washington) the directors approved the recommendation

of

the officers to

pay each of the Professors $3600 plus expenses, which amounts to about $100 a day.

I believe Mr. Jay is writing you concerning the basis on which we arrived at this
figure.

I think myself that it is eminently fair and that we might have difficulty

in sustaining a higher payment.
that you thougfirSprague should

Your letter to Mr. Jay onthis subject indicated

perhaps

receive as high as $5000.

But, in the cir-

cumstances, particularly after investigation made by Burgess to ascertain what fees
are usually paid to experts for work of this kind, we all felt that we would not be
justified in paying more than $3600, and that as long as we fixed the payment at this
figure rather than at *5000, we had much better pay both Professors the same amount.
I hope this will prove to be satisfactory to both of the Professors and yourself.
Now as to the McFadden bill.

I cabled you the substance of the agree-

ment in my cable No. 18, and as the report has not yet been formally submitted and
is not available to be forwarded with this letter, you will have to rely on that
as being substantially correct.

I
I have not myself seen the text of the re

agree with your cable No. 26, however, that.the charter prevision is as good as

we could expect, and I really think that the Hull amendment compromise is not as
bad as it might have been, although I understand that North Carolina and some other
States which have no cities larger than 100,000 are now openly objecting to the
compromise.

As far as I can learn in Washington, no one seems to know %hat

McFadden's point of view is.

There is some feeling that he shoul

duced the report in the House at once and urged action upon it, especially as he
apparently has a majority, but it is now planned to bring the matter up for a vote
on Tuesday the 22nd.




Wing° is apparently adamant and

both

he and Hull expect

FEDERAL RESERVE BANK OF NEW YORK

8

Mr. Benj. Strong

to fight the bill on the floor.

June 18, 1928

I agree with you that Wingo mig

....convinced of the inequity of the Hull amendment, except for the fact that he has so

many times vigorously and openly opposed branch banking of anyeert, and because he
agreed to the original House bill only upon the express ground that the Hull amendment be attached.

McFadden told me that bankers in Wingots own district opposed

the Hull amendment, but somehow or other Wingo has not wavered.

King switched for

the compromise measure only because he got the provision about the joint committee
to investigate the effect of the "American banking system" upon commodity prices
since 1914.

No one seems to know quite what his idea is or why he wants this in-

vestigation on top of McFadden's inquiry on the Strong bill.

Comptroller McIntosh

told me that he was sure this provision of the conference agreement would be eliminated either in the House or in the Senate as being foreign to the purpose of the
bill.

But even if it is not eliminated, I suppose it will not do much harm if we

get our recharter through, and I question whether it is advisable for us in any way
that might be conspicuous to oppose this provision of the conference agreement as
long as that agreement also provides for the extension of the charters.

our charters, it might be a poor time openly to resist a committee to ask what effect
we might already have had on prices during the period of our existence.

Platt also

told me that he understood the provision for the joint committee would be eliminated,

knowie4
so that I thought

7 '7

all the facts, it would not be wise for me while I was in

Vmshington to do anything whatever to oppose the matter.

It might much better take

its own natural course so far as we are concerned.
(4)

Wednesday as I was leaving for Washington, I got your letter of June 6

concerning Poland, enclosing an exchange of letters which you have had with Mr.
Stetson, our Minister at Poland, which I have read with interest.

I still believe,

however, as I mentioned in my cable No. 16, that I think it would be

unwise

for

you to go to Warsaw unless the atmosphere clears quite considerably before you
would naturally go there.

It so happens that Ciechnowski sat right opposite

me on the train to Washington on Wednesday,




and I

had a most pleasant trip with

FEDERAL RESERVE BANK OF NEW YORK

him.

7

He is a delightful person.

Mr. Benj. Strong

June 13, 1926

Incidentally, he had heard all about your talk

with the Polish Minister at London and was quite opposed to your compromise suggestion about having various other nations represented on the Kemmerer commission.

He said he took it up with Kemmerer, that he also was rather opposed, and tat he
himself (I think) cabled to Warsaw urging against it.

He smiled and said that he

thought that your suggestion was very probably out of deference to Norman.

But

I merely mentioned that I had not heard from you just what was the basis of your
proposal.

I assume, however, that as long as the Kemmerer commission is now all

fixed, the Polish Government is going ahead with it on an American basis solely.

Ciec4nowski seems to think that the present set-up will facilitate credits in this
country, will be just as satisfactory for credits in France as any compromise set-up,

and that as far as London is concerned, they will not want to let the business go
elsewhere when the time comes for a credit, regardless of who may have composed the
commission mapping out the program!

In any event, he seemed very happy that the

thing is set up as it is, and expressed the hope that you might be able to go to
Warsaw before you leave Europe.
(5)

Now as to Adolph Miller.

After my meeting with the Board yesterday,

when talking alone with Platt, he himself raised the question and said that he was
wondering, in view of the reports that Winston and I had given the Board about con-

ditions in Franceragg what Miller might get mixed up in and seemed most
anxious that some way somehow he Flight get an advance slant
are.

I asked Platt whether Miller planned to go to London.

thought only on the way home.

on conditions as they
He said Yes, but he

(He is to be absent ten weeks in all.)

asked me whether I thought that Miller might meet you somewhere.

no idea whether he would run into you or not, but I knew that you planned to be in
the south of France until the middle of July, and that any meeting with you was unlikely during the earlier part of his trip.

Platt did not know Miller's itinerary,

and as far as I can find out, no one else does.




The interesting thing is that

FEDERAL RESERVE BANK OF NEW YORK

6

Mr. Benj. Strong

June 18, 1926

Platt, who is quite a talker himself, seemed really worried about Miller tumbling
unwittingly into a hornet's nest.

Winston and Morrow are testifying before the Finance Committee this morn-

(6)

Oing

on the question of the French Debt settlement, and press reports of this morn-

ing lead to the belief that there may be some questions asked as to what you did
in Paris.

The dress rehearsal which Winston and I had yesterday ought to be pretty

effective preparation for him in the event that that does happen.

It may be, however,

that they will strictly confine themselves to debt settlement and nothing else.
(7)

This is all that I have to report at the moment.

The stock market
indicates
has boomed along the last few days at a great rate and your No. 26 paragraph 47that
you are worrying about it.

But I am covering that by a cable to-day and no doubt

Burgess and Jay will go into the question in more detail in their o4n letters, so
that I shall not burden you with it again in this one.

Steel and General Motors

seemed to start it and still lead it, although the ticker this afternoon 25Eppmeftr-

indicatea real check to the advance.
Take care of yourself and continue to get the rest you deserve.

Judging

by the amount of your correspondence, however, I am afraid that you do not get the
of the
chance to loaf that you should.
I am certain you won't if many7Tetters that you
get are as long as this one.

Please forgive me.
Fai

fully yours,

1/Weel,
Mr. Benj. Strong,
c/o Bank of England,
London, England.

GLH.MM
P. S.

I am enclosing on a separate sheet of paper a paragraph which might have
gone in this letter, thinking you might want to destroy it.




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Crissinger is in Marion and has been there now for two or three weeks.

For sometime he has been quite sick with some sort of kidney trouble, I think it
is.

Platt told me yesterday that he does not know when he will be back, although

Eddy intimated that he might possibly be back next week.

As far as I can gather,

he is a very sick man, needs an operation, but is in no condition to stand an operation on account of his heart.

If that is true, on top of Crissinger's own feel-

ing about the Board and his relations to it, I cannot but believe that he will
either resign or have to quit sooner or later, in any event.

It seems to be the

only opportunity for any realignment of the Board's personnel, and as I think Mr.

Jay has written you, it looks now as though Mellon would do nothing until a
vacancy such as that occurs.

Hamlin told me yesterday that he has not been re-

appointed, but he seemed quite optimistic and mentioned the names of a number of
influential men in Washington who are supporting him
I think he seemed fairly sure of his position.

including Mello. I think

The only doubt he seemed to have

was whether tha appointment would go through before Congress adjourns for the
summer.

June 26 is tentatively fixed as the date of adjournment.
In one of your letters to Mr. J.5.3r

he nor I took your last talk as ser4g

/

you mention that you think that neither
you

tended it.

0

you , how-

assur

dt

-5(1.40
ever, that as far as I am concerned, *here has never been any doubt P1

m

own mind

of the way you feel, and I have emphasized my conviction on that score at every
il(meeting we have had to discuss the question with the directors,

ot only that, but

I have discussed it privately with individual directors, and I think that they all
know how definitely I feel about your declaration.

It is no doubt true, however,

at the moment not much is being done regarding the situation in Washington.
Crissinger's illness and the possibility of his retirement seems to be the reason
AtO

prompting Ger action at the present time.
abroad possible the middle of July.




Dewey tells me that Mellon is to go

then
If that is so mad nothing will be done until

after his teturn, even though Crissinger should quit.

That would very likely

mean no appointment of any kind until after election.

In the meantime, you will

have come back, the situation will have been little changed, and I an afraid you
will feel then, as your letter to Mr. Jay indicates, that you think nothing is
being done.

But

as

a practical matter, in the face of Mellon's own views on

the situation, I do not see how it is possible to do more until a vacancy occurs,
such as Crissinger'e.

The only alternative would be - and this is one which I

have myself discussed,to let Mellon know about the whole matter and what course
you might take.

That has been discussed with the directors before

and they feel,

after some thought on the subject, that it would be most questionable tactics to
Rather

follow and might only result in embarrassing both Mellon and yourself.

than do that, the general feeling seems to be that it would be better to await the
likelihood of Crissinger's retirement.

In view of that possibility, however, I

think we should be giving very much more active thought to the name of a succ, ssor

a

and I shall talk with Mr. Jay again about that this afternoon.

1444W




4,20,44

eteS

t

"Arkbeed

au(
4tp;

/t
,er),,e....

FEDERAL RESERVE BANK

OF NEW YORK
June 22

1926.

Dear Mr. Strong:

I have just seen Leffingwell, with whom I had a very general talk
about France and Italy, more particularly France.

I had thought from one

of my earlier conversations that he was impatient with the Bank of France for
not having asked for a loan after the appointment of the Expert Committee,
when Morgans had indicated, I think, that they would consider favorably a request for a loan.

True, from their own point of view, they were glad not

to have them ask for it, but I had understood that he seemed to think that
the Bank of France should have asked for a loan as a first step toward the
formulation of a constructive program.
I made some reference to that understanding in my talk with him to-

day,

and he has cleared up his point of view quite satisfactorily.

In point

not
of fact, he feels, precisely as you do, in that they should/ask for a loan
in the absence of a concrete.program, but rather that the Bunk of France has
been somewhat remiss itself in not having been more active in the formulation
of a program.

As you state in your cable of June 9, the credit is desirable

only as a part of a more comprehensive plan which has not yet been developed,

but that when developed, the Bank should not hesitate courageously to use
its gold.

So much for that.

Leffingwell has told me of some further inquiries by the Belgians,
first through de Cartier over here and then through Franqui in London.
understand that they expect to raise a billion and a half



I

francs more taxes,

2

FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

June 22, 1926

but that nothing else very definite has been developed.

As you remember, the

original bankers' credit of *27,500,000 was doubled with an additional credit
ow.

expiring the end of March.

The latter credit was never used and about half

of the original credit which extends until June 30 is in use at the present
time.

The bankers have agreed to extend for another three months that part

of this credit, approximately ,t13,000,000, which is now in use, thus relieving

the Belgians of any pressure to pay off.

Leffingwell himself questions,as he

always has, whether it is possible for Belgium to do anything without France.

He believes, as I understand you to believe, that possibly Italy may go it
alone, but as to the other two, he is now waiting for a program.
I cabled you yesterday that the House will give preliminary consideration to the conference report on the McFadden bill to-day.

A word of explana-

tion is necessary since the paniamentary situation is a bit confused.

The

conferees agreed upon the report substantially as I cabled you on June 15.

It so happens, however, that McFadden had promised the House when the House
conferees were appointed that whatever was done about the Hull amendments, he

would give the House an opportunity to vote on that section of the report independently of the complete conference report.

That being so, the approval

of the conferees to the revised Hull amendment is naturally conditioned upon
separate approval of the Houee of this particular section.

Pending th

proval, it is impossible for the Senate to take action since there is not any unqualified conference report for the Senate to act upon.
tion that the matter comes before the House to-day.

It is in this situa-

The more I have thought

of the added King resolution to investigate the effect of the American banking
system on prices since 1914, the more perturbed I get, and particularly as the
press generally has been most critical of the proposal.

When I was in

Washington on Thursday, the Comptroller, Colonel McIntosh, assured me that




3

FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

June 22, 1926

this provision of the conference report would be struck out on point of order.

You yourself suggested that it might be taken up with the Speaker, but inasmuch as Winston has also unqualifiedly confirmed what McIntosh said, I have
done nothing more about it.

I hope it will not be overlooked.

As to the Pension Bill.

As you know, the Senate Committee has re-

ported it favorably and it is just possible that McLean may get action on it
in the Senate before this session adjourns.

McFadden's committee, however,

has not even considered it, and due to the hearings on the Strong bill, the
discussions on the McFadden bill, and also,I personally think, a little to

McFadden's own indifference, it has been impossible to make any progress towards consideration by the House committee.

While the newspapers are a bit

confused this morning as to when Congress will adjourn, there does not seem
to be much hope of affirmative action by the House this session.

The time

is much too short.

Yesterday Mr. Jay got your letter expressing some doubt as to whether
he and I fully appreciate the seriousness of your discussions of the Federal
Reserve Board matter.

You cite the fact that Miss Bleecker and Phil and I

had continued the lease on the apartment as evidence.

As a matter of fact,whil

I have not written you very much concerning the Board question because Mr. Jay
has told me that he was writing you concerning it, and,,I purposely eliminated

reference to the matter on that account, nevertheless in view of one or two
other references that you had made to our attitude toward your possible action,

I felt it only fair to mention it in some detail in an addendum which I wrote
you on June 18.

Your letter to Mr. Jay which was received yesterday, makes

me the more glad that I wrote you as I did.

As to the apertment, however,

to which I made no particular reference, when the time came

for a decision,

I explained to both Phil and Miss Bleecker, that no progress had been made




FEDERAL RESERVE BANK OF NEW YORK

4

Mr. Benj. Strong

June 22, 1926

and that it was unlikely that any would be made before the fall, if then.
It all depended so much on Crissinger.

But the cancellation clause, coupled

with the fact that whatever you may do will take sometime, even if it is only

the closing up of your affairs here, that to continue your lease seemed the
practical thing to do.

We might have cabled you for instructions, but in

view of the natdre of Alexander's report about Washington, my hands were tied
in that regard.

My chief regret is not so much that you have been saddled

with the apartment, because I think that you will be able to work that out
satisfactorily, but rather that you have interpreted that as meaning that we
As

have failed to appreciate how serious you are about the whole business.

I explained to you in the addendum to my letter of June 18, both Mr. Jay and
myself fully realize just how you feel, and I am certain also that the directors do as well.

Furthermore, I am deeply certain that they sympathize fully

with ycur point of view.

The only difficulty is what can be done at this

moment short of an ultimatum to Mellonft.This, I mentioned in my letter the

other day, we all feel would be unnecessarily embarrassing both to you and to

him, particularly in view of the fact that there is a solution short of an
enforced resignation in Washington, that is, the appointment of a Governor
who can effectively control the Board.

But this again is my own personal report to you because I understand that Mr. Jay is either cabling or writing you in some detail to-day.
I have felt from the beginning that as regards the Board situation, reports

had much better come from Mr. Jay than from me, because it was a matter that
you referred expressly to the board of directors.

I have written this much

to-day and in my letter of June 18 only because I felt that it might throw
some light upon my own personal appreciation of how serious you are.

I can

well enough see how you might have had some doubt about that because of my




FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong-

5

June 22, 1926

failure in the past to mention it in any of my letters, as well as because
of the action taken on your lease.

0

As to that, while I myself did not make

the decision, I fully sympathize with the position which Phil and Miss Bleecker
took.

In the circumstances, I think it was the best thing for them to have

done, and I hope that events will later justify it!

The Open Market Committee met in Washington yesterday.
No. 22 reported the substance of their action.

My cable

Case returned to-day and said

the meeting was most satisfactory, although there were only three members of
the Board present - Platt, James and Hamlin.

Crissinger is still away and

Cunningham went last week to John Hopkins, where I understand he may be detained for sometime.

My cables No. 21 and 22 have given you the current news on the money
market as well as the stock market, and while there seems to be considerable
optimism around the Street as to the future of stock prices, nevertheless we
expect tightening of money for the next ten days or two weeks might check the
bulls

a

bit.

The present rise is nothing like the market of last winter,

and I do not believe there is any feeling prevailing that it will develop
into such a market.

In any event, there does not seem to be anything to

worry about at the moment.

I am so glad that you are getting a good rest and feeling so much
better.

Please be sure to continue it long enough and don't let any rest-

lessness on your part hurry you.

Everything is going along very smoothly

here, and while you indicated in one of your letters that you might be back
by the first of September, I myself never expected to see you before the
latter part of that month.

Your most important job right now is the one

that you are doing over there, and I hope that you will make the best of it
while you have the opportunity.




Certainly, there is no occasion for your

FEDERAL RESERVE BANK OF NEW YORK

6

Mr. Benj. Strong

June 22, 1926

hurrying your trip to the extent of losing the benefit of the rest that you
are now getting.

0

All of us send our best,

Mr. Benj. Strong,
c/o Bank of England,
London, England.

GLH.MM




FEDERAL RESERVE BANK
-

OF NEW YORK
June 22, 1926.

Dear Mr. Strong:

I have received your letter of June

referring t

the Officers Council meeting of April 26 on the subject of the availability

of Clearing House its deposited with us for immediate credit.
As you no doubt remember, items drawn upon banks

in

our Bronx-

Brooklyn Clearing Arrangement are handed to them about 9:30 o'clock each
morning, their accounts being charged for the dollar amount of the items
thus surrendered.

It so happens, however, that occasionally the amount of

the actual balance of the paying bank is not sufficient for this purpose.

The question arises whether we should refuse to surrender the items until a
transfer has been made to their account to make the balance sufficient to
cover the amount of the exchanges, or whether we might properly surrender

the items, knowing that they have deposited with us items drawn upon Clearing House banks which, according to our time schedule, are received by us
"for immediate credit."

Our time schedule does not spell out what is meant by "immediate
credit."

But if it means what it says, a member bank might technically

claim that Clearing House items are available at once not only for reserve

purposes but to be checked against, even though it is recognized that "not
good" items might be returned by the paying Clearing House bank as late as
3 o'clock.

Some of the Reserve banks expressly state in their time schedule
that such items are received for immediate credit "for reserve and checking



FEDERAL RESERVE BANK OF NEW YORK

purposes."

2

Mr. Benj. Strong

June 22, 1926

Other Reserve bank circulars are silent on the matter, but

treat such items as being available for both reserve and checking purposes.

In our own case, and this is what was intended to be covered by the
recommendation of the Officers Council, to which you have referred, we treat
the matter purely as a credit proposition.

We have carefully studied the case

of each individual bank on our Bronx-Brooklyn Clearing Arrangement, and have
given each of these banks .a maximum line based upon their credit responsibility,

up to which the operating officers of the bank (in this case, Gilbart, Coe and
Waters) might surrender checks to the paying bank over and above the amount of
its actual reserve balance, provided, however, that in no case will they surrender checks unless the

reserve balance plus 75% of the

items is sufficient to cover the amount of those checks.

immediate credit
In any other case,

they must go to a Deputy Governor for an O.K.
This arrangement is really necessary from an operating standpoint.
Even realizing the right of a Clearing House bank to return "not good" items

up to 3 o'clock, as a practical matter there is little or no risk involved
because of the fact that the maximum limit which we have fixed is

so low.

For instance, the Manufacturers Trust Company, which is the most extreme
case, with capital and surplus of $19,000,000 and deposits of over $200,000,000
and average daily exchanges' for the Clearing House of over $5,000,000, has a
line of only $1,000,000.

This permits the mail tellers division, with the

approval of an officer, to surrender checks drawn on the Manufacturers Trust
Company, even though the amount of those checks exceeds their actual reserve
balance at the time of surrendering, but not unless 75% of their actual exchanges for the ClearinE House that morning is sufficient to cover the difference, and not even then if the amount exceeds $1,000,000.




FEDERAL RESERVE BANK OF NEW YORK

3

June 22, 1926

Mr. Benj. Strong

In substance, this is the practice followed by all the larger city
banks and is no different from what we do for country items, where we give
availability for reserve and checking purposes strictly in accordance with
the time schedule, which in some cases we know is before we could possibly
receive telegraphic advice of the non-payment of the item.

In the case of

New England items, for instance, we credit in two days, although we know we
do not get payment for three days and advice of non-payment would be impossible
before the elapse of three days.

So it all goes back to a credit proposition

in everycase, and I am continually dinning the ears of the collection function
with that fact.

It is so true in all that we do

in

the matter of collections,

whether in direct sendings, county clearing arrangements, the availability of
credits and what not.

Each institution, whether a city bank or a country

bank, must be watched continually.

It only emphasizes the ever present need

of the closest cooperation between the collection and credit departments.
I hope this covers the points which you may have had in mind.
y yours,

Mr. Benj. Strong,
c/0 Bank of England,
London, England.

GLH.MY




(Th

FEDERAL RESERVE BANK

OF NEW YORK

0-

June 25, 1926

Dear Mr. Strong:

I want to thank you for your letter of June 9 enclosing a batch of
clippings concerning you and your doings in both France and Italy.

They are

most interesting, though they illustrate that newspaper "bunk", as you so well
describe it, is not confined to this country.
I reported this letter as well as yourdelightful letter on Mussolini
to the directors yesterday, and made it the occasion briefly to review your

whole trip to date, somewhat in the same fashion that I had previously done
with the Federal Reserve Board.

They were naturally interested, as always, in

hearing of you, and I am glad that I had such a good opportunity to tie up
the loose ends of individual or current reports of your letters as they were
received.

I am enclosing a Dow Jones clipping just received to the effect that
Governor Robineau has resigned.

We have, however, had no confirmation of the

115

rumor.

Leffingwell just tells me that they also have failed to receive any

confirmation.

It is interesting, particularly in view of the reports which

Winston brought back with him.

But I wonder what the alternative can be!

If, as Winston indicated, the rumored dissention in the experts committee is
largely because of the bank's representatives, it may be that the reported
resignation is a drastic effort to overcome differences in the committee itself.

But please keep us posted of anything that you hear.
I am to-day sending you a long cable (No. 25) a copy of which is

enclosed, prompted largely by your longhand letter of June 11, which I plan



2

FEDERAL RESERVE SANK OF NEW YORK

to answer in a day or sod

Mr. Benj. Strong

June 25, 1926

In the meantime, please accept my cable as an

acknowledgment, as I simply have not time to-day for a longhand letter.

For

alet,

some reason or another the work has been very heavy, although I think everything is going along smoothly enough.
Paragraph 6 of my cable gives you the latest news on the McFadden
bill, and while every indication is that nothing will be done this session,

I secretly wonder whether Edge and Pepper (who has succeeded McLean on the
conference committee of the Senate) might not possibly accept the Hull amendment as insisted by the House rather than to have the whole bill go by the
boards.

I do not believe that any of the others feel that is a possibility,

but somehow I have a wholly inexplicable hunch that it may happen.

It is all

a great pity.

I understand the others are writing you the current reports and there
is nothing else in particular for me to write you now, so I shall close this
in order to have it go off to-night.

I am working up some data in reply to your letter of June 6 on the
difficulty Governor Norman expressed incident to their investments in shorttime Treasury obligations.

I will cover it with a separate l

we work out something.

I hope you are getting some real benefit from your rest.

We all miss

you a lot, but feel without doubt, as I have often said, that you had much better
stay over there just as long as you feel that there is anything that you might
accomplish.

That is the biggest job that you can do not.

That a great pity

it is that they cannot seem to find for themselves some strong head that will

work out an effective plan while everybody is so willing to help when they
present such a plan.

Mr. Benj. Strong,
c/o Bank of England,
London, England.



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COPY OF HANDWRITTEN LETTER FROM MR. HARRISON TO GOVERNOR STRONG

July 6th, 1926

Dear Mr. Strong:

I have wanted for some time Quietly and frankly to write
you about your handwritten letters of June 11th and June 17th
concerning the Board situation, your apartment, and our attitude
here towards each.
I can hardly blame you for blowing up a bit, because I
realize how little you has been advisee up to that time of what
had been done, or at least of what had been discussed about the whole
matter. But, as I think I wrote you in my letter of June 22, I purposely had not kept you advised because I considered it wholly up to
Joy and indeed I know he fully intended to keen you informed currently.
On one occasion when I spoke about it to him, he told me he would do
so and that there would be no need for me to cover the matter in
writing you. So I let it go entirely and when you got Jay's first
letter about the Advisory Council meeting with no reference whatever
to the Board situation in which you were particularly interested,
you naturally assumed nothing was being done and no serious interest
being exhibited. But while that may have seemed obvious to you, it
was in fact not the case.

I can assure you the directors fully and completely realize
how serious you are and how necessary it is--if only on account of
your health that something must be done to make your relations and
more particularly the Bank's official relations with the Board more
decent and bearable. They know, too, as Jay and I do, that were it
not for your health you yourself would fight it out rather than
handle it as you are very wisely and properly trying to handle it
now--by putting it up to the directors themselves. In the circumstances, you could do no less and no more and that is realized 100%
by everybody. The directors talk over ways and means after nearly
every meeting, and while they have not wanted to serve Mellon with
anything savoring of an ultimatum "Strong or Miller," nevertheless through
Alexander and Jay, the Secretary does know how serious you are and also
that it is largely on the grounds of your health. He is at a loss, however, to know what to do in the absence of a resignation of some sort.
He does not want to force one but rather to wait for one to occur, possibly Cunningham who is ouite sick at Johns Hopkins (though not dangerously, I understand) or more likely Crissinger who has had a great deal
of trouble with his prostate gland. For a while it seemed that an
operation might be necessary, and there was some doubt whether he could
stand it. But he returned to Wrashingtonl last week and seems a little
better, though ouite depressed about himself and the future. On this
set of facts, I can see how Mellon personally would prefer to temporize
rather than force an open fight, and I see, too, how the directors
would not want to embarrass either you or Mellon by urging the more
drastic course when the Secretary feels as he does about awaiting a




Page 2

July 6th, 1926

natural opportunity to clear up the situation when a vacancy
occurs. As I have cabled you, Hamlin was reappointed on July
1st, though he was unconfirmed before adjournment on July 3.
The Secretary backed Hamlin on the ground that he had played ball
better than most of them, and liked him personally too. Much
that I am telling you, we got through Alexander to whom Mellon
talked in the greatest confidence so please be sure, when you see
the Secretary abroad, as he plans now to see you, not to let on
how much you know of the way his mind has worked!

cy

On the whole, I think everything that could have been
done has been done except that no one has yet been picked as a
likely person for Governor even if the opportunity should arise.
As to that, you may have a chance yourself to talk to Mellon.
For some reason or other, Norris has not struck a sympathetic
chord when mentioned to those considering this matter. So also
Baker, we understand from Alexander. Winston feels we must
find a Republican. But no wholly satisfactory name, Republican
or Democrat, has yet been thought of. It seems to me, on the
whole, that this is the real job ahead of us for if no forced
action is to be taken, then the only alternative so far as you
are concerned is to get some Governor who can keep A. C. Killer]
within bounds. Who is he?

As to your apartment, I do not wonder you were put out
(or that you were put out about not being put out!) in all the
circumstances, chiefly because at that time you apparently had
heard nothing. When the time came for a decision, I told Phil
and Miss Bfleecker] the exact state of facts -- that nothing at
all had been accomplished but that at that time nothing much more
could have been done than had been done in view of the Secretary's
own feeling about the best procedure. Realizing you would not be
able to quit slapbang in any event and that the process of realignment would necessarily take time, even if you should quite, I did
not raise any objection when they both decided to let the lease run
This was particularly in view of the cancellation clause.
on.

It was a tough thing for them to decide--or for me to decide
but after all I hope it will prove to have been right, the lesser
of two evils! And as to that you will be able to learn much when
you see Mellon.

/I

/

have today received your letter of June 19th about
wi
Miller's statement before the Committee and agree with you it was
a most inexcusable thing to have done.
I hadn't seen it myse
since I sent the testimony (the only cony) to you as soon as it
was received. I am thinking over your suggestion of aggregate




Page -

July 6th, 1926

foreign bank figures. The difficulty is that all the participating banks get the figures, and some of them have expressed a wish
for it. But, even so, we may be able to work something out.

I have cabled you today about the McFadden Bill and
Hamlin's reappointment. When I landed in Washington last Friday.
the 2d, with your cable No. 30 for the Secretary, I learned that
he and Winston had seen McFadden the day before to urge passage of
the Bill without any branch bank legislation as proposed to Glass
or else to re-submit compromise Hull amendment to the House. He
refused to do either, rather urging King as the obstacle. When
asked if he would agree if King would, he got sore, said they had
no right to ask, refused to answer, and left the room. Both Winston
and McIntosh indicated that there was something queer under the sur.
face and that stories were about that M. had been bought! It's a
pretty mess now.
Another suspicious coincidence:
When I saw McFladden1
on Friday, I told him there is nothing in the newspaper stories of
your trip abroad, that you were following meticulously the principles
you outlined to his Committee--your annual trip abroad to visit the
central banks, careful observance of your rule never to deal or
negotiate with any representative of any foreign government and a
denial on my part of the current story that you are a special emissary of the President to negotiate foreign loans!
The next day,
July 3, Whaley-Eaton publishes a story which I am sending you separately!
My very brief talk might possibly have formed the basis for paragraph 1,
sub-paragraphs a, b, and c., though, of course, not for the rest. I
trust that fellow less than ever.

This is already much too long, and you may never reach this
I shall write tomorrow of my trip to Washington),on Friday about
your cables 30 and 31 and my meeting with James and Crissinger. This
one must go on the Aquitania tonight.
end.

Take good care of yourself, get what rest you can and do not
worry about us here.
Everything is going along smoothly, even in spite
of the I.R.T. strike today. All but 16 of our Transit Department were
on the job before 9:0.
It is serious, but they have made a good job of
preparing for it and cabs, buses, and the "L" are doing a great service!
I miss you dreadfully, felt like the dickens over your letter
of the 11th of June, largely because I felt it was not my fault, felt
much better when I got your other longhand one of the 17th of June and
am beginning to hope that by now you feel better too!




Faithfully yours,
G. L. H.
[George L. Harrison]

FEDERAL RESERVE BANK

OF NEW YORK
PERSONAL AND CONFIDENTIAL

July 8, 1926

Dear Mr. Strong:

I wrote you on Tuesday by hand

and among other things acknowledged your

personal and confidential letter of June 19 in which you make certain references
to Dr. Miller's statement before the House committee.

As I mentioned in my

letter, I agree with you that this breach of confidence should not be passed
unnoticed, but I feel, as I gather you do, that we had better not do anything
about it until such time as we may be prepared to propose another program for
handling reports of our foreign accounts.
cident as an argument for the change.

We could then use the Miller in-

As I mentioned in my other letter, how-

ever, the difficulty of consolidating the reports of our foreign accounts is

that a number of participating Federal reserve banks have specifically requested not only

individual

statements, but even

purchased for individual foreign accounts.

individual

lists of the acceptances

I have the matter in mind, how-

ever, and think perhaps the best time to take it up will be at the next Confer-

ence of Governors, when we can talk it over frankly with the Governors before
making any sort of a proposal to the Board.
The latter part of your letter of June 19 dealt with Mr. Phillip's
visit to Antibes and his report of the antagonism felt in Brussels towards
America.

Apparently it is much worse than I had supposed, wad it is most

unfortunate that Leland Harrison did not take advantage of the information
you gave him to keep Mr. Phillips fully posted.
to straighten things out.




He could have done so much

I am only hopeful that after his talks with you,

FEDERAL RESERVE BANK OF NEW YORK

0

Mr. Benj. Strong

2

July 8, 1926

and particularly after reviewing all the cables which you showed him, he may
If

be able to create a better impression before Dr. Miller reaches Brussels.

0

he gets the same story that Mr. Phillips got and returns to

this country be(1.7

fore you do, he may very likely try to stir up some trouble.

again to refer to my meeting with

the

This prompts me

Federal Reserve Board on June 17, when

Winston and I went over in detail all of your letters concerning both France
and Italy, discussed situations generally abroad, and frankly told them what
you had been doing and what you had not been doing since you left here. The
about
only omission at that time;Ahich I wrote you, was about the Indian matter,
I told them at the and of the meeting

which Winston covered subsequently.
that I would
should know.

transpired

keep

them advised of any

affirmative

developments of which they

It so happens that nothing really deserving of comment had

between my meeting of June 17 and the receipt of your cable

30, which you asked me to take up with Mellon, and about which I went

to

cable No. 31

Washington last Friday, July 2.

was teleWhile there your

phoned to me through Morgans, and since you asked me in that cable, among
other things, to get the Board's reaction, I immediately telephoned Governor
Crissinger to ask for a meeting.

July 4th

holiday, aad the

only members present were Crissinger and James.

For Criseinger's benerit, I reviewed again a little

of

what I had told the

Board on June 17 when Crissinger was away, and then read to them in

your cable

the

Unfortunately, this was Friday before

full

No.. 31, having paraphrased your No. 30 which contained a lot of

technical details that I thought would not interest them.

I indicated, how-

ever, willingness to read the whole of No. 30 if they wanted me to do so.

Your No. 31 stated in part that you would have immediate discussion

with

Moreau, provided "the Federal Reserve Board was favorably inclined towards
our aiding."

When I finished reading that cable, James did not appear to be

particularly friendly.



He said that "Ben Strong knew more about this foreign

,EDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

3

July 8, 1928

Afro
business than anybody in Washington and that if he wanted to go ahead and
have discussions with Moreau, he would do it and there was no reason that
the Federal Reserve Board should be expected to share the responsibility
when they knew so little about what was going on anyway."

I told him that

you were not asking the Board's approval in advance of any program or any plan
or any agreement;

that all you

inclined toward aiding.

wanted to know was that they were favorably

He then said that they, of course, wanted to be

helpful toward monetary stability in France, but that I could not tell you
In his discussion he said something about know-

anything other than that.

ing only the high spots of what you are doing and that they would want, of
course, to know ft whole lot more about it than they do before they approve
of any credit

to

France.

I told him that of

course any

plan would be sub-

mitted in detail to the Board for its approval before adoption.

But while I

argued about his statement that he was not being kept informed and told him
that I had taken the trouble to go to Washington to read and discuss in detail every letter that we had

gotten from you,

I did agree that his state-

ment about monetary stability was all that we could expect or that you wanted at this time.

After

the

meeting, Crissinger asked what it was all about and thy

James had taken the position that he was not being kept informed.

I told

him that I was at a loss to understand in view of the earlier meeting with
the Board, which I had myself suggested, and particularly in view

of

the

fact that each member of the Board at that time had told me how much interested they were in your letters and what you were doing and were apparently
appreciative of the course I had pursued in presenting it.

McIntosh joined Criesinger and me and

I asked him

At this point,

whether he had got the

impression that at the meeting of June 17 I had failed to be wholly frank




Mr. Benj. Strong

July 8, 1926

ERAL RESERVE BANK OF NEW YORK

''.79aile'''Oor that I was paving the way then for subsequent approval by the Board of a

plan which even then I had up my sleeve.

0

He laughed and said No that he

had not got that impression and that he did not believe anybody else had either,

that I had been obviously wholly and completely above board about the whole
matter, and that no one could have asked for more.

I mention all this to give you a little of the background in case
later on James may decide to join Miller in a joint charge that on this foreign
business we had not kept the Board advised.

Whatever may have been true in

the past, I certainly do not think they have any justification for any such
feeling at the present.

I think both Orissinger and McIntosh, the only two,

aside from James, with whom I have talked fully, agree with me.

Winston was 100 per cent for my cable of July 2 in reply to your
31, and as I cabled you yesterday, Mellon, who left Washington before cable

No. 31 was received, has since seen it and my reply and has expressed his full
approval, aithough he emphasized again the view that we should not grant any
credit before France ratified the debt settlement.
At the executive committee meeting yesterday, I read both your cables

No. 30 and 51, together with my reply of July 2, and prepared during the course
of the meeting my No. 28, to which the directors present agreed (Messrs. Jay,
Saunders, Reyburn and Reynolds).

It was Reynolds who wanted to lay particu-

lar emphasis upon this being an opportunity to gain the information in which
you expressed an interest in your No. 30.
And now we are just waiting to hear further from you as to what you
may decide to do.

Being on the ground, you yourself have so much more atmos-

phere than we can detect over here.

But the important thing is that Mellon

and the directors and those of the Board who were present, have all expressed
their desire to be helpful in procuring monetary stability in France.




Mellon

AL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

5

July 8, 1926

has fully approved my cable of July 2, and the directors have subsequently
approved paragraphs 2 and 3 (which were all they could approve) and expressly
stated that they approve of your having discussions with Moreau, realizing

that might involve needing further assistance and possibly staying over there
much longer than you had originally planned.

Reverting a moment to the Belgian matter, I am turning over in my
mind the thought that I might well take an opportunity to remind Leland Harrison
of your talks with him about the Belgian transaction, using your letter saying
that Mr. Phillips had visited you, as the excuse for referring to the matter.

While I am not decided, you need not torry that I shall not be wholly discreet
if I do make the opportunity to see him.

Since starting this letter, I have shown your letter of June 19 to
Owen Young.

He read it with much interest, smiled and said, Francqui is not

anti-American - he is not anti-anything - he is just pro-Francqui.
of the ablest, keenest, soundest and best traders in Europe.

He is one

But he knows

what are the limitations of any plan or program that he may be backing, and
being an A-1 poker player in every respect, does not object to being called.
In elaborating on this, he said that he hopes that you will surely see Francqui

when you can, that he knows that if you understand him you will both get on
splendidly, and that if, for instance, in a discussion, you should turn to

him, smile and say "You know damn well you can't do that - or - there is not
anything in what you are saying - or this that or the other thing" he will turn
to you smile and say "I know it, but I thought I would see what I could get
away with."

Young, in referring to the earlier negotiations which fizzled, said

that Janssen never had and probably
had been




dealt

with

unfairly,

never would

get over the belief that he

but that Francqui, on the other hand, in talking

6

Mr. Benj. Strong

July 8, 1926

FEL-ERAL RESERVE BANK OF NEW YORK

about it privately to Young, had said he thought Janssen got just about what he
deserved.

In conclusion, Young feels that Francqui really is not anti-American

_

at all, that if he is taking much about it, it is perhaps with a view to having
something to trade with when he has to deal with the Americans, hoping that we,
in an effort to even up, will perhaps be more lenient than we would otherwise

Young feels, however, that if you do talk to Francqui, you might

have been.

very well say to him that he had better stop his anti-American talk and make
others stop it too, or else the reaction will be the other way, and that instead
of making a good trade, he will make any trade impossible.
the kind of language Francqui understands.

Young says that is

On the whole he draws a delightful

picture of him, and assures me, as he wants me to assure you, that you will
like him.

I have cable No. 32 to-day rather cryptically, giving you this

point of view.

Oh! yes, I forgot to mention that Young said that men like Phillips
(

or Adolph Miller would be babies in Francquits hands, and he chuckled merrily
at the mere thought of it.

/
I wonder if you have heard that Mrs. Shurtleff has been very seriously
sick and a week ago Monday had a pretty tough operation.

I do not know myself

what was the matter, but they tell me in the Medical Department that she is
getting along pretty well now and that she may be out of the hospital in a week
more.

The strike on the subway continues, and while it began early Tuesday
morning after the Monday holiday, it has not crippled or even inconvenienced
us to any appreciable extent.

It is quite remarkable what a

of tardiness there was even the first day.

I have just received your No. 33 saying that Moreau prefers to defer
his meeting awaiting further developments and that this suits you since a few
days will disclose whether the plan has any chance of success.



I am delighted

7

FEIVERAL RESERVE BANK OF NEW YORK

the matter has taken this turn.

Mr. Benj. Strong

July 8, 1926

All that I intended in my cable from Washington

was to make sure that Moreau rather than you would take the responsibility of

V)

postponing a discussion.

As long as he has done that, it gives you the bene-

fit of the delay which might disclose what chance of success the Caillaux plan
has.

It looks very gloomy in the papers to-day.
I must stop so that this will get off on the Olympic to-night.

I am

rather ashamed when Miss McCarrick hands me the letters to sign to see how long

I sympathize with you when I think of all the stuff that we send

they are.

you to read!

Goodby for the moment, take care of yourself, and I hope, what seems
unlikely, that you are getting a real rest.
FaithS

Mr. Benj. Strong,
c/o Bank of England,
London, England.




y yours,

FEDERAL RESERVE BANK

OF NEW YORK
July 16, 1926

Dear Mr. Strong:

This will answer your letter of June 21 in which, among other things,

you refer to Congressman Strong's circular letter and ask that I tell him that
immediately on your return you want to go over the whole record again and that
you will then give him the very best suggestion that you can propose.

As I think I have told you, I had previously written to Congressman
Strong that I knew you would be glad to do just that, but on receipt of your

letter I wrote him again reiterating your desire to give him any suggestions
that you could after fully reviewing the whole matter.

copy of my letter of

July

I am

7 to Congressman Strong, together with a copy of

his reply, Which is particularly interesting in view of the reaction which
he has got from letters of various Federal reserve bank officials.

When his circular letter first went out, we received a number of
inquiries as to the best way in which to answer it, and in talking it over
with Mr. Jay, we both agreed that it would be a great mistake for us in any
way to indicate a line of reply if only because it might be considered as
propaganda on our part.

Consecuently, we never did more than send to

sanewho made inquiry, a copy of George Roberts article in the National City
Bulletin.

Not having a copy of your testimony available, this was the only

means wnich we had of informing people who might have asked just what you
had publicly stated before the committee itself.

only member of the Federal Reserve System to whom we even sent a copy of




I think F

FEDERAL RESERVE BANK OF NEW YORK

2

Mr. Benj. Strang

July 16, 1926

So that I think we have been meticulously careful to

the Roberts article.

avoid any action which might subject us to the charge of propaganda.
I am quite certain that Congressman Strong did not intend to imply
by his letter that we had influenced the replies from other Federalifeserve

As you know, he told us two or three times when we were in Washington

banks.

that, except for you, representatives of the Federal Reserve System all seemed

to take a rather blind and unhelpful attitude towards any proposal to amend
the Federal Reserve Act.

That was his feeling about Norris, Norris, testi-

mony, and I rather gather that he has got the same impression from others who
have written him.

I have merely acknowledged his letter and purposely did

not make any reference to his talk about propaganda because I wanted to assume
that he did not intend to direct the charge toward us.

A denial might have

given him a different impression.
While it is

perhaps easy enough to understand, I think it is too

bad the other Federals have given him the impression which they have.

The

movement expressed in the Strong bill is too serious to deal with by wholly
uncompromising denials.

I think you have struck precisely the right note,

and I only wish it would have been possible for others to have done so wi
o

our suggesting to them how they should have made their replies.

44/1

RIAM

Mr. Benj. Strong,
cio Bank of England,
London, England.
GLH.MM

Enos.




Very sipverely yours,

FEDERAL RESERVE BANK

OF NEW YORK

July 16, 1926.

Dear Mr. Strong:

Referring further to your letter of June 19, on the subject
of Belgium, as well as my reply of July 6, I have shown Owen Young
your cable No. 35 in reply to my No. 32, and have asked him to
Francqui as you requested.

He said that he would be glad to do so.
Sincerel

ours,

07

Mx. Benj. Strong,
c/o Bank of England,
London, England.




write

FEDERAL RESERVE BANK

OF NEW YORK

July 16, 1926.

Dear Mr. Strong:

In reply to your letter of June 26, I have already sent
Mr. Jay of Morgan Harjes & Company a franc draft covering his statement
for cables which you dispatched through their Paris Office, so you need
not think of it any further.
Sincerely

Mr. Benj. Strong,
c/o Bank of England,
London, England.




FEDERAL RESERVE BANK

OF NEW YORK

July 16, 1926.

Dear Mr. Strong:

This will refer to your letter of July 1, concerning a number of
matters.

I have already elaborated a little further in another letter of today
the matter of my statement to the Board and what you are doing in France and have
told you that I am keeping them currently advised of developments in order that
they might be forewarned of the poseibilltyof our being asked for a credit.
I have also advised you of the final disposition of the Ladian currency
I have sent you a copy of a letter that I wrote Winston more as a matter
of record than anything else, and also told you that Winston had written me that
he had subsequently taken it up with the Board and reported the matter to them
matter.

With this I am enclosing a copy of Mr. Jay's letter to Mr. Mellon and Mr.
Mellon's letter to the Board.

fully.

It was too bad that we failed to cover it in our first joint meeting
with the Board, but, as I explained to you, it was my understanding that Winston
would report it in behalf of the Secretary, placing the responsibility for your
work on the TreasurT.
Unfortunately, however, just before Winston joined the
meeting he had a long session with the Secretary and when he failed to mention
the matter to the Board I assumed, for some reason or another, the Secretary had
suggested that he do not then take it up with the Board.
In the circumstances
there was nothing I could do about it.
Immediately after the mee
I took it up with Winston and subsequently wrote the letter of which I sent you
a copy.
While I agree that it may appear to the Board to be a bit disingenuous,
nevertheless, I hope now that the matter is satisfactorily disposed of.
James
may well have this among other things in the back of his mind in the proposed
resolution about what you are doing abroad about which I have written you in
another letter today.
This will cknowledge your letter of July 1, giving me an account of
your newspaper difficulties and enclosing copies of telegrams from Elmer Roberts
of the Associated Press and from Flury of the International rews Service. WhatI think you are
ever you do you are between the devil and the deep blue sea.
wholly right in keeping away from as much publicity as possible and I think they
probably have already forwarded to you from the bank a copy of an article which
appeared in the American written by your friend Forbes, speaking of you as a man
of mystery and rather joshing you about being so secretive. On the whole I do
not see how you could have handled it any better than you have and there is no
need to spoil the fun you will get out of the job you are now doing by worrying
over this inevitable conflict of the press.

In one of my letters to you I sent you one of the Whaley-Eaton sheets
and indicated that perhaps ,4a4 they had got some of their dope from 1.1cFadden
with whom I had talked only in a general way to indicate that you were having
I think now, however, that
nothing to do with anybody but the central banks.
McFadden had no relation to this particular article since the Whaley-Eaton people




FEDERAL RESERVE BANK OF NEW YORK

7/16/26.

have made reference to you and "your plan and your doings" in about every one
of their issues, and much of it is about matters which in nu brief talk with
McFadden I never even mentioned.
Indeed they began their articles long before
I saw McFadden so that I think my hunch on that was a poor one. In this connection I am sending you another Whaley-Eaton discourse that might interest
you.

Sincere y yours,

/4/264e9c._
Mx. Benj. Strong,
c/o Bank of England,
London, England.

Encs.




CHIEF FOREIGN OFFICE
PARIS
10 SQUARE DESNOUETTES

(19 BOULEVARD VICTOR)

WASHINGTON. D. C.
MUNSEY BUILDING

WHALEY-EATON SERVICE

CABLE ADDRESS. WHEAT

-A CAPITAL INSTITUTION"

TELEi HONES:

FOUNDED 1918

FRANKLIN {7679
7727

Foreign Letter No. 378.
(All rights reserved.)

Information furnished
by our European Bureau.

For Clients Only.

July 13, 1926.

Dear Sir:

We have had access to a private letter from an observer in Paris to
his principals in America.

It is very frank and we have received permission to

quote from it, as follows:




Caillaux's work, in addition to fiscal sanitation, is to persuade
the French Parliament to obliterate itself. My reading of the
situation is that the chances of success are against him. His
program, no less than his personality, is distasteful not only
to the Right, but also to the Left.
He cannot count fully u
an altogether docile Center. His hold on his portfolio, even
if it be masterful and expert, is politically precarious. What
he is trying to do is to institute a dictatorship under disguise an iron hand in a velvet glove. He has powerful influences arraigned against him but he believes, in case of need, he has
powerful factors at his call. His friends aver that if the worst
It is intimated that for
comes he can stage a real dictatorship.
this purpose he would have the main strength of the army at his
back.

It is only a half secret here that Caillaux foresees serious internal troubles if, and when, stabilization is made operative.
Other politicians agree that, as the full effect of stabilization
begins to be felt, there will be manifestations which will necessitate the use of armed forces. Dissatisfaction is likely to
be acute among State employes, some strikes are certain and grave
street disorders are to be looked for. It will be noted that in
the bargain Caillaux struck with Briand he insisted on having
The
the key Ministries under his own instead of Briand's thumb.
new Ministers of Wav., of the Interior and of Public Works are his
creations and will do as he bids.
The root of Caillaux's difficulties, as with his predecessor's,
is to be found in Parliament, and particularly in the right of
initiative of the Chamber of Deputies in financial matters. It
is a right which has been abused and has been responsible for most
of the chaos in the past. There seems to be a general understanding that Caillaux's plan contemplates the proroguing of Parliament
indefinitely by its own consent and government thereafter by executive decree. It has been pointed out to some Deputies that this
method will relieve them of responsibility before their constituencies for any action that might be taken in their absence. The
Constitution requires that the Chambers must sit for at least

7/13/26.

2.

five months in the year. As they have already sat for five
months, this year, no legal difficulty is in the way. But the
Senate and Chamber have not been persuaded, as yet, to remove
themselves from the scene during the period when the franc is to
be hitched to gold. They distrust Caillaux, just as they distrust
Briand. Wherefore, my opinion is that the present Ministry will
not last very long. Briand's chief handicap is his own personality. He has no definitely fixed opinions; he stands for nothing
in particular, except a vague slogan which is called "Appeasement.".
He is a conciliator, a political broker, and not a determined
protagonist of any cause, principle, doctrine or belief. His role
of turning with the slightest zephyr that blows has brought him
ten Premierships, but it has meant in the past, as it means now,
that at an hour of real crisis he has had no profound attachments
to count upon. He is never able to go to any considerable body
in Parliament and say to it: "Give me your support in this natter,
for I am your man." He is no one's man, not even his own.
The financial situation is probably worse than anyone has had the
courage to admit. Inherently the country is strong and rich, but
Government finances are on the edge of a chasm. The proffered
Anglo-American financial aid is declined because it is asserted
that the terms necessitate a surrender of sovereignty. The seven
billions of inflation authorized in December last have all been
spent and so have the three billions obtained from the Locheur
exceptional taxes. Caillaux's oein organ of the press, "Valente,"
says:. "So grave is the (financial) situation that exceptionally
grave, exceptionally painful, measures are required. No contingency, no scruple, no law, can now be allowed to stand in the
way. The man to whom the finances and destinies of France are
entrusted will prove either a savior or a sexton."
It is difficult to reach a sound conclusion here in Paris, where
the policy of concealment and of partisanship influences the
press. As I read the situation, however, the time does not yet
seem ripe for what is termed here "the great penitence;" that is,
stabilization and a gold currency. I should say that other Governments must follow the present one, perhaps two mere, before
legislators stop playing politics while their country perishes
and before they are ready to surrender the right of financial
control to duly qualified persons who would be responsible only
to public opinion and not to a Chamber which resembles a cock-pit.
The foregoing is offered as an interesting discussion from a competent
observer, but we assume no responsibility for the statements therein made.
2.

AID:

It is proper again to emphasize here our previous advices that Anglo-

American finance is contemplating no rescue movement for France under existing
political conditions.

Governors strong and Norman will not deal with a politi-

cally-controlled bank, nor with a bank that is likely to be politically-controlled.

Both Governors, we are advised, are confident that a stabilization program,

along the lines they have considered, can be made effective and that the



3.

7/13/26.

finances of France can be restored and her credit rehabilitated.

They are

equally confident that a rescue movement on any other terms would be abortive
and foredoomed to failure.

Moreover, there are excellent reasons for believing

that Tashington stands flatfootedly behind Governor Strong and will give aid
,________
only on the terms he has outlined.
HOUGHTON PLAN:

In January and February mention was often made in these Letters

of the so-called "Houghton Plan" for the rehabilitation of Europe.

At that

time it was impossible to obtain any reliable information as to the details.

Ue are now advised that the Strong-Norman program is essentially the same as
urged by Ambassador Houghton.

As we forecast at that time, it contemplates the

rehabilitation of Continental Europe, not by American political, but by American
economic, assistance.
LION PROGRAM:

Paris informed opinion is practically a unit in attaching su-

preme importance to Secretary Mellon's approaching visit to Europe.

It is sig-

nificant, however, that he is not now looked upon as a financial Ambassador, to
initiate measures, but as coming to approve policies and "bargains" already
tentatively agreed upon.

In the sane circles, Governor Strong is spoken of as

Mr. Mellon's advance guard, sent ahead of him with the knowledge of President

Coolidge. While again stressing the Jashiapton denial that Secretary Mellon
has any such formidable program ahead of him as is credited in European capitals, we repeat the following from a highly authoritative source.




It is urgently required that agreements shall be privately reached
before it is possible to summon international financial conferences with antecedent assurances of complete success. Mr. Mellon
is coming to Europe for this express purpose. It has been arranged for him to meet Strong, Norman, Schacht and Parker Gilbert,
and later French, Italian and Belgian representatives at a resort
contiguous to the Franco-Italian frontier. Primarily, Mr. Mellon's
trip obviates sending another French mission to V:ashington, with
the bad American political effects attendant upon a formal request
for another debt revision. As the outcome of cabled consultations
between Paris and -Odshington, Mr. Mellon, by a simple reciprocal
letter outside the formal debt document but establishing interpretation of its text, will, if French representations warrant,
(a) America will abstain
accord France the following assurances;
from using a possible decrease in French caracity to pay to the
detriment of France; (b) conditional upon French guarantees

4.

7/13/26.

regarding an eventual gold currency, America will agree to refrain from commercialization of the debt obligations; (c) America
will consent to connect, though not by official measures, German
payments to France with French payments to America; (d) Transfer protection will be afforded. These "Mellon concessions,"are
to be made absolutely contingent upon various phases of French
monetary reforms.
Messrs. Mellon, Schacht and Gilbert will consult in regard to German aid in franc stabilization. Schacht will introduce the question of German railway obligations. Marketing these obligations
in their present form is impracticable. Schacht, with Gilbert's
approval, is prepared to offer modifications making them immeThe proceeds would benefit the
diately attractive investments.
French Treasury. Schacht is not making a present to France and
will require corresponding advantages to Germany. The character
of the "advantages" will be more political than immediately financial. Among other matters, the question of colonial expansion, or
obtaining mandated territories, is uppermost in the German mind
today. No French Government could survive the cession of colonies
or mandates to the arch-enemy, Germany, but a three-cornered deal,
involving Britain and its mandate, Tanganyika, is well within the
bounds of possibility.

An agreement once reached upon the above main points, Governor
Norman will be in a position to summon a conference of Banks of
Issue almost simultaneously with a subordinate private banking
conference, both cooperating in their distinct fields. It is
forecast that the most important outcome of the various consultations and conferences will be unanimous recommendations for revision of all debts, including German reparations, the findings
to be that, "astronomical figures on paper are untransferable in
fact from Germany or to America." This situation would make Mr.
Mellon's interpretive concessions merely a stopgap pending final
world settlements.
GOLD:

The Chancellor of the British Exchequer, when asked as to approximate

stocks of gold held by various nations, presented the following statistics to

the House of commons, accompanied by a statement to the effect that the figures,
expressed in millions, are not to be considered as exact, but are as correct as
possible.

Country.
United Kingdom,
France,
Germany,

1913.
157
6,570

Italy,

1,993
2,056
480
1,904
262

Russia,
Spain,
United States,
Japan,
Argentine,
Australia,




3,170

243

40

1926.

149
3,684
1,232
1,149
147
2,537
4,497
1,123
452
59

pounds
francs
marks
lire
roubles
pesetas
dollars
yen
pesos
pounds

(June)
II

(April)
(May)
(June)
(May)
(April)
(May)
(Sept.1925)

5

7/13/26.

RUSSIA:

The Russian question looms exceptionally large on the British political

horizon.

Just as the famous Soviet "Letter" was, in large measure, responsible

for the great Conservative majority now in Parliament, so the Russian question
may ultimately be the rock upon which the party may founder.

For good or ill,

Sir Austen Chamberlain has now pledged his Government not to break off diplo-

matic relations with Russia nor to abrogate the trade agreement although, it is
admitted, the Soviet Government has itself broken the terms of the agreement to
bits.

In the same breath the Foreign Secretary adds that if he had to make an

agreement today he would not make it, and if he had before him, de nova, the
question of resuming diplomatic relations he would answer in the negative.

Ad-

mitting that British relations with Russia are now anything but friendly, cordial or correct, Sir Austen believes that the question is an international rather than a national one and touches the future peace and prosperity of Europe.
Britain can take no step which would imperil this.

In his words:

"All Europe is perplexed and harassed by economic and social problems. Much of Europe in addition suffers from political undertainties and a sense of political insecurity which itself reacts
upon the economic conditions to their disadvantage, and it is
these things which it must be the object of statesmanship in all
our countries to alleviate and, if possible, to remove. If we
break off diplomatic relations with Russia, we not only introduce a new and disturbing issue into our domestic politics, but
re introduce a. new and disturbing issue into European politics.
It would be no good to us, would give us no weapon for fighting disloyalty or disorder or revolution within our own borders,
would create division where we seek union, and would, in its
echoes abroad, increase the uncertainty, increase the fears, increase the instability of European conditions, which it is and
ought to be our chief object to remove."

CANADIAN VAT: Mr. Sale, Governor of the Hudson's Bay Co., claims a strong
advantage, through lower land values, for the Canadian wheat farmer over his
American brother. His figures include values of 040, $70 and $100 per acre
for American lands as against $25 to $30 an acre for Canadian lands across the
border.
"In the same year, 1925, an average acre of land seeded to wheat in
the latter produced $20 to $24 per acre, so that the price of his land was virtually returned to the Canadian farmer in a single year."
S.

Developments, holding possibilities of great importance to American
business, should come out of Europe before autumn.




Very truly yours,
IVHALEY-EATON SERVICE.

FEDERAL RESERVE BANK

OF NEW YORK
July 16, 1926

Dear Mr. Strong:
This will acknowledge your letter of July 5.
I kept very closely in touch with Leffingwell while he was here, but,

as you no doubt know, he sailed for Scotland on July 6, so I have not heard
the
Leffingwell, before he
anything froM7Morgan people for the last ten days.
left, was very insistent that I keep in touch with Lamont or Morrow or any of
the other partners, about anything that I wanted to take up with them.
do so, but thus far there has been no occasion to.
come more important after you go to Paris on Monday.

I shall

It may be that it will beSo I plan now to have

a chat with Lamont or Morrow sometime next week.
You mention in

your

letter of July 5 that the Bank of England may

want to reduce its rate when the coal strike is settled and that if they do
so it will make it much more difficult for us to increase ours.

As Burgess

has probably written you, we have been watching developments very closely for
the past two or three weeks, and had a special session yesterday of the Officers
Council to consider nothing else.

The directors also went into it very thor-

oughly yesterday, and it is our best judgment that at the moment we should do
nothing.

Relative rates in London and New York are so nearly in equilibrium,

that any reduction by the Bank of England or increase by this bank might well

throw things askew.
not make it




So that I myself am hoping that the situation here will

necessary for US

to do anything.

I think Case has always felt

FEDERAL RESERVE BANK OF NEW YORK

July 18, 1926

Mr. Benj. Strong

2

in the back of his mind that we should not have reduced in April, and Burgess,
too, has somewhat that same feeling.

But the rest of us, I think, still feel

that it was the right move and that there is nothing in the present situation
to worry

or

alarm us.

Our cable last week giving the amount of borrowings

of the New York City banks might have worried you a bit, but we are sending
you one to-day that may prove more reassuring.

In two or three of your letters, and also in your cables, you refer
to the fact that you may appear to be a deserter and that you are afraid you
are staying away too long.

But I hope that you really do not feel that way.

You are in the right place at the right time, and as I have already cabled
you, the

directors

feel that you should stay as long as your present job

might make it necessary for you to stay.

We are getting along splendidly

at the bank, we are all well, and the work, while heavy, is not too

onerous.

So please forget about that part of it and spend your spare moments trying
to get the rest and relaxation that you deserve.

I am very m

that your so-called vacation in the south of France has proved to be a "dud"
so that if you can manage in

your

spare moments from not on to get a little

time off, do so and, above all, do not feel that you have to hurry your return trip.

a hfully

Mr. Benj. Strong,
c/o Bank of England,
London, England.
GLH.MM




re,

FEDERAL RESERVE BANK

OF NEW YORK
July 20, 1926

My dear Governor:

Last week Colonel Ayres called at the bank to aek when you expected
to be back.

I told him that very likely it would not be until the latter

part of September.

With some hesitation he then told me that Mr. Baker had

made the inquiry because of the fact that he wants to talk with you about his
fee in the Pascagoula case.

As Colonel Ayres explained, he is somewhat at

a loss on what basis to submit his bill and wants to get your reaction as to
the best way for him to handle it.

I told Colonel Ayres that I knew you would be glad to talk it over
with Mr. Baker when you got back, although I felt it would be difficult for
you to give him any opinion by mail.

In the wholly informal discussion

which I had with Colonel Ayres, I mentioned that I thought it would be interesting to have Mr. Baker prepare a bill precisely on the same basis as he
would have submitted it for a commercial client, and that he might then consider taking the matter up frankly with the Federal Reserve Board suggesting what he would have charged another client, itemizing the various elements
in the bill, and suggesting to the Board that in view of the semi-public
character of his clients, he would leave it to the Board or to the Federal
reserve banks to fix the fee on the basis of his statement as to what he
would have charged another client.
was

merely

thinking aloud

I explained to Colonel Ayree that I

when I mentioned

this procedure.

But both he and

Dr. Burgess (who was present) thought there was much merit in the suggestion.




FEDERAL RESERVE BANK OF NEW YORK

Mr. Benj. Strong

.2

July 20, 1926

I rather think, however, that Mr. Baker will either wait until you get back or
until he hears something from you as to what you believe he might better do in
the circumstances.

Personally, I think
amount

that

he is entitled to charge us a considerable

He personally handled the whole case after the most careful and

detailed study not only of all the related Court decisions of the Supreme
Court and other Courts, but after the most laborious study of the theoretical
and practical workings of the Federal Reserve System.
and ought to be paid proportionately.

He did a great job

I appreciate that we might not be

able to pay him what he might be entitled to charge another client, but if,
as Colonel Ayres indicates, he is a very conservative charger in any event,
it might be possible to do so.

If you have any reaction that you care to put on paper, you might
let me have it so that he need not hold up his bill indefinitely.
Fait

Mr. Benj. Strong,
c/o Bank of England,
London, England.
GLH.MM




ully your',

FEDERAL RESERVE BANK

OF NEW YORK
July 29, 1926

My dear Mr. Strong:

Air

I am enclosing a copy of a letter dated

Jay

20 which Mr. Jay

received last week from Mr. Winston concerning the silver inquiry.

In

my letter of July 16, I sent you a copy of Mr. Jay's letter to Mr. Mellon
together with Mr. Mellon's letter to the Federal Reserve Board.

It was

with reference to this letter that the Board adopted the resolution to
which Mr. Winston refers, but which none of us has seen.

Apparently,

however, the matter of the expense is, as Winston says, satisfactorily
disposed of.

You may be interested to know, however, that when I was in

Washington on Tuesday of this week, Governor Crissinger told me most

informally

that he had heard (I rather think it was through James) that

some Democratic Senators in discussing the Indian Currency Commission
had mentioned that the Reserve System had done all that it could to
aid England in its return to the gold standard and that it was apparently making efforts to aid others in a return to the gold standard, but
that for some reason or another we had opposed

India's

efforts to

adopt a gold standard.

I have no idea who made these comments or how critical they
really were.

I mention the fact merely becauseit indicates that your

appearance before the Indian




Currency

Commission was apparently known

FEDERAL RESERVE BANK OF NEW YORK

to people i
pro and con

2

Mr. Benj. Strong

July 29, 1926

Washington and that without any appreciation of the arguments

d expressed some interest in why it was that we should favor

a return to the gold standard in some caaes and not in others!

that if these comments were general or serious, we will some day have to
explain just what you presented to the commission and why.
meantime I think it is nothing to worry about.

FaithfUllyours,

,/'

61;//Y

Mr. Benj. Strong,
0/0 Bank of England
London, England.

GLH.MM
Enc.




FEDERAL RESERVE BANK

OF NEW YORK
STRICTLY_ CONFIDENTIAL

August 5, 1926

My dear Governor:

I have received your hand written letter of July 9 supplemented by
your typewritten letter of the same date, concerning our foreign accounts,
arm agree with you, as I have felt for sometimelthat the number and detail
of the reports concerning our foreign accounts is unfortunate.

I have al-

ready changed the report to our directors by giving a summary of the aggregate of our deposits and investments for foreign banks, and

I am now

puzzling

over the proper way to take the matter up with the Governors of the other
Federal Reserve Banks and the Federal Reserve Board.

The fact that Mr.

Miller made public to the Banking and Currency Committee the

amount of

our

Reichsbank account, will be a fairly valid excuse on which to raise the
question with the Federal Reserve Board, and I shall take it up with
'Governor Crissinger first personally in order to find out what they really
need and also to ascertain whether it will be possible to strike out Miller's
statement from the record.

I.agree with you that it must be done if it is

not too late now to do so.

We are still working over the problem which Governor Norman has

raised with you to provide shortdated investments for their account, and
we have about reactea the conclusion that a sale and repure

which we first thought of, would not be as satisfactory

e a

se agreement,

ar icipation

worked out somewhat along the same lines that other Federals now participate
in our open market purchases of securities.




FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong

August 5, 1926

Mr. Rounds insists that this is the only practicable way to

handle

the matter and has shown me that the bookkeeping and computation of interest

difficult

will be so

under

the repurchase arrangement as to make it almost

impossible in any case inhere the Bank of England might want to anticipate a
resale.

It so happens, however, that there are hitches even in the participation plan, particularly if

we should

attempt to give the Bank of England a

participation in the System's securities, and 1 hope you will be patient
with us,

realizing

a report by cable,

that we ara all working on it with the hope of giving you

if

necessary, before you reach London.
Faithfully yours,

Mr. Benj. Strong,
c/o Bank of England,
LOndon, England.

GLH.MM




FEDERAL RESERVE BANK

OF NEW YORK
August 5, 1926

Dear Governor Strong:

Our cable #43 on the question of

discount

rates, which was dispatch-

ed last night, gives the substance of our views to date.

le

discuesed

the

matter at some length to-day at the directors meeting, and while we recommended no change, we indicated that it might become necessary next week.
five members, including Mr. Jay, were present.

Only

The only view expressed by

th,directorsw, s that of Saunders to the effect that we should raise, but not

before we got your views, in the light of the foreign situation.

The day before yesterday, Crissinger telephoned to me to state that
he thought we should raise at once and possibly sell $75,000,000 of securities.

He supplemented his suggestion to-day with a letter enclosing a memorandum
from Goldenweiser also recommending that we raise.

On the telephone today,

Crissinger said that three members of the Board (that is, himself, James and
McIntosh) feel very strongly that an increase should be made to-day rather
than later, but that Hamlin wanted to receive our recommendation before expressing his opinion.

Personally and entirely apart from the fact that we

have not yet had opportunity to hear from you, I feel that it is much better
to wait until next week, in any event.

For while as my cable indicated, rates

are stiffening, business is very active with some possibility of overproduc-

tion in some lines and the stock market boiling, nevertheless we will have a
much clearer picture next week, a little further removed from the end of the
month adjustments and after Monday's statement which will show a substantial
increase in brokers' loans.



FEDERAL RESERVE BANK OF NEW YORK

As I told you in my cable,

0

August 5, 1926

Governor Strong

2

I wired

Governor Norman that we had the

matter under consideration with the possibility of an early increase, though
not likely this week, and just before the meeting to-day I received his reply
saying that there was no early prospect of a Change in his
appreciating my

cable

plans but

greatly

which only confirmed the impressions that he got after

discussions with you.

your

I had rather gathered from one of

letters that the Bank

a

Englend might reduce as soon as the coal strike is settled, and while that

has not yet occurred, the papers indicate that virtually they have reached
an agreement.

Governor Norman's statement that there is no prospect of an

early change in his plans will only make it easier for us to go up.

But in writing this, I am encroaching upon the report that you will

bank,

probably get from some one else in the

stale by

and

the time it reaches you.

My best to you, as

always,

/

FaithfU/lly

Mr. Benj. Strong,
c/o Bank of England,
London, England.
GLH.MM




in any

yours,

event it will

be

FEDERAL RESERVE BANK

OF NEW YORK

'August 10, 1926
rear Mr. Strong:

I am sending you copy of a letter which I have today written to

introduce to Mr. Trotter Professor Luther A. Harr of the Wharton School of
Finance, whom Congressman MacGregor has sent to Us.

I am also attaching

copy of my personal letter to Mr. Trotter explaining the circumstances under
which I have written the introductory note.
Miss Bleecker may have told you that Congressman MacGregor has
written you two separate letters asking for a letter of introduction to Governor
Norman for Mr. Harr.

But rather than bother you with the matter, and in order

not to run the risk of offending Mr. MacGregor, I wrote him saying that in your
absence I would be glad to give Mr. Harr a letter to the Bank of England if he
would stop at the bank on his way through.

While none of us here knows him, and while I saw him for only a few
moments, he seemed to be a clean-cut, nice enough fellow, although, as his name
implies, I imagine he is of German extraction!
I am sorry to have bdthered anyone at the Bank of England, but don't
see how it could have been avoided.

In any event, you may be able to explain,

even in more detail than my personal letter to Mr. Trotter, why we have given any
letter to Mr. Harr.

Incidentally, Mr. Harr told me that he had introductory letters to
various people from Mr. Stotesbury in Philadelphia.
My best to you.
Benj. Strong, Esq.,
Bank of England,
London, England.



FEDERAL RESERVE BANK

OF NEW YORK

4^-\

August 11, 1926.

Dear Mr. Strong:

You will probably remember that when you and I appeared before the
Clearing House Committee a year ago last May we were asked, among other things,

whether we would be willing to give up the requirement of separate sorts of
items drawn on branches of banks in our Manhattan, Bronx and Brooklyn clearing
At that time we pointed out to the committee the likelihood that

arrangement.

if we should abandon the requirement of separate sorts for branch items those
banks would withdraw from our list and would require separate presentation by
hand over the counter of their respective branches.

Some of the members of

the committee, particularly Harry bard, agreed with us that that would result

and, in the end, it was unanimously determined by all present that we should
not try to abandon existing sorts, but

that we

bank sorts except in unusual circumstances.
later by letter.

should not create any new branch
This conclusion we confirmed

So far so good.

When the new Clearing House Uommittee appointed a subcommittee this
spring to consider changes in

their

procedure and in their constitution, they

took up, among other things, this same question of branch bank sorts and Mr.

Gregory, as Chairman of the committee, called upon me two or three times to discuss what was in the minds of the committee.

At one time he indicated that he,

personally, preferred to extend the branch bank sort to include all branches in
New York.

He said that a majority of his committee preferred sorts for none

rather than sorts for all.

He intimated on other occasions that the subcom-

mittee would very likely conclude to ask the Reserve Bank to abolish the separate
sort in our collection arrangement;



and in the end that was done.

FEDERAL RESERVE BANK OF NEW YORK

2

Mr. Strong

8.11.26

To be sure, in order to make their request effective, the subcommittee
passed a resolution which they recommended to the full committee, which in substance

required banks with branches on our list to sort separately for all branches of
clearing house banks if the items were presented to the clearing house through the
Federal Reserve Bank.

I objected very vigorously to the apparent discrimination

against the Reserve Bank and just before the meeting of the ulearing House Committee
to consider the subcommittee's recommendation, I wrote a letter protesting that the
clause which made their resolution applicable only to items presented through the

Federal would leave such a loophole that it would not accomplish the purpose.
In the end the resolution was passed as originally presented to us,

but with the recommendation to the Clearing House Association that it be not made
effective until we had had time to take the matter up with our banks and to report
The Association took this action on July

back to the Clearing House.

then, on July 27, before we had had an opportunity either to complete our studies
or to report back to the Clearing House, we received a notice that the resolution was
to become effective August 2.

In my opinion it was a complete

on Gregory's part, and wholly unexpected because, inasmuch as all of the other
recommendations of the committee were to be made effective August 2, we naturally
assumed that the special provision about the branch bank sorts would not be made
effective at the same time, since it was intended to hold that up until such time
as we could report back.

I immediately called up Gregory and asked him to ask

Mitchell to postpone the effective date for a month, but Mitchell declined, and
said that he did not think it even worth while to take the matter up with the
other members of the committee.

On July 29 and 30 I had meetings with all our banks and told them
formally of the resolution of the Clearing House which had been referred to in the
newspapers.

I indicated that the issue now appeared to be whether we should have

sorts for all or sorts for none in New York City.

they sympathized


Many of the banks said that

with the decision of the Clearing House on the theory that it was

FEDERAL RESERVE BANK OF NEW YORK

3

Mr. Strong

8.11.26

apparently unfair to require them to sort for branch banks when they had no reciprocal

advantage for their branch banks, and in the end the great majority of the banks which
I consulted indicated that they preferred sorts for none, rather than sorts for all,
and asked me again to ask the committee to postpone the effective date of their
resolution until 6eptember 1 in order to enable them to gear up their organization
to take care of their own sorts.
I called on Mr. Mitchell on the 30th only to find that he was out-of-town,

so took the matter up with Mr. Frew, who called a meeting of the Clearing House Committee that afternoon and sent for me to be present.

I presented the request of

our members and briefly explained the intricacies and complications that were resulting from the request of the committee, which explained our not having acted
before the end of July.

I pointed out that unless they postponed the effective

date of their resolution they themselves would be confronted with the very embarrassing

question on Monday of returning branch bank items that were not sorted or else of
accepting them as at present, unsorted, and thus violating the terms of the Clearing
House resolution.

Mr. Ward and Mr. Frew were the only members present, although

Mr. Simonson sat in for Mr. Mitchell.

But they ha

four times during the meeting, and, in the end, decided to postpone until September
1.

The devil of it is now, however, that we face the possibility of disruption of our Manhattan, Bronx and Brooklyn clearing arrangement.

The very day

that I had my meeting with the Clearing House, asking for a postponement, the
Central Union served notice on all banks in New York that inasmuch as the city
collection department of the Clearing House had abandoned branch bank sorts,

SM.....

they would require hand presentation at each branch.

I told the Clearing House

that similar action by many of our banks seemed not unlikely, particularly in
the case of the Manufacturers Trust.

6ince then the Empire has served notice

on us that while they were perfectly willing to continue the present arrangement
for
 whatever


banks preferred to send their items through us, sorted separately,

FEDERAL RESERVE BANK OF NEW YORK

3

Mr. Strong

8.11.26

apparently unfair to require them to sort for branch banks when they had no reciprocal

advantage for their branch banks, and in the end the great majority of the banks which
I consulted indicated that they preferred sorts for none, rather than sorts for all,

and asked me again to ask the committee to postpone the effective date of their
resolution until September 1 in order to enable them to gear up their organization
to take care of their own sorts.
I called on Mr. Mitchell on the 30th only to find that he was out-of-town,

so took the matter up with Mr. Frew, who called a meeting of the Clearing House Committee that afternoon and sent for me to be present.

our members and briefly explained the intricacies and complications that were resulting from the request of the committee, which explained our not having acted
before the end of July.

I pointed out that unless they postponed the effective

date of their resolution they themselves would be confronted with the very embarrassing

question on Monday of returning branch bank items that were not sorted or else of
accepting them as at present, unsorted, and thus violating the terms of the Clearing
House resolution.

Mr. Ward and Mr. Frew were the only members present, although

Mr. Simonson sat in for Mr. Mitchell.

But they had Mr. Mitchell on the telephone

four times during the meeting, and, in the end, decided to postpone until September
1.

The devil of it is now, however, that we face the possibility of disruption of our Manhattan, Bronx and Brooklyn clearing arrangement.

The very day

that I had my meeting with the Clearing House, asking for a postponement, the
Central Union served notice on all banks in New York that inasmuch as the city
collection department of the Clearing House had abandoned branch bank sorts,
they would require hand presentation at each branch.

I told the Clearing House

that similar action by many of our banks seemed not unlikely, particularly in
the case of the Manufacturers Trust.

Since then the Empire has served notice

on us that while they were perfectly willing to continue the present arrangement
for
 whatever


banks preferred to send their items through us, sorted separately,

FiDERAL RESERVE BANK OF NEW YORK

4

Mr. Strong

8.11.26

nevertheless they would require hand presentation at their branches for items
not presented as at present through us.

Since the Central Union has required hand presentation, a number of the
Clearing House banks have come to us to ask if we would not present their items
for them, but we have insisted on maintaining the status quo for the present.

If

banks withdraw from our list and require hand presentation, I think we would be
wholly justified in refusing to act for Clearing House banks which have forced us
to agree not to require branch bank sorts in our Manhattan, Bronx and Brooklyn
arrangements.

The whole thing appears to forecast a jam later on, and only

indicates to us, and I hope to the Clearing House banks as well, that they have
acted much too quickly and that they would have done much better had they given

us opportunity peacefully and amicably to work the thing out with our own member
banks as we were trying to do when they suddenly announced that they would make
their resolution effective August 2.
Some time ago Mr. Jay and I talked with Mr. Davison about his making
immediate payment for checks drawn on the Central Union.

While he has never

reported back to us as he said he would, he told Mr. Jay last week that he hoped
to call us up in a few days.

I have little hope, however, that he will agree

voluntarily to make payment in Federal funds, and sooner or later we may have to
decide whether we want to require payment in that fashion.
they are the only member bank not on the immediate list.
Another interesting angle is this:

If the Public

instance, should withdraw from our collection arrangement and require hand presentations just as the Central Union has done, we would probably be justified in declin-

ing to collect such items for the Clearing House banks which have unanimously voted
to ask us to abolish branch bank sorts.

But I question whether we could decline

to accept a deposit of such items from the Central Union, for instance, or any
other bank that is not a member of the Clearing House which has not asked us to
abolish branch bank sorts.




In other words, the action of the Clearing House

FEDERAL RESERVE BANK OF NEW YORK

5

Mr. Strong

8.11.26

was taken with the possibility of hand presentations in sight, and having forced

en

that situation, they are info position then to insist on what would be their
right otherwise to ask us to collect items on the Public National and its branches.
But in all of this I am merely thinking out loud.
merely staying "put"

.

At presen

The Clearing House I think is already seeing reactions

that we ourselves anticipated but which they apparently never even considered.

Certainly in forcing a hurried action on the part of the banks in our Bronx and
Brooklyn arrangement (we acted only as messenger or intermediary between those
banks and the Clearing House Committee) they now find themselves in a position
which is more bothersome and troublesome than the old situation, for they still

have to make their sorts and instead of dumping all items on us they have to
present separately by hand.

I have kept our directors advised of these developments and shall, of
course, let you know of anything new that turns up.

Incidentally you may be interested to know that every member of the
Clearing House Committee, and every member of the subcommittee which studied these
matters is a representative of a bank with branches.
are beginning to feel the whole thing wasupacked:

Some of the non-branch banks
In the end it may only serve

to increase the agitation that is at hand already among some banks to have the
Federal Reserve Bank take over all the collections in the metropolitan area.

We all miss you at the bank, and hope that you are getting a reasonable amount of rest and relaxation, though judging by the amount of correspondence
and traveling that you suffer it is probably most unlikely.

In any event, don't

worry about us or unduly hurry your trip for that would only tire you all the more
and leave you in no shape to go on here when you do get back.
Faithfully yours,

Mr. Benj. Strong,
cio The Bank of England,
London.



FEDERAL RESERVE BANK

OF NEW YORK
August 12, 1926
Dear Mr. Strong:

You will remember that some while ago I wrote you of Colonel Ayers'
visit to my office about Mr. Baker's fee.
I forget to mention to you that the last time I was in Tashington

Governor Crissinger told me that he has already received Mr. Baker's bill for
$35,000;

that he asked me what I thought of it;

but that before giving me op-

portunity to reply he said he himself thought it was a little steep and that
he wished it had been made for $25,000, rather than $35,000.

I told Governor Crissinger that in my opinion, considering the time
and effort that Mr. Baker spent, the fee did not seem immoderate, particularly
when considering the value of the results to the Federal Reserve System.

I alsc

explained that had Mr. Baker given the same attention and time to a case for a
commercial client of prominence, he would undoubtedly have been justified in
charging a considerably larger fee than that charged the Federal Reserve Board.
I added that in my opinion, if the only question in Governor Crissinger's mind
was the difference between $25.,000 and $35,000 it was not worth quibbling over

and that I, myself, would be inclined to pay it.

Governor Crissinger did not state what he would recommend to the
Board, and I have not since heard what has been done about it.

I thought,

however, in view of my earlier letter, I had better let you know of this
development.
Faithfu

Mr. Benj. Strong,
c/o The Bank of England,
London.



y yours

0
FEDERAL RESERVE BANK

OF NEW YORK
August 13, 1926
Dear Mr. Strong:

Dr. Burgess has handed me the letter which you wrote to him on July 16
referring among other things to the fact that

you have

never received a copy of the

record of the hearings before the Banking and Currency Committee subsequent to Dr.
Miller's testimony.

Through some misunderstanding Dr. Burgess once wrote you that

the whole record had been sent.

AB

a matter of fact, while we

have

forwarded every-

thing that we received, we have never sent anything subsequent to Dr. Miller's testimony.

I do not know now whether- it will be possible to obtain a copy of the balance

from the Federal Reserve Board, or, indeed, whether they themselves have got it, but

I shall try the first part of the week to see whether it will be possible even at
this late date to procure the balance of the hearings for you.
As we have cabled you, we raised our rate yesterday to 4%.
were unanimous in their decision.

The directors

While Mr. Woolley had some fee

ago when the matter was discussed most informally that he then saw no occasion for an

increase, and while there were one or two of the other directors at that time that
wanted "to be shown," nevertheless all that were present at the meeting yesterday were
A

unqualifiedly in favor of the increase.

Mr. Woolley was not present, but I understand

that he told Mr. Jay over the telephone that he would be glad to go along with the
rest if they thought it advisable to make the change.

We are now planning a meeting of the Open Market Investment Committee for
early next week (likely Tuesday) for while there may not be any real necessity for our
selling any securities as long as discounts remain at a high enough level to make our

present rate effective, nevertheless there are

a number of

aspects

of

the situation

in connection with the Treasury's plans which should be discussed.
When Mr. Winston passed through here a week ago, he said that he needed
Digitized for not much more
FRASER


than $250,000,000 on September 15;

that he was lontll to put out such

A
FEDERAL RESERVE BANK OF NEW YORK

a small issue;

0

2

Mr. Surong

8.13.26

and that what he hoped to do was to purchase about $100,000,000

Thirds prior to September 15 and then to make a nine months' 'issue for some $350,000,000.

It so happens that we have $25,000,000 Thirds in our System account, which he says he
will be glad to buy.

There are also $15,000,000 scattered about in the separate invest-

ment accounts in two or three of the cther Federals which he would also like to get.
But either transaction makes a meeting of the Open Market Investment Committee advisable,
particularly as there may be some inclination on the part of some of the members to
replace securities sold to the Treasury.

it seems to us, however, that these pur-

chases by the Treasury, if made gradually, will accomplish most satisfactorily what we
might want to accomplish by sales to the market from the System account.

Any additional

purchases that Mr. Winston might make in the open market will, of course, have no effect
on the market itself, other than the slight change in reserve requirements.

.9
Since starting this Mr. McKay has called up about some other matters and
I have taken occasion to mention Mr. Winston's program to him.

His immediate reaction

was that while he saw no objection whatever to the sale from the System account, he
thinks that we should replace gradually.

I took the position with him that we should

sell and then determine, after we see the effect, whether it would be advisable to
replace or not.

But all that will very likely be threshed out on Tuesday at the

committee meeting.

Governor Crissinger Is spending the week-end on Long Island and told

his secretary he did not want to be disturbed, so we are communicating with him
through his ownoffice.

I rather think he assumes that the next meeting of the

committee is to be in New York, but before making arrangements and in order not to
trespass on the agreement of last Spring with the Board, we area aiting his formal
O. K.

fi

40/4t

aece/4

v

gzu

I forgot to mention that when we raised our rate yesterday we advanced
the carrying rate for Governments from 3-1/2% to 4% to keep pace with the discount
rate.

But at Mr. Kenzel's recommendation made no change in the bill rates, which he




7(DERAL RESERVE BANK OF NEW YORK

Mr. Strong

8.13.26

wants to maintain at the present level at least until next week.
Mrs. Shurtleff returned to the bank this week, and while she looks pretty
well

considering

the miserable time she has had, I rather gather she is not at all

strong and that she really has no right to be back at the office.

Dr. Crawford feels,

however, that considering Mrs. Shurtleff's temperament, it is much better to allow
her to come back each day for a few hours than to insist upon her staying home alone.
I suppose there is much in what she says.

about

She has been a great sport

it all,

particularly as she knows well enough that she is not out of the woods, and may not be
for some time.
It is
of it all.

very

hot and muggy, - most uncomfortable.

The temperature is not

so bad,

I am glad you are out

but the humidity is dreadful.

know when I have felt a summer as disagreeable as this one has been.
bad storm yesterday.

I don't

We had a very

It stopped all the subways and surface cars, the Long Island

trains and most every other means of transportation.
while, today is about as bad as it has been.

So

While it was cooler for a

take your

time and don't come back

until it cools off.

I understand Dr. Miller is on the water on his

return

trip!

Miss Bleecker, who is helping me during Miss McCarrickto absence,
and I both send our best.

We both certainly miss you.
Faithfully yours,

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

England.




FEDERAL RESERVE BANK

OF NEW YORK

August 17, 1928

Dear Mr. Strong:

I find that we have already sent to you all of the record
of the hearings before the Banking and Currency Committee that we have
had with the exception of Dr. Burgess' statement, and a short statement

by Major

Bellerby.

Dr. Burgess had only one copy of his own testimony,

and had so many corrections to make in it that he preferred not to send
anything to you until he has a final draft.

Major Bellerby's state-

ment was very short, and the only copy that we have seen is an original
draft that belongs to the Reserve Board, which they have asked us to
return to them.

In the circumstances, and until the
out some

page

proofs,

there will

Printing

Office turns

be nothing more to send you.

As I

think I explained to you once, however, aside from the Burgess and
Bellerby statements there is very little else that you lack.

Mr. Benj. Strong,
c/o The Bank of

London, England.




ngland,

FEDERAL RESERVE BANK

OF NEW YORK

August 20, 1926

Dear Governor:

This is merely to acknowledge the receipt of your letters
of July 21, 24, 26 and August 1, giving a running account of your experiences in France at that time.

I have not yet had a chance to read

them carefully and will reserve any comments concerning them until I
have gone arerthem more carefully.

I just want to let you know that

I have received them, together with the copies of letters to Mr. Mellon
all of which I have arranged to give to Mr. Winston next Tuesday.

He

is leaving Washington today and will not be back until that time.
Many thanks.
Sincerely yours,

Benj. Strong, Esq.,
c/o The Bank of England,
London, England.

P.S.




Through an oversight this letter was not transacribed until August 50.

FEDERAL RESERVE BANK

OF NEW YORK
August 20, 1925.
Dear Governor:

Things happen so very quickly these days that it is difficult to
you of them in any very logical sequence.

tell

To send a cryptic cable and then to fol-

low it up with a detailed letter is most unsatisfactory, since the first is necessarily incomplete and the second unavoidably slow.

Then, too, so many of us are

writing you that it is difficult to avoid duplication.

But in the circumstances I

It must be very confusing to you, however,

see no wholly satisfactory solution.

particularly as busy as you are in that whirlpool on the continent.
Nothing very interesting has happened this week other than the Open
Market Investment Committee meeting on

Tuesday,

about which I cabled you.

assuming that the discussions pro and con concerning the rate change the previous

week have been covered by Mr. Jay, but it is possible, in Burgess' absence, that
the committee meeting has not been described.
As stated in my cable, Crissinger, James and McIntosh
McKay and Hutt substituted for McDougal and Norris respectively.
absence Sailer was in the chair.

Ke presented a report

Burgess, a copy of which I am enclosing.

were present.

And in Case's

which was prepared by

This report was read through and each

member of the Board and of the Committee was requested to express his views.

A

majority favored selling $40,000,000 from the System account ($15,000,000 of which
was to be obtained from Boston, Cleveland and

Philadelphia

individually in sub-

stitution for other of the System's maturities) to the Treasury between now and
September 1.
Crissinger stated rather vehemently that he thought we should sell
all of the System's holdings before October 1.

He expressed very grave fears

about the stock market, and, to use his own language, thought it was the rottenest



Governor o

FEDERAL RESERVE BANK OF NEW YORK 2

situation we have had in some time;

trong
8.20.26

that the market was honeycombed with pool

operations on the part of people who were booming stocks to unload before election
wnen they anticipate a democratic victory;

and that the System Should not be a party

to providing funds for such operations.

McIntosh, on the other hand, said that he, himself, was not much worried
about the stock market;
earning capacity;

that the stocks that were going up were ones of known

and that, in any event, we perhaps paid too much attention to

market operations.

Harding was in favor of selling the $40,000,000 to the Treasury, but
said he hoped that we would be able to replace in December so that we might enter
the January period with at least $300,000,000 in the account.

James said that he wished it were possible for us to purchase
$500,000,000 of securities without affecting rates, but he did not give sufficient
explanation to indicate whether he was trying to differ with Crissinger or whether
in fact he was perhaps "kidding".
meeting;

contributed no suggestions;

He said very little during the course of the
and made few, if any, comments other than to

agree with Crissinger that we were a little tardy in raising our rate.
This raises an interesting question about which Criasinger, who has been
here all of this week, ha $ spoken to me.

We, ourselves, began the serious con-

sideration of a rate change about the middle of July.

we watched the matter very

carefully and made special studies and reports each week to the directors.

It was

on August 2 or 3 that Governor Crissinger called me on the telephone out of a clear
sky to say that he thought we should raise our rate and sell $75,000,000 of securities.
I told him that we had had the matter under consideration for some time;
of us thought that it should be done fairly quickly;

that some

but that we were a little

hesitant until the picture was a little clearer and outside rates and conditions became a little more positive than they were at that time.
to cable you and get your views before taking any action.

I said also that we planned
He said at that time that

he had not talked with any other members of the Board and that he was expressing his




FEDERAL RESERVE BANK OF NEW YORK

(I)

own personal views.
the matter.

11

3

Governor Strong

8.20.26

It was on August 4 that I sent you my cable #43 concerning

On that same day, I think it was, Crissinger had a meeting of the

Reserve Board;

told them of his conversation with me;

and then let me

the Board, by a vote of three to one, had expressed a willingness to approve a
change.

Hamlin, who was the one, said he preferred not to express an opinion

until he had had a recommendation from us.
It now appears that the Board was very much put out that we did not

change our rate the next day, August 5, and when James and Crissinger, at the
Open Market Investment Committee meeting this week, expressed their vexation
that we had not acted sooner, they apparently referred only to the fact that we had
not acted a week before.

I think it was perhaps more pique th

followed their express wishes than because they thought any serious harm resulted
from the delay of a week.

I have explained in some detail since then to Crissinger personally

why we did not raise, and emphasized the importance of having gotten your point
of view about the foreign situation before we took any action.

I think he, him-

self, at heart was wholly satisfied, but insisted that the Board (which I presume
really means James) thinks we should have acted the week before.

I lose all

patience with them, because I am confident that not a one of them could have made
a decent argument for the raise at the time that they expressed a willingness to
aprove an increase.

Crissinger does feel still, however, that we perhaps should have
sold some securities some six weeks ago, though he had never intimated this in
any of his discussions with us until his telephone conversation of August 3.
Indeed he had not indicated that he had any thought about the matter whatever.

The truth really is, I think, that somebody has been talking to him about the
stock market and given him quite a scare.

In infer this from various remarks

that he let drop about pool operations, member bank speculations, and even sug-

gestions which he made that he thought it would be advisable if the directors of



FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

4

8.20.26

Federal Reserve Banks were not allowed to deal in the stock market!
One more thing, and quite a distressing one.

0

After all our efforts to

keep wholly and completely confidential the incoming shipments of gold from
Australia for account of the Bank of England, the New York Evening Post on

Tuesday night of this week (that is the 17th)ran an article purporting to be a
wireless from London to the effect that the current shipments of gold coming to
San Francisco from Australia were for account of the Bank of England under arrangements with the Commonwealth Bank of Sidney.

The next day at 10:00 o'clock

the Dow Jones ticker service, under a San Francisco headline referred to the fact
that $30,000,000 gold had been imported into this country for deposit with the

Federal Reserve Bank of New York for account of the Bank of

ngland.

I immediate-

ly cabled Governor Norman as per the enclosed, and yesterday got his reply, # 63.
We have today sent off an answer,

41,

which is also enclosed.

At first I really was perturbed lest the news might have leaked out

in San Francisco, but I am quite confident now, although I have not yet had confirmation from Governor Calkins, that that is not the case.

At any rate Norman

himself believes, as I think must be true, that the report originated with the
Financial News in London.

In any event, wherever it started, it certainly has

stirred up a lot of comment in the press and elsewhere.

has

Everyone

been trying

to find out something about the matter, but we have thus far maintained our
position that we have no statement to make one way or another.

While, in response

to Governor Norman's request for any suggestions we might have to offer, I have
indicated the possibility of informal and confidential chats with the news re-

porters before the next shipment comes in in September, I would not care to attempt
even such an informal talk unless I have a little more definite word from Governor
Norman as to that he would like to have us say.

But that is entirely up to him.

We shall, of course, do nothing directly, indirectly, or confidentially except
upon his request and authority.




The whole episode, however, has evidently been quite embarrassing to

FDERAL RESERVE BANK OF NEW YORA

8.20.26

Governor Strong

5

him, &,,nd a little embarrassing to us too because of the fact no one seems to

understand the mechanics of the operation, or the effect upon the money market.
lE

Ve

are now investing the proceeds of the gold in securities out of our Open Market

account, so that there is no effect whatever on the market, but of course We cannot make a statement about that.
You may remember that some time ago I told you that there was some com-

ment from Sidney about shipments of gold to this country, but it was not until
the reports this week that any mention was made of us or of the Bank of England.

I mention this, however, to indicate that the first two newspaper references to
the transaction were from points outside of this country.

An unusual record!

I am describing this in some detail merely because Governor Norman
will no doubt want to talk to you

about it when you see him in London.

I am

of course sending him a set of the newspaper clippings.

Everything seems to be running along pretty smoothly now that we
have got the rate increase and the Open Market meeting out of the way.

Case

is still on his vacation and while Burgess has been called back for both the
rate change discussions and the Open Market meetimg, he is new finishing his vacation somewhere on the Jersey shore.

The rest of us are still on deck, and

feeling very fit.

I only hope that you, yourself, are really feeling better, as you
seem to indicate.

There is no use preaching to you, but I do hope you will not

overdo it for the rest of the time you are there.
My best, as always.

ki

Faithfully yours,

c:\

tated but not read.

Benj. Strong, hsq.,




FEDERAL RESERVE BANK

OF NEW YORK
August 25, 1926

My dear Governor:

This will acknowledge your confidential letter of July 29, enclosing
a confirmation of the cable wnich you sent me concerning Dr. Miller's testimony.

As I wrote you on August 5, I fully agree with you as to the import-

ance of eliminating from the record any reference to the status of the Reichs-

bank's account

with us.

The only question which T have had in my mind has

been - what would be the most effective and yet the most inconspicuous way of
accomplishing it.

After considering various

possibilities, 1 finally took the matter

up with Dr. Goldenweiser personally and learned that when Dr. Miller went
abroad he left the editing of his testimony to Goldenweiser and Perry.

When

I explained the matter to Goldenweiser, he told me that he remembered having
seen the statement but that he thought that either he
it from the galley proof.

or

Perry eliminated

Not wishing to take any chance, however, I urged

upon him the importance of verifying that fact.

H

over the telephone that the galley has not yet gone to the printer and that
Mr. Thompson (McFadden's secretary) has agreed to let Perry look through it
in order to make the correction, if it is needed.

I impressed upon Dr. Goldenweiser the importance of keeping my
name out of any action that he might take regarding this testimony.
stands the situation fully and will, I know, handle it discreetly.

He underIn the

circumstances, I think this will prove to be the simplest and most effective
way of correcting a bad situation.




FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong

It still leaves open, however, the

August 25, 1925

possibility of

future breaches.

In this regard, I have carefully gone over all the statements and reports

issued by the foreign department - whether to other divisions in this bank
or to the Federal Reserve Board or other Federal reserve banks.

Already we

have eliminated or modified a number of the statements, but it will be im-

possible

for us to accomplish what we want with regard to the other Federal

reserve banks or even the Federal Reserve Board until we have an opportunity
of talking it over with the Governors first.

My only idea is that we might

well make a frank statement of the importance of the strictest confidence in

handling our foreign accounts and through prearrangement, or otherwise, we

may mow have some one of the Governors suggest the elimination of much of
the detail that we now send them at their request.

But I want to assure

you we have the matter in mind constantly and are vigorously doing our best
to jack up our procedure.

I feel much better satisfied about it now than

I did sometime ago, although there is still more to be done.

Faithf ly yours,

Mr. Benj. Strong,
c/o Bank of England,
LONDON, England.

GLH.MM




FEDERAL RESERVE BANK

a

OF NEW YORK
August 26, 1926

Dear Mr. Strong:

I want to thank you for your letter of August 11 from Amsterdam,
concerning the taxes on income earned from bills purchased for the account
of foreign banks.

We have been receiving reactions on this subject from all directions,

undoubtedly prompted largely by the fact that during the last

winter we sent a copy of the income tax law to each one of our foreign
correspondents calling attention to those provisions which might concern
them.

This, you will remember, was in accordance with discussions which

I remember that you and Mr. Case and Governor Norman all had together concerning our obligations to our foreign correspondents in informing them of

46(

theirpossible liability to this Government.

I have talked with Mr. Winston about the possibility of a new
ruling on the subject, but on this there is not much chance of having the
present one reversed.

However, in response to a request from Mr. Alexander

for suggestions for the Advisory Council meeting to be held on September 17,
I have drafted the enclosed memorandum which may start something.

The

situation at present is wholly illogical and unreasonable and even if it is
impossible to have the Treasury Department modify its present interpretation
of the law, I rather think we should not have much difficulty in procuring

an amendment to the lawat the proper time.

I am also placing the topic

on the program for the Governors Conference.
Fai

Mr. Benj. Strong,
c/o Bank of England,
England.

 LONDON,


fully

ours,

TAKES ON THE INCOME RECEIVED FROM BANKERS ACCEFTANCES
HELD BY fOREIGN CORPORATIONS

Under the provisions of Section 230 of the Revenue Act of 1926 as construed by the Internal Revenue Bureau, a tax of 13 1/2

is imposed upon the discount

received by any foreign corporation from American bankers acceptances.

Section 217

of that Act, however, exempts from taxation any interest on bank deposits received

by a foreign corporation not doing business within the United States and not having
an office therein.

Under the terms of Section 236 interest upon obligations of the

United States is not subject to tax.
Entirely apart from the fact that there seams to be no logical basis for
taxing the income from investments in the form of bank acceptances while exempting
the income from investments in the form of bank deposits, the practical effect of
this discrepancy in the law is to force foreign banks having surplus funds in this
market to invest in government securities rather than in, or to the exclusion of,
bankers acceptances.

Already serious criticism of this provision of the law has arisen in
various foreign countries, and the ultimate effect may be seriously to handicap
the free development of the dollar acceptance and to drive foreign funds to London
where their employment in the local discount market would not be subject to tax.
Because of the imPortance of this matter to the continued use and
marketability of dollar acceptances, it is
SUGGESTED

That the Federal Reserve Board take such steps as it may feel

to be appropriate in the circumstances to urge either an amendment to the present rulings
of the Internal Revenue Bureau or, if necessary, an ameudment to the law in order to
exempt from taxation the discount received from American bankers acceptances just as
interest upon bank deposits is now exempt when received by foreign corporations not
doing business and not having an office within the United States.




FEDERAL RESERVE BANK

OF NEW YORK
August 30, 1926

Dear Mr. Strong:

In your

letter of August 3 from Amsterdam, you refer to the resolution,

about which I wrote you, that was introduced in the Federal heserve Board inquiring into the authority of your trip abroad.

I think that I have told you in

one of my earlier letters that 'that resolution, while introduced, was never

formally considered and eventually was dropped entirely.

Incidentally, I

think the feeling in the Board at the moment is perhaps better than it has
been at any time, about their being kept advised of your trip and your doings
in Europe.

I certainly have done all that I could to keep them informed

without at the same time unduly burdening them with details that would
fuddle the
position in

main issues and that might much better await your return for ex-

a long consecutive story when you yourself are able

to tell it.

Faithfully yours,

Mr. Benj. Strong,
c/o Bank of England,
LONDON, England.

GLH.MM




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COPY OF HANDWRITTEN LETTER FROM MR. HARRISON
TO GOVERNOR STRONG.
ENVELOPE MARKED "PERSONAL"

Wednesday, September let,
1926
AO!,

Dear Mr. Strong:

While I do not yet know just when you plan to sail,
it is likely that this will be my last letter to you unless I
hear you plan to stay beyond the 15th.
I am writing this by
hand for two purposes -- first, to thank you for your fine long
handwritten letter full ofibtmosphere" and the most satisfactory
reports of Moore and Warren and, aend, to give you a most private tip
about Crissinger. When he was here about ten days ago, I had a long
personal talk with him. We reviewed the System, the Bank, and the
Board in some detail and, as usual, he dilated upon the difficulties
he has in Washington, the lack of friends, his unhappiness there
and his complete lack of sympathy with other Board members personally. He then told me in the strictest confidence what I told
him I might tell you under oath of secrecy that he has been offered
a job up here that is now in the process of negotiation. He
naturally does not want to discuss it promiscuously (he hasn't told
aloul in Washington, he said) since a failure to materialize might
only result in embarrassment. It is the presidency of a new indemnity company now being promoted. He did not tell me who are the
backers but said they were "all good men," some of them personal
friends of his, that the paidin capital would be $2,000,000, and
that the proposed directors had over $700,000 of premiums to throw
to the company as soon as it opened for business. The salery had
not been discussed when C talked with me, but since then he has
had other talks with the promoters and something further may have
developed about which C will likely tell me when next I see him.
In his own mind, he thought he should start with about g30,000
with a bonus of some founders' or managers' stock. I warned him
of some of the pitfalls, the possibility that they wanted his name
only through the early stages and that they might then ditch him,
the importance, in that particular field, of having only the best
names as directors and backers, end the fierce wear and tear here
in New York. He said he had all those things in mind, that so many
of the 'backers' in this case were his own personal friends, that
the founders' stock gave him a measure of assurance as to continuity
and that physically he feels ever so much stronger.
So, it may be a go. I hope so. It will solve a number of
problemsor at least afford the opportunity for their solution.
But I do not yet see the right man for his job. You yourself suggested it to Winston, but while I personally have always liked him,
he is not generally popular throughout the System. I hear, though, that
he is being liked better in Washington. Whether he is changing his




Page 2

surface or whether they are seeing through it, I do not know.
However all that may be, he himself has laughed off the suggestion as out of the question. I imagine he might whistle another
tune if the job were offered him! Of course, his name is
eligible only if both Cis depart -- one to make the job vacant,
the other to open up the Chicago district. Sidney Anderson
would, I think, fill the bill most excellently and would perhaps
satisfy the dirt farmers as well.
he take it? I would
But,
doubt it, somehow. The question of a successor, however, is
still the all important factor from your standpoint. I am assuming
from your letters and cables that your health is really improving,
though I realize that Dr. Miller (J. A!) will have a large voice in
guiding you in that regard.
It is getting late, and I must be starting home. I
certainly do miss you and am glad you are getting "home sick"
(see your No. 63)!
As I stated in myS2, the feeling in favor
of your returning as soon as you have done all
"necessary"
pervades us all. There is still so much public comment about
both you and Mellon that I cannot help but think that the sooner
you can leave, now that you are finishing your discussions with
Moreau, the better it will be and the less likelihood of future
criticism.
It will indeed be good to see you back here, and to
hear directly from you all that you have done and seen. But first
of all take care of yourself, get what respite you can and come
back feeling your old self again. Even the "yellow memos" will
be welcome!




that is

My best

to you as always,

Faithfully yours,
(Signed)

GEORGE HARRISON

FEDERAL RESERVE BANK

- OF NEW YORK
September 9, 1926.

Dear Mr. Strong:

This is in further reference to your letter of August 26, replying

to mine of August 11, about the Clearing House Committee's action on branch
bank sorts.

The September 1 period has passed without any very serious break in
our line-up to date.

As I wrote you, the Central Union Trust Company with-

drew from the City Collection Department of the Clearing House when they learned that they were no longer to havetbe benefit of branch bank sorts.
other words, the Clearing House lost 100% of the banks affected..1

In

-

We, on the

other hands, have to date lost only one out of 20 odd which have branch banks,
that is, the Empire Trust Company.

That is not at all surprising because,

as you know, the Empire Trust was one of the last to come on our list, and
prior to that time they had received their items on their branch banks over
the counter.

They have

therefore, returned to the position they occupied

prior to their coming on our list.

I rather suspect, however, that we may

possibly still lose the Municipal Bank, which has some brunches in the far
distant suburbs.

But even if they go, it will not be very material.

I am

not sure whether I told you that we were able somewhat to modify the effect
of the abolition of branch bank sorts by providing for a delay in the return
of "not good" items from branch banks in the outlying districts, beyond the
3 o'clock hour heretofore in force.

This has enabled many of our banks

to get all their items in bulk, sort them by branches, and return "not good"




-0tDERAL RESERVE BANK OF NEW YORK

2

Mr. Benj. Strong

September 9, 1926

J

items later in the day, so as to be at the heserve bank before midnight.

We

have protected ourselves, however, by requiring service of notice from the main
office in writing before 3 o'clock of any such items that are to be returned
by midnight.

In any event, our casualties to date have been less than

The real problem is as you suggest:
Union Trust Company.

51.

what to do about the Central

To date, we have maintained the status quo and declined

to collect by hand for Clearing House banks, checks drawn on the branches of
the Central Union,

those items having been collected through the City Collec-

tion Department in the past. We felt thet until we have had an opportunity to
diacuss the whole matter with Mr. Davison, it would be better not to alter our
relations one way or another with the Central Union.

That being so, Clearing

House banks now have to present items on the Central Union and its branches
by hand.

Immediately after all of this occurred, we got in touch with Mr.

Davison and asked him if he would not be good enough to renew the conversation
which Mr. Jay and I had with him early in the spring, before he went abroad.
He said that he had just returned to the bank after a vacation, that he was
not at all familiar with the situation and that he preferred to delay a talk
witA us until he could familiarize himself with all its aspects.

Not having heard anything more from him, we telephoned him again
I plan, how-

about two weeks ago only to 1(;)arn that he had gone out of town.

ever, to call him again next week, not with a view to forcing any issue, but

merely to go over the whole matter with him, indicate the embarrassment we
are now faced with in declining to accept items on his branches for collections kr account of Clearing House banks, and also emphasize

again what we

discussed at some length last spring - the continued embarrassment that we
have in the fact that the Central Union is the only member bank in New York
City whose items are not collectible by us on an immediate basis.




D.

FEDERAL RESERVE BANK OF NEW YORK

5

Mr. Benj. Strong

September 9, 1926

In this connection, Mr. Davison seemed fairly sympathetic with our
point of view when we first discussed it with him.

He pointed out, however,

that it was not directly within his bailiwick and that he preferred to talk it
over with his operating men after his return from Europe.

It will be only to

pursue this earlier quite amicable discussion that we shall call on him next
week.

If anything appears to reach an issue or there is any sort of indica-

tion of embarrassment either to Mr. Davison or to ourselves, I shall back-water
pending your return!

I do not think there is anything in the situation at

the moment which would call for their withdrawal from the System, since we are
not insisting on immediate payment, The only thing that we might properly requite from them as a member is immediate payment and we are not now requiring
that, in any event.

But I shall let you know if anything happens.
Faithfu

y yours,

Mr. Benj. Strong,
c/o Bank of England,
LONDON, England.

P. S.

Incidentally, you may be interested to know that the Clearing House is
to put into effect on Monday, a plan for clearing coupons!
This is
one of the matters which I suggested to the sub-committee when I first
appeared before them sometime ago and which indeed we took up with them
years ago when we first drafted a plan here in the bank.
some difficulties attendant upon this plan, they are going to establish
it only gradually and I think it will develop most satisfactorily with
I do not think we can claim credit for this move because
experience.
I really believe the committee had it in mind even before my meeting
But it may well be that some of our earlier discussions
with them.
with some of the individual members of the sub-committee may have helped
to facilitate action.




Whil

Miss BlePcker

Do you Aant to keep this with
We have just sent the
your other corres.
Governor a copy of Morrow's testimony.




!Plc°.

FEDERAL RESERVE BANK

OF NEW YORK
September 9, 1926

Dear Mr.

Strong:

This will acknowledge your letter of August 26, which among other
things refers to Dwight Morrow's testimony before the Senate Finance Committee.

Sometime before Mr. Morrow sailed for Europe, I asked him whether
he could give me a copy of the testimony to send to you, since I knew how
much interested you would be.

He explained that there was at that time only

one copy in existence, but that he would be glad to give me a transcript of
his testimony for you as soon as he had corrected the copy which the committee
had sent to him.

I have since learned from Mr. Leffingwell that the copy has

never been corrected and that there are no spare copies in existence.

In the

circumstances, I could not ship any along to you, and at Mr. Leffingwell's
suggestion, I myself have not read the only

available copy

since it has not

yet had the benefit of Mr. Morrow's corrections.
But all this can, well wait

gest, there may be a

real

your

return when I imagine, as you sug-

possibility of your being asked to testify before

the committee.

I presume we will never get through with our Washington appearances.
Faithfully yours,

Mr. Benj. Strong,
c/o Bank of England,
LONDON, England.
GLH.MM




WASHINGTON: D. C.
MUNSEY BUILDING

CHIEF FOREIGN OFFICE
PARIS
10 SQUARE DESNOUETTES

WHALEY-EATON SERVICE

(19 BOULEVARD VICTOR)

TELEPHONES:
7679

-A CAPITAL INSTITUTION"

FRANKLIN

FOUNDED 1918

CABLE ADDRESS: WHEAT

17727

Foreign Letter No. 386.
(All rights reserved.)

Information furnished
by our European Bureau.

For Clients Only.

September 7, 1926.

Dear Sir:

There are two statements in the report of the Indian Currency Commis-

1.

sion which continue to cause widespread comment in European financial circles.
We quote them:

Though signs are not wanting of a spirit of cooperation among
the (European) Central Banks towards effecting considerable
economies in the international use of gold, there can be no
doubt that a large extra demand from India would cause increased competition for gold among the countries of the world
and lead to a substantial fall in gold prices and a substantial curtailment of credit,**** We consider that the stock of
"free" gold in America cannot be regarded as superfluous and
will probably be absorbed in a comparatively short time.

Both authorities (Governors Norman and Strou) view the proposal (of gold credits to India) iIth alarm on the grouna-s--"
that it would retard the progress of monetary reconstruction
in Europe, would upset world prices, and would be fundamentally
***Inharmful both to India and to the rest of the world.
obtaining the
superable difficulties would be encountered in
necessary credits.
with
The first of these statements is taken to mean that the Commission,
full information before it, concluded that the prospective Norman-Strong plan

for international use of pld was certain to go through #

wherefore, in a com-

paratively short time, gold now "warehoused" in America will be put to work.
It is expected that this can be done without any great
but only if India is left out of the picture.

curtailment of credit,

In regard to the second state-

ment, America declined absolutely to participate in any scheme which would divert to India credits urgently required in Europe.
2.

CONMENT:

tend
To put American "superfluous" gold into active employment will

the
inevitably, in the opinion of European economists, to strengthen greatly



WASHINGTON: D. C.
MUNSEY BUILDING

CHIEF FOREIGN OFFICE
PARIS
10 SQUARE DESNOUETTES

WHALEY-EATON SERVICE

(19 BOULEVARD VICTOR)

TELEPHONES:

-A CAPITAL INSTITUTION"

CABLE ADDRESS: WHEAT

FRANKLIN {

FOUNDED 1910

Foreign Letter No. 380.
(All rights reserved.)

1 5,11

Information furnished
by our European Bureau.

For Clients Only,

.77 76

July 27, 1926.

Dear Sir:

The idea is so prevalent in Britain that America is asking for

British West Indian possessions, in order better to control the smuggling of
liquor, that a popular song has been parodied to say,

"Yes,

we have no

Bahamas."
PAY1ENTS IN KIND:

The suggestion of Poincare' that France may ask America to

accept payments in kind is important.

Caillaux was once credited with the

remark that France would pay every cent if the United States would take payment in champagne.

American officials are so far declining even to consider

any proposals that look toward the breaking-dawn of the tariff barrier.
REHABILITATION:

It has come to be commonly accepted that the Briand Govern-

ment Was in sympathy with a gradual decline in franc values, thinking this
the best way out for France.

Poincare is made of sterner stuff.

one thing he does know how-to do it is fight.

If there is

Neither he nor any of his ad-

visers, it is probable, really believes that financial rehabilitation is possible through internal effort only.

Outside aid must be got; wherefore, the

present Poincare policy must be considered not as a permanent program but as
the building-up of additional trading material.

"Better terms for France."

Poincare is considering the adoption of a gold accounting unit for treasury
and budget purposes.
EPOCHAL:

That would be a marked step toward stabilization.

The formula for stabilization will chart the course of business and

industry over the next half-century.

The importance of the negotiations jus-

tifies the secrecy that is exacted, just as it explains why each nation



1

el t

.

2.

7/27/26.

involved is making every move with extreme care.

An authority whois inti-

mately connected with the situation advises us:
The main idea behind the presence of high American financial
personages in Europe consists in exploring the possibilities for
a vast capital exportation from the United States, accompanied
by the introduction of American technical methods in all processes of manufacturing and distribution.
The present
debt policy conflicts with the realization of this project. It
is clear now that this debt policy is to be changed, but it is
valuable temporarily as a bargaining weapon. The course of
events will probably be as follows: First, Secretary Mellon
will informally and separately talk with other Finance Ministers;
Second, there will be formal meetings of the governors of the
various banks of issue; Third, international bankers will meet,
and the widest publicity will be given their deliberations after
agreement has been reached by the various diverse elements in
regard to future procedure.

As a

practical thing, the whole program for a "Financial Locarno"

rests in the hands of Governors Norman and Strong, who thin2i, of the problem

as fundamentally a banking one.

Neither of these gentlemen appears to have

been at all impressed by sentimental appeals.

There is responsible authority

that can be dealt with now in Rome and Brussels.

there


It will not be long before

will be similar "authority" with which to deal in France.

CHIEF FOREIGN OFFICE

WASHINGTON. D. C.
MUNSEY BUILDING

PARIS

WHALEY-EATON SERVICE

10 SQUARE DESNOUETTES

(19 BOULEVARD VICTOR)

-A CAPITAL INSTITUTION"

CABLE ADDRESS: V1/' EAT

cr

TELEPHONES.

FRANKLIN {7727
7679

FOUNDED 1916

American Letter No. 420.

September 28, 1926.

All Rights Reserve,,.

For Clients Only.

Dear Sir:
5.

MELLON-STRONG:

Reports persist that tentative decisions of decisive importance

were reached by Secretary Mellon and Governor Strong, in Europe.

No positive

proposals from either one of them, we understand, have reached Washington.
icism of negotiations with the French is:

"They talk too much."

Crit-

Washington

would be extremely reluctant to grant any such revolving credits to France as
were granted to Britain.

A ranking diplomat tells us that "the tentative ar-

rangements made indicate that the new conditions contemplated will not obtain
until next spring."



WS.CI,NW-7-24

FEDERAL RESERVE BANK

OF NEW YORK

7.E CORRESPONDE C
Dr. likirgess
ROM

OVA

1tU
SEP '24

G. L. Harrison

44.

DATE

B.

Sept. 23, 1926

192

ECT

While I have recew d o'direct reply from the Governor concerning
the suggestion that we allow the bank reporters to run a personal news item concerning his return, nevertheless in a wireless which must have crossed mine, he
stated that his name is on the passenger list, so that the news will necessarily
come out in any event, and I see no reason why you should not authorize its
release by those fellows to whom you have already given it in confidence.




a1,1

At

-

/0'

P

.




2F12

ttneTA444#

4

Misc. 3 1,50M.8-25

FEDERAL RESERVE BANK
OF NOW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

- ROM,

f

Ls. H

DATE

Sept. 28, 1926

SUBJECT

arrison

telephoned to Governor Crissinger this afternoon referring to
your earlier conversation with him, and repeated that you would be glad

at any time after our directors meeting on Thursday, to have a talk with
the Federal Reserve Board about your European trip, if they care to have
you do so.

I told him that you preferred to have the Board fix the

time.

Governor Criseinger told me that Mr. Hamlin will be out of town

all this week and that there 'would probably be more chance of having a full
meeting of the Board on next Tuesday than on next Monday.
suggested that you go down on Tuesday.

He accordingly

I told him that I knew that

would be agreeable to you and that we would consider it settled for Tuesday.

GUI. ?V




192

A

WESTE

.611-rate

frI or Cable
rn unless ,ira

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r in the address.

SYMBOLS
BLUE

UNION

NEWCOMB CARLTON. PRESIDENI"

.1

4h°

C. WILLEVER. PiRsT VICE-PRESIDENT

Day Letter

NITE

Night Message

NL
LCO

CLT

Jb WiT

Nigh' Letter
Deferred
Cable Letter
Week End Letter/.

shown in the date line on full-rate telegrams and clay letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME

he filing t;*.-

ceiv6:-.

Form 12C11-

A

E61CC 6C RADIO

461)-A"H
SS MAURETAN I A RCNY 15

ici 24,

BENJ STRONG

270 PARK A VE NEW( ORK

FEELING VERY FIT AND HOPE YOU ARE TOO




HARR 1 SON

135A DEC 4 19 26

December 29, 1928.

Dear Mr. Strong:

This ir; illet 4 hasty note which I am anxious to ship off on the one

o'clock train to let you no that I have just received a cable from Governor
Norman saying that he expecte to sail within two weeks and wishes to return to
London by February 8.

That, of course, makes the date of his arrival here somewhat uncertain

but I assume for the moment that it will not be so soon us to make it neoessary
for me to Change my plans to go to you early next week.

I,am anxious to have at least One more talk with you befor6 Governor

Norman arrives, my present plea is to arraoge to eee Secretary ;gallon sometime

Monday, January 3, and leave :iasnington that night for Asheville.

I hope that

will be entirely agreeable to you.
I rather imagine from something Mr. Morgan said last week that when

he learns of Mr. Norman's plans, he will wt,..at him to stay with him that part of
the time he is in New York. 'I wonder, however, whether you might not want to
offer your apartment to Mr. Norman.

He has been there before, is used to it,

and might prefer to stay there rather than to visit some gne else. If you would
like to have me act for,you, I shall of course be only too glad to move over to
the apartment myself while he is there, although I am not making that as a suggestion.
As I may go to lashingtoa on Saturday, you might ask Phil to telegraph
me if there iu any message you wsnt to reach me before I leave hero.




December

2

I

lt"28

5/2all eee you so eoon that I won't try now to give you the news

or even a report of the parties that we heve had for Mr. Jv.
to say that we have all miesed you dreadfully.

Suffice it

In the meantime, my best to you and all sorts of good wishes for
the New Ye%r.

Faithfully yours,
c-cr.-441

Mr. Benj. Strong,
Grove Park Inn,
:Asheville, h. O.




1
Misc. 24. 1

40 M 6-25

FEDERAL RESERVE BANK

0F.T5V1gYikR6f N.Y.

SENT BY

G. L. Harrison

SEND To FILES

e

(DAY LETTER)

COPY OF TELEGRAM

Z7),

Ur. Philip G. Strong

/,

Asheville, N. N. C.

Please lot me know when it will be quite convenient to have me Eo to
Asheville.
I am able now to leave here at any time but as I would prefer first
to see the Seoretary on his return td1Whehington latter part of this week and as
nothing haa transpired to make haste necessary, I am wonderins whether tometime
next weokswould be wholly satisfactory at,your end.
Best to you both




George Harrison

6

-

.

Wit?
Misc. 24. 1

40 ILI

5-25

FEDERAL RESERVE BANK
OF rei4NVOPi.i

SENT BY

1.11-. Harrison
SEND TO FILES

COPY OF TELEGRAM
_

p i437
.

Beaj. Strong
Telephone Ashland 70D.5

Diltmoro, north Carolina.

Monty and Dick left at one forty five today arriving Biltmore tan tea
tomorrow morning




Ho news haro but :is all send our best
Harr/ on

4

r-- 2.4"1
17

Misc. 24. 1 40 M 5-25

FEDERAL RESERVE BANK

Mr. Harrison

0 F pf-E.V2a.MR K

SENT BY

SEND

To

FILES

COPY OF TELEGRAM

Benj. Strong

Ar.1, n

7

77if.

Biltmore North Carolina

I

Lubbock snd 1 leave tomorro!g arrivingBfitmore Wednesday morning
r*7
Please reaervs coTpartmtilt for re returning i';ecneodi..y sn'd slterk.te
/

,

rec,crw.tion for Thurrdt1




0/:'

Harricon

roai:

Misc. 24. 1

40 M 6-26

FEDERAL RESERVE BANK
0 Fiz

Eff. YEM

SENT BY

G. L. Harribc,n

SEND To FILES

COPY OF TELEGRAM

Feb. 4, 1027

Benj Strong
Teiephcne Asheville 700L
Biltmnre, North C,xrolin

Mr)nhet Lnd 1 both f:,rrive biltmore Sualle4 loraing

ten ten




Pieass reserve drawing room returnin
HAEPISON

cnday 4Sttirncon

t444.0
Misc. 24. 1 40 M 525

FEDERAL RESERVE BANK

OF Ngvq-.YoBnik




SENT BY

r.

rrion

SEND To FILES

COPY OF TELEGRAM
February 213,1:1 927.

1cnj Strong
cr.,hr. A

-1,73_11 c '73'4)5

tiiitmoro North Carolina

t off

7:1.v

morning
Tho oth or s

$-.131

t..x :17 0

<v. 1 ok:.),.. iv, for it%sh.inp ton tai
not 4,:olag.

FEDERAL RESERVE SANK

OF NEW YORK
March 15, 1927.

PERSONAL AND CONFIDENTIAL
Dear Mr. Strong:

I believe I forgot to tell you that on one of my visits to
i4ashington, Mr. Hamlin told me that he was very much perturbed by the 0+811

Street Journal article concerning the Board's future centralization program.

He said that, while he was quite certain the article was inspired by one cf
the members of the Board, he himself did not agree with it and would never
support such a program.

He also stated that he could not believe that Mr.

Mc Garrah would take kindly to the article or would permit himself to be
made the Board's "rubber stamp" in New York, and that both Mr. Mc Garrah
and the directors, in his opinion, would make it impossible for the Board,
even if it voted as a whole, to carry out the program referred to in the
article.

At his request, I sent him several copies of the article, which he
said he wanted to discuss with Senator Glass.

I have learned subsequently,

on my last trip to 4ashington, that Mr. Glass is irate about the article and
is determined to write a letter to the Secretary of the Treasury saying that
if the article reflects the point of view or intentions of the Federal Reserve Board, he is sorry he ever voted for an extension of the charters, and

that he is determined to take appropriate action at the next session of Congress if the article really reflects the Board's opinion.
I do not know whether he has actually sent such a letter to the
Secretary as yet, but Mr. Hamlin assures me that it is his firm intention to




FEDERAL RESERVE BANK OF NEW YORK

do so.

2

Governor Strong.

I thought you would be interested in the development.

3/15/27.

It may

well be that we will find the article a blessing in disguise, because it
now affords the opportunity to "smoke out" its proponents.

Sincerely

Mr. Benj. Strong,
Stuyvesant Roan,
Biitmore Forest,
Biltmore, N.C.




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WEST CHOP, MASSACHUSETTS
Matha's Vineyard Island
August 18th

1101)

[1927]

Dear Governor:

I was glad to get both of your letters, the 15th and 16th,
and to get a cross section of what's going on there. While I am
thoroughly relaxing in this let-up that I know now I needed so much, I do
I am still loafing
miss you all and everything that is going on there.
hard -- in fact, I have been so weary that I have done little else.
I
haven't so much as touched a golf club. With things as :easy as you say
they are there, I think I shall take advantage of this opportunity to
recover a little of my patience and equilibrium, so lacking the past
several months. So, as you suggest, I shall drag along for two or three
weeks longer unless, of course, something develops there to make it desirable for me to go back. I was so tired out when I got here, mentally more
than physically, that I have lived the last ten days more or less in a
trance. I think I would lose most of the benefit that I might otherwise get,
were I to go back now. But please be sure that I would gladly return any
time you might want me for anything. Indeed, I wouldn't enjoy myself as I
am now unless I could think you would let me know if I can help by going back.

My present plan is to stay here until early next week and then
to go to my sisters at Jamestown, Rhode Island.
But I shall keep
vised of my address. In the meantime, I shall be thinking over the gold
story as you outline it and if Crane will ship me the various memoranda
DONE
on it, I might take a whack at a preliminary draft; his report of forei /20,27 mbl
markets, the Canadian proposal, the memo we sent Mills on Treasury practice,
gold points, and especially the mint laws.
Give my best to all at the bank. Thanks again for your most welcome
letters and please let me know when ever you want me to go back.
I miss
you all.




Faithfully yours,

GEORGE HARRISON

1.tle4.0t-14'
MISC. 3. 1

60 11

12-23

0.4.1641t.4,_.1

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Itt

FROM

Governor Strong

DATE

Oct. 10, 1927.

192_

SUBJECT:

George L. Harrison

CONFIDFVTIAL

Mr. Case has just told me of developments regarding Crane, about which
he was unable to speak to me himself last week because of my absence from town.
This offer, which Mr. Case tells me Crane is seriously considering,
again prompts me to mention what I spoke to you about sometime ago, that is, the
need for another officer in the foreign department.

While I would much prefer

to have an opportunity to talk this over with you, nevertheless I know how busy

you are today and am sending this along for you to mull over on your way to
Washington.

As you know, I have always felt that Crane is one of the best of our
junior officers, that he is one whom we should encourage in every way consistent
with good organization in the bank.

Indeed, on the basis of his present work,

entirely apart from future prospects, be is entitled now to some promotion.

I

would like to think, therefore, that it would be possible to promote him to a
Controller (so long as we have that rank in the bank) and formally to make him
Secretary of the bank.

As you know, I have always agreed with you that the

secretarial work should be under the jurisdiction of the legal department and
that other things being equal, it would be much better to have the assistant
counsel act as Secretary.

setup.

In principle that is no doubt the most desirable

But Crane has served as assistant secretary for so long, and latterly

has acted as Secretary so satisfactorily and efficiently that I not only think
he is entitled to the appointment but that he will do the job better than any
one else that we could procure in or out of the legal department.




He handles

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
FROM

DATE

Governor Strong

Oct. 10, 1927

SUBJECT

George L. Harrison
2

the work with so little fuss and so little confusion that it interferes but
little with his job as manager of the foreign department.

And so much of

the discussions which now take place at the directors meetings involve the
foreign department that I think there is some advantage, in any event, in
having him present.

Entirely apart from the offer that has just been made

to Crane, I feel, as I told you some weeks ago, that he is entitled to pronotion and if you and the directors should agree, I hope it will be made

clear to Crane that this has been in the offing for sometime entirely apart
from any consideration of the possibility of his leaving the bank.
Together with Crane,s promotion, as I previously mentioned to you,
I think that Scott should be made a manager.

While there are a number of

possible outs about this, nevertheless the volume of work in the foreign department has increased so greatly in the past two years, and the amount of
correspondence, orders and tickets requiring official signature is correspondingly so much greater that we really need another officer in the department qualified to handle work which now is needlessly thrust upon either
Crane or myself or perhaps some other officer in the bank outside the foreign
department.

I think Scott ranks up well with other managers in the bank, has a
thorough knowledge of the work of the department, has applied himself most
conscientiously to his job for a long time and for long hours each day.
effect of promoting him, in my opinion, would be favorable not only in the
department itself but throughout the bank as well.

 them with


Mr. Case wholly agreed with these suggested changes when I discussed
him several weeks ago.

192_

r CLASS

WES JE N

OP SERVICE

---4

This is a full-rate
1F-ram or Cable-

UNIO

unless its character is indicated by
a symbol in the check
or in the address.

SYMBOLS
BLUE

Night Message

Night Letter
1CO

Deferred

CLT

.1. C. WILL EVER, FIRST VICEPRESIDENT

NEWCOMB CARLTON. PRESIDENT

Day Letter

wrrs

Cable Letter

WLT

Week End Lettere

The Sling time as shown in the date line on full-rate telegrams and day letters, and the time of receipt at destination as shown onall messages, is STANDARD TIME.

teceivf -I at Grand Central Terminal Main Concourse, N. Y
N Y.

ALWAYS
OPEN

1927 OCT

23RI 12

Ta1o3 28 BLUE
I THACA NY 23 1201P
BENJ STRONG

270 PARK AVE
IN ORDER TO SAVE T
BAIT I MORE FROM VII-IERE

AND DELAY
I

SHALT.3

VISIT WITH TREMAN




TE HARKI SON

I

I

HERE TONIGHT DIRECT FOR

2H ONE YOU TOMORROVI HAVE HAD A F. I NE

7

r

C.0),..evtak
"6"-s.' 60147"

( CONF

)

DEPHIAL

FEDERAL RESERVE BANK
OF New YORK

:FICE CORRESPONDENCE
Governor

, '.-trong

Nov. 29, 1927.

RANK OF TTALY

SUBJECT:

_George L.

=ROM _

DATE

garrison

While it was of course

impossible for me to

hear Mr.

Lubbock's

side

of the telephone conversation with you this morning, I rather gathered from
your remarks and what you subsequently told me of the conversation that the
substPnce of it was as follows:

That Governor Norman had received satisfactory assurances from

Governor Stringher as to his desire to cooperate with the banks of
issue, as to the amount of their gold holdings

and as

to their ability

to Put through a program;

That Governor Etringher had indicated that they do not propose
.

(6.44./.

/IAA,

a long loan but that they would probably want a shortA cre

t of

$100,000,000 from the Federal heserve Bank and the Bank of England;
That Governor Norman had indicated, with emphasis, that precedent
and

m.

desire for continued cooperation among the banks Of issue would

probably make it necessary for the credit to be not only with the Federal Reserve Bank and the Bank

of

ngland

but with many banks of issue;

That Govermir Stringher had not considered that sort of a credit
and would like to think it over, but that he was
Governor Norman's

opinions and

very

grateful for

reception.

After telling Mr. Lubbock that you agreed wholeheartedly that cooperstion is desirable and that we should have a large party rather than

El

small one,

c4.40.Level_
you asked whether they hadesupe4 or would consider the following points:




(1)

Whether it is the plan of the Italians to do anything with

the private bankers and if so whet?

On this point you subsequently

tola me that Mr. Lubbock had said that they had not as yet made any
inquiries and had no information.

192_

111M. 3.1 *OW

7.ser'

(CONFIDENTIAL FILEiDERAL RESERVE BANK
OF NEW YORK

FICE CORRESPONDENCE
r.:3\

'ROM

DATE

Governor strong

Nov_ 29, 1927.

BANK OF ITALY

SUBJECT

Goorg.e L. Harrison_
2

At about what rate would the lira be stabilized?

Mr. Lubbock

said that they had not R6 yet had opportunity to discuss this question.
Would the conversations concerning a credit be of a character
that would avoid bringing ur any political questions?

In reply to this

Mr. Lubbock stated merely that btringher had emphasized that
issue credit to the Bank of

Italy would do more

A.

bank of

than anything else

to

insure the future and effective independence of the Bank of Italy from
any Bort of political influence or control.

How imminent is the stabilization and would there be time, if
we were asked, for Us to meet somewhere to discuss a credit arrangement?
As to this Mr. Lubbock said they would cable some




suggestions tonight.

FEDERAL RESERVE BANK

OF NEW YORK
PZ2°

December 15, 1927.

PEhSONAL AND CONFIDENTIAL

Dear 'Mr. Strong:

I am quite ashamed of myself for not having sent you a word except by cable since you left here.

The truth of the matter is that we have

been so rushed most of the time that I have put it off from day to day until now I find that it is almost two weeks since you left.

We have had a long hard day today and as I find to my surprise
that the only decent boat this week sails tonight rather than tomorrow

night as I had supposed, I am just going to hit a few high spots in this
letter to keep you in touch with some of the gossip.
The directors, through the various and appropriate stages,
have been considering your recommendations regarding organization, cafeteria,
salaries, etc.

At the meeting this afternoon in executive session, I under-

stand that the whole "bag of tricks" was approved, including two new Deputy

Governors , abolition of the Controllers, office, creation of the Assistant Deputy Governors title,

25,OOO additional absorption of cafeteria ex-

pense, and the appointment of two new Managers.

While I understand that

Messrs. McGarrah and Sailer will visit tashington in advance of any formal
submission of the program, you will remember that under the Board's requirements, the recommendations regarding salaries and organization will

very properly not come up until after the first meeting in Anuary.




You may remember that just before you left, you advised me

RAL RESERVE BANK OF NEW YORK

2

Mr. Benj. Strong

Dee. 15, 1927.

of the remarks of Owen Young in the executive session of the directors
regarding the memorandum on rate procedure.

I attempted to incorporate

his views regarding a separate vote on the existence of the national emergency prior to any action regarding rates, and had several discussions with
Mr. McGarrah about it and informally with the Officers' Council.

At any

rate the directors have today adopted a minute in the form attached, with
a view that it will be transcribed in the records of the meeting, where it

will be available for transmission to Washington whenever the appropriate
occasion arises.

I rather understood from Governor Young that while he

is gradually making progress with the only member of the Board whom he expects might make some difficulty, nevertheless the matter is about in the
same status down there that it was when you left.

In this connection, I rather imagine from what Governor Young
says that he will make considerable headway with James because of Governor
Young's unqualified support of James in the Atlanta controversy.

I do not

know much of the details but, apparently, James has gone pretty deep and
committees from the Atlanta district are threatening a march on Washington
with a view to registering all sorts of complaints and appeals.

I rather

think, however, that Governor Young will support the Board's committee in

their recommendations, regardless of the influences being brought to bear
from Atlanta.

That will, of course, - and rightly enought - strengthen

Governor Young's hand with James.

Incidentally, I understand that

Eugene Black will be the new Governor in Atlanta to succeed Wellborn.

I do not knot much about him other than I hear that he is some relative by blood or marriage - of Wellborn's.

They seem to persist in their

nepotism!




For some reason, of which I am not advised, McLean will no

Am. RESERVE BANK OF NEW YORK

Mr. Benj. Strong

3

Dec. 15, 1927

longer be chairman of the Senate Banking and Currency Committee.
of South Dakota is to take his place.

Norbeck:

I was much alarmed when I first

heard this, but learn -from Governor Young that Norbeck is an excellent

type of fellow, quite willing to seek and follow advice and altogether,
in Governor Young's mind, a happy selection.

If we can get such a man

as that from the Middle West, I agree that our position there is strengthened rather than weakened by the shift.
5.

We are having much difficulty in our consideration of the

action of the Governors Conference relative to stock drafts.

I feel that

the other officers are quite right in their belief that you cannot
"gradually discontinue" the handling of these drafts.
collect them or not collect them.

We must eithe

That being so, the big question is

when should it be done, if at all.

I first suggested that

agreed that we must do either one thing or the other, without tapering
off gradually,

it might be wise to have the collection committee make

their whole study of the character of items to be handled before we do
But Strater now feels that on the matter of the stock drafts,

anything.

his committee has no discretion or option in view of the action of the
conference.

Then I saw Governor Young in Washington on Sunday -(and I

spent a most delightful day with him at the Ireasury)- he said that thile
he always advocated abandoning non-cash collections, nevertheless he
feels that as long as the System expects to continue handling non-cash
collections, we cannot discriminate against the stock drafts.

He inti-

mated that he was waiting to see how long it would be before the banks
found that it would be impossible to do what the Governors Conference recommended.

After talking it over for sometime, we both were inclined to the

conclusion that a satisfactory way to control the collection of stock drafts -




itscomE BANK OF NEW

Mr. Benj. Strong

Dec. 15, 1927.

or indeed any other class of ityms - is through a charge, and I am hopeful
that it will be possible to let the matter ride along until you get back,
with a vies to reopening the question on the basis of a charge.

Indeed,

properly applying the charge would control all of the abuses to which it
has been stated the collection system has been subjected.

I then asked

Governor Young whether he would feel - as we once felt - that it would be
wise to offer a. city-wide collection system for non-cash items for all of

our city banks as well as for the country banks, provided we make a charge
for the service.

Governor Young expressed complete agreement with the sug-

gestion and said that he had once tried to work it out in Minneapolis but
for some local reasons he had some difficulty which discouraged him in doing so.

Some more gossip which I picked up quite privately in Trashington.

McFadden has for sometime been angling for a job in some of the Re-

serve banks.

Apparently, Colonel McIntosh, for one reason or another, with

which I am not familiar, suggested the possibility of his being appointed

to succeed Austin in Philadelphia, but thewhole matter of Class C directors
has been brought to a show-down by Governor Young, who raised the question
of the tall Street Journal article about Federal Reserve Board management
of Federal reserve banks,

and he gathered from the statements around the

table that all of the members, with the possible exception of one, would
not for the 'world tent to see the Reserve Board an "operating body" or any-

thing other than a "supervisory body."
all of the members,

Furthermore, I think that practically

denied knowing anything of the Tall Street Journal

article or how it was conceived.

Adolph Miller at a recent meeting in keshington, raised the
question whether the time might not soon be here when we should raise rates.




Mr. Benj. Strong

5

essenvE BANK OF NEW YORK

Dec. 15, 1927.

as interested, and after the meeting asked Governor Young

Cunningham

whether he saw anything in the situation which justified an increase at
Young answered that he saw nothing whatever to support it,

this time.

with the possible exception of the stock market which he hoped would

crack of its own teight before it would be necessary for the Reserve banks
to raise rates and be blamed for any break that might occur in the market.

The purchase of securities has lagged so far behind the gold movements
that I think most of the members of the Board are quite happy in the execution of the open market policy approved by the bo,7rd at the lest meeting.

Even Miller, who is ready to squabble if le had offset the gold movement
dollar for

dollar, bas

expressed himself most favorable in the way the

account has been handled.

I think every one at the moment is in favor of

maintaining the status quo leaving the question of rates for discussion
after Christmas or after the turn of the year.
8.

There is not much point in my discussing market

conditions

or the state of our own account in a letter, since it will necessarily be
out of date by the time the letter reaches you.

But briefly, as of last

night, our total bills and securities were $353 millions, of which 85
millions were discounts .for the city banks, $46 millions bills under sales

contract, and $59 million other bills purchased.
investment account was $113 million.
lion under the previous week.

Our share of the special

The total of $353 million is $21 mil-

While I am not certain, I think that the

Treasury's overdraft has been reduced to about $60 million as of last night,
so that I presume it may be necessary as the Christmas demand progresses
and the Treasury overdraft is liquidated, to buy some more securities.
At the moment, however, there is no understanding that that will be done.
In this connection, Bailey of Kansas City, wrote you a personal letter




sier-6

Mr. Benj. Strong

RTC SARK OF NEW YORK

PP

Dec. 15, 1927.

which Case has answered, asking to be advised as soon as there is any likelihood of any bank raising its rates.
to be among the first to go up.

He apparently feels that he wants

His letter, however, did not indicate that

he feels any pressing demand for & change.
Whaley-Eaton.

Governor Young regarding the

I have had several quite private talks with

thaley-Eaton

article, which I wirelessed you.

He has felt all along and told me to assure you that that report could not
have

resulted from his discussions with any members of the Board.

While he is not certain of his dates, he feels fairly sure that Miller and
Platt, who were the two members not present when he first advised the
Board, were not told about the matter until too late to have been the cause
of its appearing in the Whaley-Eaton issue of December 5.

As I cabled you

a day or so ago, however, McIntosh, when he first saw the article, blurted
out apparently that somebody "peeped" down there.

I think, from what Gover-

nor Young says, that McIntoshle feeling was based not so much on the particular dispatch as it was upon his general irritation over past leaks about
some of his Comptroller's calls.

At any rate, I have done all that I could

with Governor Young without any embarrassing pressure on him formally to
investigate the matter.

Governor Young, by the way, seems to be taking hold in
grand fashion, and organization is now apparent where chaos was rampant.
Things are being done and done quietly and in an orderly fashion.

decks all seemed to be cleared and from what he told

The

me on Sunday, all

the regulations are disposed of and everything that was done at the

Governors Conference will be out of the way before he leaves on the 18th
for Minneapolis, where he is going to spend Christmas.

The only thing

that has not yet been disposed of is Burgess's article for the Year Book,




Mr. Benj. Strong

Dec. 1E, 1927.

which they are apparently squabbling about for one reason or another.

I rather think their objection is not so much to the article but rather
in

to the fact that it was written in New York instead of/Washington.
11.

Bell of Barris Forbes came in last night to see me, saying

that they and some other house have an option, which expires the end of

this month, on $12 million bonds of an Italian HydroElectric company.
He was snooping about to see whether we knew anything in the situation
which would make it any less desirable for them to issue the bonds in
question.

I avoided any direct reply, told him that while we were not,

of course, as Closely in touch with general trade conditions in Italy
as he himself was, nevertheless we felt that they had made great strides
in their monetary position in the last two or three years.

I ended up by

just telling him that I knew of nothing which we could tell him which

would be a help to him one way or another in determining what he should
do about the issue.
quite approved.

Mr. McGarrah was present during the discussion and

It is difficult to give you the atmosphere of the talk,

but Bell got nothing out of us.

I mention it only because of the fact that

his coming the way he did gave the impression that he is suspicious that
something is in the air:

k7

I could ramble on indefinitely and have probably forgotten to

mention much more important matters than those enumerated here, but the
time is so short and it is getting so late that I must stop this now so
that Miss McCarrick can type it and get it on the boat tonight.

I am

not even going to wait to read it, so please take it for what it is worth
and quite leniently.




We all miss you a lot and only hope that the severity of the

ILSINVIE BANK CF NEW YORK

!Jr.-be:1j.

8

Dec. 15, 1927.

Strong.

trip and the pressure of the work over there will not tire you out.

Above all, take care of yourself and if for any reason you want to come
back or want help, send me a cable.

It doesn't take me long to pac

Always, affectionately yours,
COVIAA-61-4Ao

Dictated but not read, and signed for
Mr. Harrison by Miss P!cCarrick.

Mr. Benj. Strong,
c/o Bank of England,
London, England.

ail. 0
the..




0




-COPY OF OUTGOING CABLEGRAM

New York, N. Y.
December 24, 1927.

Benj, Strong,

S.Mauretania, R.C.N.Y.

My love and Merry Christmas to you.
George Harrison.

ANSFR

W. T. H.1 567,1 S-27

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TEDERAL RESERVE DANK

CI, NEW YOkK

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mISS MARY ,ICOARRICK
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FLEASE

),-

Hai: GOVERNOR

IS AND -IHETHER ANY NE-fS

YHICH qICH1 (JONCEPN MY PLANS

O1

YET DECIDED ..1HE1HER

SHALL STAY ANOTHER ':,!EEK




HARR I SON

311-

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0

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MISS MARY MCCARRICK
FEDL RESERVE DANK

AM AT HOTEL
IF ANY NEWS
FORARD. UP




POINCIANA PALEACH
AND VIHFRF

STRONC IS

NY

PLEASE WIRE ME TODAY

STAYING AT ATLANTICCITY

MAIL \IILL TELEGRAPH FURTHER ADDRESS TOMORROV:
HARRISON

-

't

4

157P

180 80

FEDERAL RESERVE BANK
OF NEW YORK

1-26

OFFICE CORRESPONDENCE
To
FROM

Mr. Harrison

DATE

March 29,i-926

192 _

SUBJECT:

Benj. Strong

If you have not done

so, will you have a talk with Mr. Crane

and prepare his mind for the possible need for rearranging our trip in case I am
unable to sail Saturday.
Attached is Governor Robineauts cable, which is self-explanatory.

Wtzetctite,



daa,e6
14,60

On board s/s "Aquitania",
May 15, 1926.

Dear Mr. Harrison:

I have your fine long letter of April 30th, which mentions
only my first cable regarding the hearings, but I hope the second cable

reached you In time to make the necessary changes.
first on

I was too ill at

the boat to do any work on it.
Miller's testimony has not yet arrived, but I think Winston has

I have not had tie* to look at it, but will do

some of it with him.
after reaching Paris.

He is flying over today, and we are

the "Aquitania" from Southampton
Paris on Sunday.

to

so

crossing on

Cherbourg, but I join him again in

It may be necessary, when the hearings are recumed, for

us to clear up any doubt in the minds of the Committee as to certain

matters that he has dealt with.

I of course can have no

opinion until

I read the record.

Fisher's and Lombardic letters are really ridiculous.

Of course

it is a piece of effrontery for them to ask me to be an honorary vicepresident of their association, and it is all of a piece with the other
assumptions they have been guilty of ar to my attitude.

About the

designation of a Governor for the Board, I did not

gather from Winston that anything had as yet been done to settle the
question.

In fact, I think it all depends upon what you fellows do at

home.

Won't you tell Burgess that I am

grateful to

him for keeping me

His latter gives the nem very fully, and that is just what I
like to have.
posted.




Mr. Harrison.

2.

May 15, 1926.

I don't believe there is any need of my writing to Governor
Crissinger about the Belgian matter, but in case you fellows don't agree
with me, I am enclosing a reply which may prove to be satisfactory.
If not, you can get one up yourselves.

I shall write separate letters about various matters over here,
so as to facilitate filing, etc., and this is just a general reply to yours
of the 30th.

My very best wishes to you all.
3inceraly yours,

Mr. G. L. Harrison,
c/o Federal Reserve Bank of New York,
New York.

BSIM




fete' du Cap d'Antibos,
Antibes, :rune 8, 1928.
Dear 7r. Harrison:

I am most grateful to you for your letters of May 18th and 21st.
About everything touched upon in both letters will hove ben dealt with before
you hear from me, so / shall not burden you with a long reply.
I am of course anxious about the Mc Fadden bill and the eorcibility
of an unwise compromise.

Personally, T. would rather have no bill than one

which embodies even the shRdaw of the Hull amendment.

7qinston will have arrived home before this letter reaches you and

given you first-,iand all the news.

T have 'eritten you separately about Mr.

Case.

One re-.son for my suggestinc Reyburn was because

had had a frank

talk with him about our office situation and I thought he could make some contri-

bution to the solution of Oftse'e puzele.

Tnoloeed is copy cf a letter just received frcn Mr. Stetnon, our Minister nt Polnnd, orncerning which I cabled you.

I rn inclined to think you

hove been a bit too anxious about the situation there.

My reply tc his letter,

which is also enclosed, may be of interest.

Again, --ny thnnks for your letters.
news.

I em so glad to }Inv° all the

My best regards to all of you as always.
Sincerely yours,

Mr.

L. Harrison,

c/o Federal Reterve Bank of New York,
New York.
13S:11




Hotel du Cap d'Antibes,
Antibes, June 6, 1926.
Dear Mr. Harrison:

I notice in the minutes of the Officers Council meeting of April
26th a reference to drawing against items deposited before 9 o'clock for
which immediate credit is given.

That items are these, and what relation

will this arrangement have to the right of a member bank to recover on items

up to 3 o'clock if not paid by the drawee bank!

This is a procedure that

should be mighty carefully studied from a legal point of view, and the minutes
do net disclose enough inforrrtion to enable me to form an opinion as to
whether we are taking an undue risk.
Sincerely yours,

Mr. G. L. Harrison,

c/o Federal Reserve Dank of New York,

New York.
BS,M




Hotel du Cap d'Antibes,
Antibes, June 11, 1926.
Dear Mr. Harrison:

I find I have failed to acknowledge your fine letter of May 7th,
which gave me o good idea of just how matters are going in /ashington.

*Ile I have not yet finished reading Miller's statement, which is
a wearisome document, I can ree standing out very strongly an indicetion of his

belief that the Board must have a larger hand in operations and that the judgment of the directorn and officere of the Reserve Denks is now allowed to have
too much influence in arriving at mejor decisions.

But the greatest impres-

sion that I gather is unfortunately that he has been rather disingenuous in
giving the Committee the impression that the Board has s much greeter comprehension of System problems than we know it has.

I think he falls into the

rether natural error of expressing his own views as though they were the views
of the Board an a whole but it is an error that we all make and I cannot
blame him so much for that.

I can well understand his embarrassment in an-

swering some of the questions.
In the appenrancee.before the Committee, I am much impressed with

the desirability of assuming n constructive attitude rather than a defensive
attitude where any doubts arise such as the legality of the repurchase agreement.

T think our nosition should always be that any doubt, if it exists,

should be rerolved by making the law clear that we have the power to do what

we are doing, for if the power were denied us, it would be an injury to the
country and to the System.




The Committee reacted well to sugiestions of

Mr. Harrison.

2.

June 11, 1926.

that sort When I made them, and I am certain they will always, for the
Committee is in a thoroughly constructive frame of mind and will be helpful.
Sincerely yours,

Mr. G. L. Harrison,

c/o redera7 Reserve Hank of New York,

New York.




Hotel du Can d'Antibee,
Antibee, June 21, 1926.
Dear Mr. Harrison:

Yours of June 8th has just reached me, also yours of the 11th, but
the corresponemon with Mr. Redfield ha e not yet arrived.
About a French lean, now that Harriet has failed to form a Government

and Briand has again been requested to make the attempt, I presume all talk

about loans will be ended for the time being.
I hope our friend R. L. does not rely overmuch on the Committee of
My gumee is that they will produce a mouse.

Nxperte.

I shall net answer Congreseman Strong'y letter, but with very much

that on receipt of thief you would write him, telling him that I have received
a copy of his letter and that T have written you that immediately on my return
I want to go over the whole record again and will then give him the very best

suggestion that I can devise.
There ere one or two suggeetions of much significance in hie proposed
amendments..

One is the provirion in the new earegraph that the powers of the

Reserve Syetem !shall be used to control the total velum) of credit and currency

rather than the use that ie made of each credit.

This is an important recogni-

tion of our contention that er cannot control the use.

Another ir that the amend

ment provides that the study of the subject Olen be made by the Federal Reserve
Board inetead of by a Cmuitts. of Congress.

I met say there aro hopefu3 signs

In the activities of this Committee.
Sincerely yours,
Mr. G. L. Harrieon,
c/o Federal Reserve Bank of New York,
New York.

ISM



Hotel du Cap d'Antibes,
Antibes, July 1, 1926.
Dear Mr. Harrison:

I just have your pencilled note, and doubt whether you realize how
learn that I did
relieved I am tr/give a satisfactory answer to Mr. Coss by cable snd letter.

It was a difficult puzzle, as difficult as any that I have faced in o long
time.

One cvn shape a conversation to

meet questions

and replies ar cannot

be done by letter, and there sms svc'n a possibility thst Case would misunder-

stand my attitude, especially in vier of our recent discussisne in regard to
the manegement of the Lein Department, that I was rather terrified lest I be
respionsible for a decision one way or the other by him which would be unwise
and unjustified.

Incidentally, it seemed highly desirable that this be made the opportunity of eliminating any illusions as to the future, and I gather from your
letter that that has been done.

Many thanks to you, an is so often the case.
Sincerely yours,

Mr. G. L. Harrison,
c/o Yale Club,
Vanderbilt Avenue,
New York.
111S:M




FEDERAL RESERVE BANK

OF NEW YORK

Hotel du Cap d'Antibes,
Antibes, July 5, 1926.

Dear mr. Harrison:

This will simply acknowledge receipt of your letter of June 22nd
in regard to Mr. Winston's report on the Indian Currency matter and the
expense of the inquiry, and your other letter of
Bronx-Brooklyn clearing arrangement,

both

bincerely yours,




2.1 0
in regard to the

of which are very satisfactory.

any thanks.

Mr. G. L. Harrison,
c/o Federal Reserve Bank of New York,
New York.

the 22nd

Intel du Cap d'Antibes,

ibes, July -, 19P6.

Dews Mr. Harrison:

This will just acknowledge yours of the 25th of June, covering

a variety of subjects which call for no special comment.
SiEcerely your,

:Ir. G. L. UarrIFon,

c/0 Federal. Reserve Bank of New York,
York.
38:101




/914

Hotel de l'Europe,

Amsterdam, August 3, 1926.

Dear Mr. Harrison:

Yours of the 20th about Mr. Baker's bill is just received.
ee how I can possibly deal with it by correspondence.
me as most practical.

I don't

Your suggestion strikes

Ur. Baker did a great job for the Federal Reserve System.

He did it almost too well, in a sense, because if there had been any sloppy work
in the lower court, we might have had a review by the Supreme Court on the merits.

Mr. Baker has not got the reputation of being a heavy charger, and after the devo-

tion which he has given to this matter and to other matters for the System, I
would feel mortified and ashamed if his bill should be questioned.

So my sugges-

tion is that it be handled in such a way that there is no possibility of that eituation arising.
Sincerely yours,

Mr. G. L. Harrison,

c/o Federal Reserve Bank of Now York,

New York.




Hotel de l'Europe,
Amsterdam, August 3, 1926.

Dear Mr. Harrison:

what you write in yours of the 16th in

Frankly, I am disturbed by
regard to Congressman Strong.

nether we agree with him or not, the earnest-

ness and sincerity with which he has tackled a very difficult problem entitles
I wish that my own

him to the very best help we can give him.

statement to the

Committee could have been more helpful and have less the appearance of being
simply destructive criticism.

when I get home

You can tell him from me, if you want to, that

I will take my coat off and

do the best I can to be of help, up

to the point where it is necessary for me to sacrifice some honest convictions.
I will not ask him to abandon his, any more than he would ask me to abandon mine,
but I do think that some formula

can be

worked out which will be expressive of

what we are trying to do, without being deceptive as to what we cannot do, and
I would like to have a hand in the job.

gaging in any propaganda.

But he must not think that we are en-

I have not communicated with anybody on the subject,

as you know, and I believe everyone else in the Bank has been as careful.
Sincerely yours,

Mr. G. L. Harrison,
cio Federal Reserve Bank of New York,
New York.




Princess Hotel,
Hotel, August 26, 1926.
Dear Ur. Harrison:

I am cabling you in reply to your* of the 12th about Mr. Baker's fees,
so shall not comment further.
Yours of the 10th I thoroughly understand, and am sure Mr.. Trotter will
do the needful.

Your letter of the 11th about the Clearing House Committee action again
exhibits the inaptitude of those gentlemen in dealing with a situation which requires a combination of technical knowledge and good judgment.

I have full confi-

dence that you will work it out all right with them, and really the only point that
gives inc any concern is the attitude of the Central Trust Company.

If the Contral

Trust Company should take a determined stand, it might involve the question of
eir membership in the System.

I know they don't feel any sense of dependence

upon us, and we would very much regret to see that fine old bank pull out.

Not be-

ing members of the Clearing House puts them in quite a different category from the
others.

Replying to yours of the 13th, don't bother about the record of the hearings before the Banking and Currency Committee subsequent to Dr. Miller's testimony.
I can pick that up on my return.

That you write about the discount rate is most enlightening.

I am not

inclined to repurchase securities sold, certainly not until things hereafter develop so that the picture is a bit clearer.
that if developments require a further
the better.

Of course you and

advance

the

others realize

in our rate, the sooner it is made

But you probably realize also that we must give some consideration




Hr. Harrisor

2.

then to

the situation in

London.

August 26, 1926.

I have a feeling that

coal strike will momentarily put some strain on the

the settlement of the

exchanges, as

British manu-

facturers undoubtedly slowed down very Sharply in their foreign purchases of raw
materials because of the strike, whereas the discontinuance of the strike might
necessitate immediate heavy purchases, with the offsetting exports not arising
for some months.

That is just a thought suggested by the fact that the trade

figures showed a greater reduction in imports than in exports after the strike
got under way.

suppose you are acquainted with Mr. lorraw's testimony before the
Senate Finance Committee, during which he was closely questioned in regard to what
I had been doing

abroad.

The hearings have simply

been discontinued until Con-

gress reassembles, and the Senate Finance Committee is going to give further consideration to the subject of debt ratification, probably having some more hearings
before the French debt agreement is formally reported before the Senate.

In view

of the interest they have displayed in my activities over here, I think it may be

a good opportunity for me to ask to be heard and disabuse their minds of some misunderstandings of what we do abroad, exactly as we attempted to do before the
House Committee on Banking and Currency.

That is a matter for you and the rest

of us to consider on my return.

My return home will need

to be governed a bit

planning to sail some time in September, with the
early.

by

events, but I am now

hope that it can be reasonably

There is no end of trouble getting accommodations, and I have been so un-

certain of my dates that I have been unable to

"hook" anything definitely, except

some rather poor accommodations for September 22nd.

I will cable just as soon as

I know definitely.

Best regards to all at the Bank.
_re G. L. Harrison
St., New York.


33 Liberty


Sincerely yours,

Princess Hotel,
Paris, August 30, 1926.

Mr. Harrison:

I was delighted to have your long letter of August 20th, and would
have been vary much worried about the disclosure of the gold shipments from Aus-

tralia had I not seen the cables.

You can see the importance and bearing of the

/salient in Dr. Miller's testimony, and I can give you more details when I get
3, earnestly hoping that it is eliminated.
About the Open Market Committee action, I have no reason to doubt its

lam and, as you know, this time was for more drastic action than was contem-

plated by the Directors.

In fact, I don't think I would hesitate to let

some of

the September 15th maturities, although possibly not all of them, run off without
replacement.

You know I have always said at the Bank, and still believe, that a

discount rate at a law level is more effective in control of credit when we have a
large portfolio than a higher discount rate is when we have a very small portfolio.
The reasons for this are obvious, so if our Directors are not willing to go to
it seems to me we are forced to dispose of some of our securities and couple with

that, if possible, the policy of distributing the borrowing as much as possible among the different member bankc

and not having too

much borrowed by

any one or

even any half dozen.

I am sorry the Board got disturbed about the delay in

raising the rate.

I had a feeling, as I think I emote, that the indications pointed towards the increase come time ago, and I have often made it a practice under

those conditions

to have a preliminary and very confidential talk with Crissinger, so that he will




2.

Mr. Harriso:

August 30, 1926.

be 41 position to aay when these disputes arise thet he has been consulted.

It means risking at times some advance publicity, if there is any leak, but
generally there has been no leak end the feeling of cooperation has been effective.

I am enclosing with this a letter addressed to Winston, and a tissue

for your confidential information, to save repetitions.
There has been great difficulty getting accommodations home, but I have

finally secured a room without a bath on the "Mauretania" sailing on the 18th of

September, and will take that in preference to the "Homeric" on the 15th, as they
get in about the same time and Mr. Morrow will also be on the "Mauretania".

If

I could got a sailing a week earlier, / would probably take it, but I Shall be
detained here until the end of this week and then rant to spend a week or ten
days in London, to keep some ongagemento which I tentatively made before leaving.

I am distressed at being away so long, but when you finish reading all the dope

Ir3 home, I think you will feel that it has been worth-While.
Best regards to all at the Bank.
Sincerely yours

Ir. G. L. Harrison,

c/o Federal Reserve Bank of New York,
low York.
4S-14




Princess Hotel,
Paris, August 30, 1926.

Dear Mr. Harrison:

Thank you for your note of the 17th.

I read the statements which you sent me, which included all of

Dr. Miller's, as I understand it, and these have been returned to the office
7ith the only suggestion that sesmed of sufficient importance to be justified.
Sincerely yours,

Mr. G. L. Harrison,
c/o Federal Reserve Bank of 1
Nev York.
BS:M




iork,

Bank of England,
London, September 9, 1926.

Dear Mr. Harrison:

I am delighted with what you write about Dr. Miller's testimony
on the subject of foreign balances with the New York Bank.

It worried me,

and I feared a bad reaction over here.
With thin I am enclosing the monthly review of the Midland Bank,

which contains a criticism of the Indian Currency report that you may be

interested in reading.
Sincerely yours,

Mr. G. L. Harrison,

c/o Federal Reserve Bank of New York,

New York.
BS:ii




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CLASS OF SERVICE

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appears after the check (number of

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symbol appearing after the check.

appears after the check (number of

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NEWCOMB CARLTON, PRESIDENT

GEORGE W. E. ATKINS. FIRST VICEPRESI

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 sh

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G. L. H.

37WUX 18 RADIO SS MAURETANIA

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NEWCOMB CARLTON. PRESIDENT

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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 Grand Central Terminal Main Concourse, N. Y. ALWAYS
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GEORGE L HARR[SOT

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Stuyvosant !load,

Biltmore Forest,
Biltmoro, N.C., February 18, 1927.
Dear Ur. Harrison:

The Manager of the Biltmore Setate, !gr. Ashley, just telephones
me that Mr. Cecil ALS just written him about the visit of the Poles, and
I hink Mr. aad Mrs. Cecil probably know the Polish ffinister in 'lashington

and will arrange to silow them some attention while here.

He says that ar-

rangements will be made to put up the party at the Biltmore Forest Country
Club, which will be much more convenient than to stop 'way over at the Grove

Parh Inn, which is five miles away.

If, on receipt of thls, you will ascertain whether such an arrangement is satisfactory to them, I will notify Mr. Ashley right away on hearing
from you.

I would need to !mow who is coming and their full name, so that

if necessary wards could be issued.
Sincerely yours,

Mr. G. L. Harrison,

33 Liberty street,

New York City.
BSA




pitAllst

Stuyvesant Road,
Eiltmore Forest,
Biltmore, N.C., February 18, 1927.

Dear Mr. Harrison:

The Manager of the Biltmore &tate, Mr. Ashley, juet telephones

me

that

Mr. Cecil has just written him about the visit of the Poles, and

I think Mr. aad Mre. Cecil probably know the Polish linister in Washington

and will arrange to show them some attention

while here.

Ho says that ar-

rangeaentc will be made to put up the party at the Biltmore Forest Country
Club, which will be much more convenient than to stop 'way over at the Grove
Park Inn, whith is five miles away.
If, on receipt of this, you will ascertain whether such an arrange-

ment is satisfactory to them, I will notify Mr. Ashley right away on hearing
from you.

I would need to know who is coming and their full names, so that

if necessary cards could be issued.
Sincerely yours,

11:. C. L. Harrison,
33 Liberty street,
New York City.
B3:11




A

RECEIVED
MAR 8

FEDERAL RESERVE BANK

1927

G- L. 1-1.

OF NEW YORK

Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., March 6, 1927.

PERSONAL
Dear Mr. Harrison:

In view of the probability of your sailing for Europe so soon
and the uncertainty

as to how long you

will be away, I feel unwilling to

have you leave without some steps being taken to have Mr. Young clearly
understand my views about the future of the Bank.

So I have had the

draft of the letter to him rewritten, and enclose it herewith.

kindly read it again and then deliver it to him, with

the

Will you

understanding,

however, that if you and he agree as to the wisdom of doing so, it should
be -considered simply a memorandum and either returned to my files or be
destroyed.

My only reservation about your going to Europe, with Mr. Jay
gone and while I am also away, is the

possibility

that this whole matter

may reach a crisis with no one at the Bank thoroughly conversant with the
situation and all of its complications, and especially the past record, and
no means of having the point of view which you and I hold clearly exposed.
You will notice that there is no reference in the letter to the
resolution of our board of directors, which has committed us so far as to be
almost an insuperable obstacle.

You will need to handle this most tact-

fully with Mr. Young, for I realize how urgently he felt the need for some
such resolution.

Now that it has passed to the Federal Reserve Board, the

damage is done, and I think you should explain orally to Mr. Young




just the

FEDERAL. RESERVE BANK OF NEW YORK

2

Mr. Harrison.

3/6/27.

way I feel about it, but nevertheless in such a way that he will by
no

possibility misunderstand my doing so.

Sincerely yours,

Mr. G.

L. Harrison,

33 Liberty Street,

New York City.




IIIIIIIIIIMPIIIII1111111111111111111111111111111

auyvesant Rated,
Biltmore Forest,
Biltmore, N.C., March 6, 1927.
PMEONAL

Dear Ir. Harrison:

In view of the probability of your sailing for Europe so soon
and the uncerLainty as to how long you will be away, I feel unwilling to
have you leave without some steps being taken to have :Ir. Young clearly
understand my views about the future of the Bank.

So I have had the

draft of the letter to him rewritten, and enclose it herewith.

Till you

kindly read it again and then deliver it to h.:ea, eith the understanding,
however, that if you and he agree as to the wisdom of doing so, it Should
be considered simply a memorandum and either returned to my files or be
destroyed.

My only reservation about your going to Europe, with Ur. Joy

gone and while I am also away, is the possibility that this whole matter

mpg&




4,1

may reach a crisis with no one at the Dank thoroughly conversant with the

situation and all of .it s complications, and especially the past record, and
no means of 'selling the point of view which you and I hold clearly exposed.

You will notice thet there dee no reference in the letter to the

resolution of our board of director-, hich has committed us so far as to be
almost an insuperable obstacle.

You will need to handle this most tact-

fully with Mr. Young, for I realize how urgently he felt the need for some
such resolution.

NOW that it has passed to the Federal Reserve Board, the

damage is done, and I think you should explain orally to

Young just the




Millirr11111111111111

2.

Ur. Harrison.

3/6/2711

I feel about it, but nevertheless in such a way that he will by
possibility misunderstand my doing so.

Sincerely yours,

Mr. G. T. Harrison,
33 Liberty Street,
Now York City.
B1:1

Stuyvesant aoad,
Biltmoro Forest,
Biltmore, N.C., March 6, 197:7.
Uy dear Owen:

In defeult of opportunity for a full discussion with you, the

lext best thing is a letter, but I am afraid it will be a poor substitute
for a talk. I have been moaning to write it for come time past. Its
length is due to the necessity for recounting a littic history.

k

way of Introduction: when the Federal Reserve Act became law -

in the face of strong banking opposition, manifested more in ".all troot"

than in any other part or the country - the principal fears aroused yore,
I believe, three - others being of less consequence.

The firut was that

the new banking syston, lhich was compulsory upon national benkc, rould be

politically controlled.

The cecond was that dividing tho country into a

lumber of districts - as it developed, no less than twelve

stronc sec-

tional feeling would enter into the manegament of the Syeten and it would

be Impotent to perrorm its chief functions smoothly and efficiently.

The

third was that the Reserve Ne'r, taking over such vast resources of capita and deposits from the netienel bruks and with such broad powers
granted them, would become active competitore to the detriment of the interests of the member banks.

This was the situation before the /ar started.

In April or

May of 1914, Warburg brought the Federal Reserve Board's request, with the
approval of 7resident Wiloon and Secretary Mc Adoo, that I aheuld become

the head of the New York Berk, organize it and be responeible for its
OSO.




I was on the eve of sailing for lrope, and declined positively

2.

Mr. Young.

to entertain the idea.

3/6/27.

On my return about the first of July, the pro-

posal was renewed with greater urgency, and Ruin I declined.

Then

came the Vex- and, as you know, a desperately bad situation, liable to be-

come greatly worse as the vteissitudes of the ar developed unlace our new
bunking system immediately became effective.

Some tine .!.n neptember I

was again approached by a committee of the reeerni Reserve Board, of which

Tarburg wes one, with a very insistent plea that I should undertake the

task.

I think they &leo brought 'ea a letter from rresident Wilson urging

me to do co.

They then told me that the Board WAV encountering the

greeters difficulty in getting nen to take positions in the Reserve nenke.
My memory is that they did not definitely have e hate:, for even one /rink

of the twelve, and the argument was that if I would accept the position,
It would set an example that would enable thee to get good men in the

other districts.

After many conferences with my associates in New York,

and especially elth Seek lorgan, Harry Davison, Dwight Morrow and lAr.

raker, 1 was persuaded to say *Yes".

It involved a very greet financial
sacrifice, as you realize, end, as it has later developed, e evcrifice of
my health as well.

But my. acceptance of the position was only after a

very clear declaration of my attitude which I made to 7erburs, Jack Aorgan
and Marry Davison, and which "eerburg advised me he had convoyed to his

associates in ashinston.

They told me that the head of the rank would

be designated as the Governor of the Dna, that he would be the actual
executive heed of the Break and would be pernitted to pass upon the selec-

tion of assecistes.

I replied that I preferred to accept the position

without any conditions whatever, either as to title or eelary or otherwise




3/6/27.

Mr, Young.

3.

save that I would head the Bank, but that

everybody should understand
In a word, it was

what my position would be in certain contingencies.

that any development in the System in the direction of a political control,
or of control by the banks of the country or by the 'all Street benkers,

or any interference from any quarter

with the autonomy and independence

of the Reserve Bank of New York as contenpleted by the statute, would not

result in my resignstion but would certainly result in my attempting by
every legitimate means to defeat any such effort.
It developed that the suggestion of my accepting this position

coming from the Federal

Reserve Board gave rise to some resentment on the

part of those directors who had then been selected.

As T

the six

elective members of the boerd had been elected by the Bank , and one out

of the three Class C directors had been appointed - Mr. George F. Peabody.
The other two appointments had not yet been made.
the position of

Governor, the Board with my assent

When 7 agreed to accept
appointed Mr. Jat6 and,

over my protest, appointed Ir. Stemck as the third Clnes C director - a
most undesirable appointment, as it later developed.

The directors then

appointed me Governor of the Bank, but not before T had received a call
from Mr. Woodward, the object of which, as shortly developed, was to
satisfy himself end associates thet the Federal Reserve Bank, because of

my selection, would not become

promptly *Morgenized."

satisfied before we got through.
I did fear

the political

I think he was

That possibility T never feared!

But

control.

Privately, I told those members of the Federal Reserve Board
whom I knew that I anticipated difficult times ahead, on the one hand with




Mr. Young.

4.

3/6/27.

the members of the System, many of whom were hostile to the plan, and on
the other hand between the Reserve 'Janke and the Fedorel Renerve Board.

I also anticipated the oevelopment of feeling and jealousy between the
Reserve Banks.

It is a eingular fact that the Reserve lienks had not been organ-

ized three months before all of these develoements were actively harassing

us, and not the least was the immediate effort by the rederal Reserve Board
to aseume powers and exercise authority not contemplated by the Act.

As

a result of the Governore° Conferences and our conmittee form of ereceduro,
we have succeeded in overcoming sectional jonlousies.
work hareoniously together.

The twelve banks

Largely as a result of patient "creeping* by

the Reserve Banks rather than attempting to move too fast, most of the
banking hostility to the System has been overcome.

The one outstanding

weakness In the System is in the unsatisfactory reletions which now subsist
beteeen practically all the deserve Banks end the Federal Reserve Board.

This difficulty is the result of inherent defects or uenknosnos
in the schema itseik.

The situation which has now arisen was almost bound

to arise, and some of us clearly foresaw it in the early days.

The only

difference between what I anticipated being forced to do and what proves to
be eracticable, is due to the circumstance that my health is now such that

it is quite impoesible for we to carry out such a program as I had outlined
twelve years ago, for I am simply not phdsically equal to the task of dealing witi a developuent,

which

I bolicve io almost certain to vreck the

Systeu in the course of years; nor do I believe our directory would support
me in the attomet.




Lot me endeavor to give you the picture as I see it,

3/6/27.

Mr, Young.

5.

and thereby explain, as I hope 1 may bo able to do, the causes of tho

jor difficulties.
The Federal Government has never yeL constituted an independ-

ent bureau as a permanent branch of the Governmont free of departmental con-

trol under a meLber of the Cabinet which has been a success.

The Inter-

staLe Commerce COMAS:AM(certainly until the lust three year) in bowing

to the public clamor for lower rates in Lhe face of increasing costs of
operation, that is, wages, materials aed taxes, wrecked the railroad oysteme
of the countre, end it was not wony years ago that we had between 60,000 and

80,0te; miles of our railroad lines In the heeds of receivers - between a

fifth and a quarter of the entire mileave

Many othero barely acceded.

The Shipelee Board - there is no need to recount the history

of this unfortunate enterprise.
The Federal Far m Loan &elle'.

Tere the facts knomn in regard

to the -Mire of this organization, as they are Lr,alually becoming _mown in
the Treasury, I am satisfied that you would be astonished.

They vould be

fully knoen, were it not for the alarm which might arise among holders of the
obligations of a cyotem which is today borrowiag over a billion Zellers from

the public in one form or another.
The Alien Proeerty Custodian.

It has been nothing dhort of -

scandal of the first order, and here the independent officer of the Government appointed to execute this vest trust of :300,000,000 or more is directly
responsible to the President.

Fortunately, recent changes have improved

matLers.




(5) The Tariff Commission.

It has been an unfortunate end impotent

4/6/27.

Ur. Young.

6.

body from the start.
could go on at some length recounting °there with

nre doubtleso familiar.

you

The one notable exceetion is the Vas Finance

Corporetion, and Ito escave from the fate of these other independent bodies

has been due to tho good fortune of getting a man of outstending ability
and large independent means who dominated the oituation absolutely from the

st;rt and was willing to devote himself to the work 30 long as he could

control it, without fear of losing his job:
The reason. :or these failures have ,1: been disclosed many times.
The failures are principally due to inability to get good men. The

riee are sanll.
.1cns.

political considerations enter too much into the selec-

But what Is even more serious, these men, when they are selected,

become t1to7d, and inefficient, unconseoutly almost subordinating real con-

victions to their for_rs lest they nay not be reappointed or may encounter
criticism. such a bodyb as the history of every burm,uc clic body shows,
endeavors to cure its own inefficiency by seeking to grasp more 1.owero.

'he difficulties of their edministretion t,rioe partly from inability to get
ood assistents, because they cannot pay enough, and pertly because business
is conducted -a though it were a .arlimmentary body, votes must bc had upon

everithire. End members hesitate to go on record for and against important
_easuree which may arouce antagonisms.
cion between:




The moult is a fairly equal divi-

neritation,. procrastimtion and inaction;
Unfortunate convromiree; and

lietakee.
Almost continuously throughout the past twelve years a compare.-

I RI!

2r. Young.

7.

3/4/27.

timely small group of mon in the :emery° Banks have been contending ugLiact

those difficultieu in the Federal Reserve Boerd.

Their exittence is well

known and admitted even by members of the Board.

Usually logical argument

and frank submission o tho facts and persuasion has been sufficient.

At

time* It has even been noceesary, as you know, to Gook the influence of the
*Secretary of the Treasury.

The first real test that arm) in this rather settle reeeting for
autherity by the Federal Reserve Board was. as T said above, within a few
Ie'.he of the opening of the tatOes.

The Board undertook to direct the

Fodorrl Reeorve Beak of "':nneaeollo (as I recall) to make a chenge IL its

diecount rate.

The Governor of that Bulk protested by direction of it

directol , and the matter ere brought up at a meeting of the Gcvernors in
lashington.

At a joint meeting with the Federal Reserve Board, this effort

wee very frankly diocuesoe, the Ward attempted to assert its authority to
initiate changes in the rel.°, and as I was then Chairmen of the Governors'
Conference, I told the Board, le, unanimous direction of the Conference, that
if the Board undertook to do to the aeservo Bunko would find it noceseary to

test bho Board's power in the courts.

It was, of couroo, a bembehc11, re-

sulted in the Boerd's asking the opinion of the then AtLornoy-Ceneral

as

to

their powers, and while I have never eeen the opinion I have boon informed

that it was somewhat adverse to the Board's contention, except that in the
ease of a Bank which proved obviously recalcitrant in renrining out of lino

with the general level of 'setae or something of thet sort the Board could

initiate rate changes.

- have since been informed that a later opinion

was secured from Attorney-Conerel neugherty or one of hie assietente, which

rather sustained the Board's point of view.



're at that time consulted Mr.

8.

3/6/27.

Mr. Young.

John G. Johnson of Philadelphia vs to what the Act

meant, and after some

correseondence, as I recall, he wrote an opinion which was substantially

similar to the one which I understand was given by President Wilson's
Attorney-General

and which I

believe was written by Lir. John W. Davis,

although this is hell hearsay.
From that

conducted quietly,

early beginning until

the present time, there has been

but nevertheless with a certain degree of success, a

systematic effort on the part of some members of the Board to gradually sot

up precedents which would give them powers greeter than the law contemplates
to direct the operations of the Reserve Banks from Washington.

It would

make this letter much too long to recite the various efforts in this direction, but the files of our Panic, of the Governors' Conferences, and I be-

lieve equally of the other Reserve Danko, are filled with correspondence,
memoranda, opinions of counsel, etc. constituting a long record of resistance by the flanks to efforts by the Dorrd to centralize authority and

assume executive duties in 7ashington.

In the first few years of the life

of the New York Reserve Dank, committees of

our

directors and sometimes the

entire board, at times vieitod Washington to protest

against this develop-

ment and, while Secretary !lc Moo was Chairman of the Board, usually with
complete success.

This relates simply to the euestion of centralization of authority
and direction of operations, etc.

The other serious development lies, I believe, in the graving inability of the Board to make prompt decielons and in many cases wise once
whore important but nicely balanced questions appear for decision.

I think

the three outstanding examples are the pension system, dirt we cell the non-




3/6/27.

Mr. Young.

9.

c-eh collection system, and the Cuban branches.

A proposal for a pon-

cion system has been pendino before the Board for over six years.

We

hove spent about 100,000 in studying and foreulating it, and during that

entire six years the Board her never boon willing to approve the plan produced from the studies which they originally authorized.

Finally, through

Mr. Hamlin, a vote MB obtained in the Federal Reserve Board to the effect
that the Board would raise no objection if the Committee of the Reserve
Banks which was handling the matter eouoht to obtain the necessary legisla-

tion from Congress, but the Board would itself assume no reeloneibility.
The Committee got to work astively within the past year.

The bill was

passed unanimously by the Senate, but has just failed in the House.

The

result of this delay, which many of us feel was entirely unnecessary and

due to diosention and timidity in the Beerd, has boon to accumulate a liability for accrued contributions approaching 4,000,000.

This can be dealt

with by a readjuetment of the plan, but somewhat to the injury of the enter-

prise, and the delay of course makes the protection ineffective to the extent
that come five or six years of contributions may now never be made.

As to the matter of the non-cash collections, for over three years
there has boon argued and pending before the Board, whether we should con-

tinue this service, and if we do continue it, whether it should bo done with
or without a service charge.

It is the typo of service which should be con-

ducted uniformly as to methods and charges throughout the System.

The

Board has now ruled that the Reserve Banks may continue the service, but

charge or not as they please.

The result is that some Reeerve Banks will

charge for doing the work, and others will not - c thoroughly unwholesome

situation to be nermitted to develop.




10.

Mr. Young.

3/6/27.

In the Cuban matter, which is a very long story, after come
intimation from the Department of State, the Board was led to compromise

this important question by authorizing the establishment of two branches
in Cuba, one for Boston and one for Atlanta, both offices probably being

illegal and conducting n business which is not jut-tined either by the
situation itself or by the Federal Reserve Act.
1 am developing this subject in the two categories: one the effort on the one hand to obtain more authority, and the other the evidence
which is now so convincing, that once obtained it is almost impossible to

hope that it will be wisely and intelligently exercised; efficiency will
be impaired.

But there is still another point of view, and that is no to

the capacity of my. body such as the Federal Reserve Board in nkehington to

initiate and direct policies in credit mettern when they are located such a
distance from the money markets, e'hon all their Information reaches them by
word of mouth and second hand, or through written reports end from very

limited sources.

There is no bank of issue in the world which has its ad-

ministrative and executive headquarters elBeehere then in the money capital

of the country as well as in the political capital.

In our cue°, if the

executive and administrative direction of the System is gradually assumed

by the Federal Reserve Board, the political influences which surround the

Board in 'ashington will render so many of their acts subject to fear of
political consequences that a clean-cut, decisive, courageous policy by the
System will be impossible.

Of this we have had abundant evidence time end

again, in those matters requiring decision where political considerations
might prove to be an influence.

Repeatedly we hear from the Federal rte-

servo Board that this or that must ho done or must not be done, because of



U.

3/6/27.

Mr. Young.

the reaction which will be felt

in Congress.

All of the above is to give you the background for what! wish
to write you about - the present development in our own Bank.

Before I

left New York, in my convorentione with Mr. Jay, Mr. Reynolds, Mr. Woolley
and Ir. Reyburn, T took the position that upon Ir. Jay's reeignetion the
wiseet and best course would be to secure the appointment of Dr. Burgess if

that

were possible.

If it were not possible, my second choice, as you

T had no doubt of Dr. Burgess' ability to fill the

know, was Mr. Mc Garrah.

position and ultimately to develop into an influential and valuable officer
of the Bank and of the Syrtem, but of course it would have taken some time.

The appointment of Mr. Mc Garrah, I felt, would be in every way a happy one
so far as personal relations were concerned, but as I explained at the time,
selecting an outside person would be much more likely to open the door to

the very development which we all feared, namely, to give a further impetus
to the Board's desire to center the executive management of the System in
This letter, in order to give you the whole story, must be

"ashington.

frank to the last degree.

doubt Mr. Jay explained
Fe: era].

I

happen to have

known for come time, as no

to you, that the Board is

Reserve Agents in

a number of other Banks.

contemplating chengec in
There are various

causes, but it just so happens that these Banks are Boston, Philadelphia,
Cleveland and Chicago.

three-quarters

Those four Banks, with the New York Bank,

represent

of the resources of the System, and the Governors of those

five Dans constitute the Open Market Committee.
of policy are initiated in thot Committee.

Practically all

matters

The development of initiative as

to policy should originnte in the Reserve Banks, whore the operations are
conducted;




supervision and collaboration

only

should lie with the Board.

12.

Mr. Young.

3/6/27.

Feeling as I did that Mr. Jay's resignation would open the door

to just this development, I awaited with much interact the terms of the
Board's announcement of the change for come confirmation of my expoctntion.
Certainly the announceeient was ample cenfirmation..

I hove just now re-

ceived the enclosed news slip, which is undoubtedly inspired and is further
confirmation

of my belief that from now on the drift in the System will be

in the direction of centralizetion and that in five or ton yearn we will
not recognize the Federal Reserve System of that day an being even a second

cousin of the one that has existed for the pact five or ton years.
reason for writing this I think, is simply common sense.

My

The resistance

to this development has centered in the organisation of the Governors.

It has taken concrete form in the Open Market Committee.
least desire to exaggerate my min

nithout the

influence in these matters, tho bettle

hes mged 'ever my head most of the time.

that every time I have been away in recent yearn, effortn have

It unfortunat
been mode by

the Board to weaken the influence of this Committee and of the Governors.
In 1923, when I was in Colored°, the Committee of Governors previoun3y con-

ducting the open merket operations (which I had appointed at the Governors'
Conference) was suerretrily dismissed by the Federal Reserve Board and a new

Committee appointed, not by the Governors' Conference but by the Fedora
Reserve Board, the same

individuals constituting the new Committee, but with

Instructions set out in a resolution of the Board which deprived the Reserve
Banks of even their statutory powers in the matter of investments in Govern-

-ent securities.
,

A protect wee mode no to the terms of the resolution,

come lack of perspicacity on the part of those present led them to over-

look the fundamental oncreschment, which lay In the assumption by the



3

Mr. Young.

13.

/27.

Reserve Board that they had the power to dismiss such a Committee and
appoint a new one subject to their own direction.

Similar occurrences

of less importance have taken place more recently and at times due, I
regret to say, to a lack of vigilance on the part of the members of the
Committee, who have missed the point of these efforts by the Board to
grasp in greater degree some sort of authority over the operations of the
System.

So far I have discovered no one in the Federal Reserve Banks who,

when I retire, will be willing to submit to all of the annoyance and give
the amount of time necessary, by scrutiny of every
Reserve Board, so an to
fort.

lead

single activity of

the

a proper and necessary resistance to this ef-

Certainly the directors of the Reserve Banks have not got the time,

nor is it possible for a director to scrutinize everything that transpires
with this thought in mind.

It is no exaggeration for me to state that the

Board, probably under the influence of only two or three of its members,
has within the past few months

seen an opportunity

more favorable than any

that has formerly arisen to consolidate its grasp upon the System.

I be-

lieve that sem of themare consciously expecting that, as soon as I retire,
they can gradually assume an almost undisputed control of the activities
of the Reserve Banks to a degree far beyond what the law originally contemplated, and to an extent which in the and
the System and to the country.

will be disastrous, I believe, to

This will likely be expressed by an at-

tempt to have Federal Reserve Agents serve on the Open Market Committee.

Of course, when Mr. Jay's resignation first became a possibility,

wee in

irope and hed opportunity

without the

disability of illness

to

consider the situation resulting, and all of those fears of mine were most




Mr. Young.

14.

3/G/27.

active at that time and were then exprenced to Mr. Jay.

On my return,

illnese made me doubt my own judgment somewhat, but my instinct, which I
frequently find a pretty good guide, was co strongly against any outside
appointment that only the urgency and persuaolvenesa of our own directors

led mo to take the position I

did.

It had coemed to no that there were ao

many evidences that the Reserve Board and our own directors felt, an had
been ropertedly state(' to me, that I hod too much the habit of wishing my

awn way, that I should in this instance, being a natter where I had absolutely no authority, surrender my own view r completely to thee° of my assoc-

iates, and I did so
lay.

after making perfectly clear in whet direction my doubts

Nov frankly, Owen, the terms of the Board'e announcement and of thic

undoubtedly inspired article in the News
had in mind at the time of our

Bureau confirm ovary doubt that I

There is

correspondence.

nothing in this

situation that

coupon mo any personal embarrassment or uneasiness, or even

mortification.

Ac you 'mow, I have been for a long time eager to (=ape

any reoponsibility at r17,
man.

to nurse ny hoclth

and to feel that I am a free

!Ay anxiety in about the Federal Revery() Dank of New York end the

Federal Reserve System, and.I am writing you
you my conviction that we are

this long epistle to express to

not only headed

that we are in i minont danger, looking ahead

that very grave
tion by Congress

in the wrong direction, but

only but five

or ten years,

questions will arise which must be the subject of considera-

and which may Judea result in a very serious strife through-

out the country about the System.

The enclosed letter of Profonsor Allyn

Young of Harvard is evidence of that may happen.




You may properly ask that other course could have been pursued,

15.

3/6/27.

Mr. Young.

and it is not an ovsy question to answer.

The course which was followed

The alternative, I believe, was the one which

vies certainly tele easiest.

I had advocated before leaving for EUrope, and thet was a definite, clearly
drawn issue between the Federal Reserve Banks and the Federal Reserve Board

on all those points where the Board was seeking to encroach in its authority.
You must not gather from the above that I have not considered the possibil-

ities of an equally successful System in case the Board were able to get the
right typo of men as Chairmen of the Reserve Banks and have what might be

called a "Class C" management of the Banks, with the Board directly govern-

ing the activities of the Federal Reserve Agent, who would then be the executive head of the Ben1c.

I think I can assert without reservation that such

a scheme of management would be Impossible of success.

The Board has never

been successful since the System got started (except in the cane of Mr. Mc
Gerrnh) in getting the type of men essential to such a cchemo, end they have
endeavored to exercise such a domination of those they have appointed as to
render them ineffective as managers anyway.

Mr. Jay, Mr. "'Me of Cleve-

land, and Mr. Perin of San Francisco were the outstanding examples of first
rank men who eere not dominated by the Board.

Mr. wills, who mover had a

high regard for the Board, died recently; Mr. jay, as you have doubtlees
learned, never really had the confidence of the Board; and Mr. Perin has

boon forced to resign in despair.

No one of those Banks could be said to be

run by the Federal Reserve Board, bemuse the Chairmen in each case declined

to submit to their domination.
dominated in well instance.

In the other nine Banks, the Governors have
A °Clow C" type of management for the System

would result very promptly in losing some of the best men we have got in the




16.

3/6/27.

Mr. Young.

erve Banks.

(In our own Bank I would expect shortly to lose Case,

Harrison, Rounds and Gilbert).

The executive heads would all of them

owe their positions to the Federal Reserve Deere.

Bowever honest such a

man may be or however independent he may intend to be, after come yeare in

-arch a position to be faced with losing it, and of subjecting his family to
possible distress by doing so, he will usually suheit, and that I appreheed
ld be the situation in the Reserve Benks.

The fact now is that six of

the nine directors of a Reserve %nit control the selection of the heed of
the Benk, but if the Dorrd has its my, ehile tho Board nemes but three of

the directors, it will nevertheless select and control the heed of the Bank.
There has been ample time down here to think these matters over

deliberately. My fear is that circurstaxlcos hew nov led to the development
,
of a situation -hero it will be almost jr rere4140
to stem tee
ization. M eiief is that thin deeeloement in
Arelutely contrary to the
conviction and the deeire of each men as the President,
Secretary lonen,
1

Oenator Mese, and others who understand
the System and who have a keen int-

eract in its welfare. T feel very certain that such men
ne Russell Lettingen, Parker Gilbert and Gerrard Winston and there are
none in better ponition to judge than they - will look with crave
concern upon the development
of ouch a plan for the FeCerel Reeerve System as in forecast
in this inspired
article of the ran Street Journal.
Now the question Is, lima to do about it.

After expressing the
views eh/eh I held, poscibly not as urgently as I would hew
expreoced them
had I boon sure of the future as to my herlth, etc.,
our directors, Mr. Mellon
J the Federal Reserve Deere heve
decided upon what to do in our own came,




17.

3/6/27.

Ur. Young,

and T suppose the Federal Reserve roard will now decide What to do in the
case of the other four Banks T have mentioned, and probably in one or two
others which T believe are somewhat in their minds.

I personally feel
that my last responsibility is discharged in making clear ell that I feel
about it. You and my other associates in the Dank have boon so wonderfully loyal and understanding and sympathetic in your attitude to me, that
feel more then willing, even more then obliged, to conform to any course
which seems to than to be wise.

It is nevertheless a question as to whether
this courses which I mew fee/ is clearly ibrked upon, will not force me to
cbandon all hope of achieving anything further in the matters in which

T.

have been particularly interested all these years.
If T should resign now, I fear only adding to the difficulty end
embarrassment.

rven though it may subject me to sees criticism, it hoc

seemed to me that I should continen tie 1,__A--v.nn.
drift of matters personally and on the ground and form a bettor opinion than
I no con as to What my real duty is.

But for the last few weeks, T. have

felt that it was impossible for me to remain silent and watch this developwithout some miming.

I have opened my mind to you very fully, but with the conviction

that, for the present, it Should go no further.

The thought has been grow-

ing an me thst possibly the best plan would bo for me to arrange to meet you

in rastington within, say, a couplo of weeks, as I could probably than make

the trip without much risk, so that we could discuss this situation frankly
with Secretary Mellon and, if necessary, with the President.

I am sensible

of come anbarrasnment because of the fact that you are now a Class C director

and Vice-Chairmen of the board end feel a natural sense of responsibility to



Mr. Young.

180

3/6/27.

the board, which I would not for a minute ask you to lay aside and

especially not if you did not ?ratty fully agree with sass- of the concern *Jell I have expressed.

So I hsil conclude by asking you to hold

this letter in confidsnce for the moment end consider Whether such a visit
in "V,Ohington is not the visost course as preliminary to any conclusion
Whith I might otherwise readh.

with best regards, I remain
Sincerely yours,

Mr. Owen D. Young,
120 Broadway,

New York city.
1




00.4-6-A

RECEIVED
MAR 2 1 1927

FEDERAL RESERVE BANK

G. L.. H.

OF NEW YORK
=SONAL

,.,arch 17, 1927.

AND

CON2IDLNTIAL

Dear Mr. Harrison:

Yours of the 15th reporting your talk with Mr.
Hamlin has been received, and, of course, I have read it

with

much satisfaction.

The difficulty we are bound to encounter will
be due to certain inertia in the Reserve banks, as well as
the very natural unwillingness to start anything like a
row or an issue.

I can fully understand and sympathize

with the attitude of the directors of Reserve banks, Find

really much will depend upon whether Senator Glass is willing to pursue his intention of writing the Secretary and

himself Taking the subject a matter of inquiry possibly
in Congress.

I have sometimes ielt that it would be a

good thing to have a real inquiry as to the way the Reserve
System had functianed.

Such an inquiry could not be con-

ducted by the ranking and Currehcy Committee, but could
well be conducted by a small sub-committee.
a project that I want to promote,

,,Lt

But it is not

least until other

efforts had failed.
I .,hould be

glad

to hear anything Zurther that

you lee.rn about the letter Senator Glass proposes, to write.

With best regards, as always,
Sincerely yours,

Mr. George L. Harrison,
C/o Federal Reserve Bank,
33 Liberty Street, New York.




---1

Aarch 17, 1927.

PERSOliAL AND
CONFIDENTIAL

Dear Mr. Harrison:

.

Yours of the 15th reporting your talk with Mr.
Hamlin has been received, and, of course, I have read it
with much satisfaction.
The difficulty we are bound to encounter will
be due to certain inertia in the Reserve banks, as well as
the very natural unwillingness to start anything like a
row or an issue. I can fully understand and sympathize
with the ttitude of the directors of Reserve banks, and
really much will depend upon whether Senator Glass is willing to pursue his intention of writing the Secretary and
himself making the subject a matter of inquiry possibly
I have sometimes ielt that it would be a
in 7!ongress.
good thing to have a real inquiry as to the way the Reserve
System had functioned. Such an inquiry could not be conducted by the Banking and Currency Committee, but could
well be conducted by a small sub-committee. But it is not

a project that I want to promote, t least until other
efforts had failed.
ehould be glad to hear anything further that
you learn about the letter Senator Glaee proposes to write.
With beet regards, as always,
Sincerely yours,
Mr. George L. Harrison,
C/o Federal Reserve Bank,
33 Liberty Street, New York.




c'setz,,)
FEDERAL RESERVE BANK

OF NEW YORK

August 9, 19°,7

Dear Yr. Harrison:

Things are very quiet here and I do not know of anything to bring

you back as soon as you plan to come, so I am writing to say that you should
stay on for a. month anyway and get a decent rest.

up, I would stay longer.

And unless things liven

It isn't worth while impairing your heath qhen

there is really nothing to keep you here.

You will be interested to know that both Norman -nd Schacht
have agreed to November 1 for the Polish agreement and we have notified the
Bank of France so that they can go ahead with the letters.
4.86-1/8 means that there is nothing to fuss about there.
know of a thing that need make you uneasy about being away.

sterling at

In fact I don't

I shall be

here with the exception of a few days at a time, but I begin to doubt
whether we are successful in having quorums at our directors' meetings for
the next few weeks.

The banks are borrowing a bit more than expected, but this
gives us the opportunity to buy some more securities, which we are doing.
We will be up to $300,000,000 by the end of this week and possibly buy the

entire 40,000,000 authorized at the last meeting which would give us a
total of $315,000,000.
I saw Dr. Hiller this morning.

He went all overme and says

that he is pretty well satisfied with my condition.




He rather approves the

RESERVE BANK OF NEW YORK

2.

i

. 1M-rison

8.0.9.7.

\FEDERAL

.
idea of my takin,,,,, a winter vacation ti
-

.

i6

your.

If I carry out my present

plan it would enable me to have a talk with our friends etro,,,d and, after
the meeting, take a holld-,y in some nice place on tie Riviera.
Take care of yourself; don't overdo the golf and don't come b:.ck

until you are feeling fit and wiLh a good margin to spare.
Faithfully yours,

1.

Mr. George L. Harrison,
c/0 Mr. Thomas 7. Bowers,
..iest Chop,

Marthas Vinyard, Mass.




FEDERAL RESERVE BANK

OF NEW YORK

August 15, 1927.
Dear Mr. Harrison:
This is simr:ly to reinforce my earlier letter about remaining
away longer than the forteni.sht ,:hich you first suggested.

Things are very

quiet and there is really no n ed for you to return.

The arrangement with the First National Dank, which was confidentially
discussed last month, 11s been effected today.

There has been a little more demand for money than we anticipated so
we purchased *40,000,000 of the '50,000,400 of securities authorized at the last
meeting in 'dashington.

This has eased things up a bit and offsets the consider-

able trend to the interior which seems to persist.

You have observed, I suppose, that seven of the reserve banks are
now down to 3-1/2%.

It was a good job and. on the whole has been well received.

Please take care of yourself;
about the bank.

have ,,.

7000

rest;

Case is back looking very fit, and we are neither short-handed

nor over-worked.

Best regards to you.
Sincerely yours,

F,7r. George L. Harrison,
c/o
T.
Bowers,

1est Chop, Marthas Vinyard, Mass.




d don't worry

August 15, 1927.

Deer Mr. Harrison:

This is simply to reinforce my earlier letter about rene:ining
away longer than the fort4n1ght which you first suggested.

Things are very

quiet and there is really no n, ed for you to return.
The arrangement with the First National Bank, which was confidentially

discussed last month, hes been effected today.
There has been a little more demend for money than we anticipated so

purchased 140,000,000 of the '-50,0C/0,000 of eecuritiee authorized at the lest
meetino, in Washington.

This has eased things up a bit and offeate the consicer-

eble trend to the interior which seems to persist.
You have observed, I suppose, that seven of the reserve banks are
now down to 3-1/2%.

It was a good job and on the whole has been well received.

Please take care of yourself;
about the benk.

here a fs 01 1

rest; ,,nd don't :lorry

Case is back looking very fit, and we are neither short-handed

nor over-worked.

Best regards to you.
Sincerely yours,

Mr. George L. Harrison,
0/0 Mr. T. W. Bowers,
west Chop, Marthas Vinyard, Mass.




ZrJ-1.44

0

rl

4

1_4

rt I Attect-Z-4-2?

FEDERAL RESERVE BANK

OF NEW YORK
August 16, 1927.
Dear Mr. Harrison:

Many thanks for your note of the twelfth which tells me just what I
wished to hear about your holiday, but which does not assure me that you are
going. to stay away as long as you should.

You will be interested to know that yesterday we liquidated 1.1,000,000

of our London account, the exchange market being rather strong all day long.

Of

course if we reduce the balance very considerably it will necessitate buying more
securities here to offset the impairment of bank reserves.

There is no news other than what I have already written you, so please
have no feeling of uneasiness about the bank.

I have been thinking over Ogden Mills' request that we prepare a section
for the Secretary's annual report on the subject of gold, and it struck me that you
might care to be thinking about it while away.

My idea, subject to further thought,

is to divide the article into four sections:




I.

The Figures.
(a)

(0
(0

The Law.
(a).'

(0
(c)

III.

The gold supply of the country and
how it is distributed.
Gold movements since 1914 in and out.
How the gold is divided bet7een coin,
bars, and the amount of certificates
in circulation.
p

(0

There should be an analysis of the law covering

Buying and selling gold
Provisions as to bars and coins
Provisions as to charges.

Our Practice.
(a)

This should show

This should describe

The Assay Office practice
The Federal Reserve Bank Practice.

FEDERAL RESERVE BANK OF NEW YORK

IV.

2

The Gold Points.

8.16.27

Mr. Harrison

This should be a careful analysis of -

All items which effect the gold movement.
Just how the gold 'Toy ement works with regard
to our present law and practice.
With this analysis of the pre:.ent situation, it would be e=.5--y to lay out a

description of changes to law or practice if one or both are needed in order to improve
our gold position vis-a-vis the rest of the world.

e ought to describe how our gold market at present offers inducements
for gold to get into the mouse trap and the difficulties presented as to its getting
out.

I think we also might bring in some description of how we were able to
absorb gold from the rest of the world without great price infl,tion, and take a
crack at Keynes in his idea that we have a wasteful policy as to gold just be:cause
we hmre decided to run on an 80% reserve, or thereabouts, instead of inflating

until our reserve gets don to 50% or thereabouts;

and. that a, high reserve position

is simply the price we are willing; to pay for sound monetary and business conditions
in the country.
My best to you.
Sincerely yours,

C5.44-tr1

4)
'Mr. G. L. Harrison,
c/o Mr. T.
Bowers,
est Chop, Marthas Vinyard, Mass.

(Dictated but not read)




Harrieoe:
,

'

It relieved me to have your letuer of Luc

extenddyour stay.

and to leer!:

thaL jou

Until you had really left I do not think I was as con

ocious as I should have been of your need for the rest and possibly it is explained

by the invariably selfcentered point of viw of a chronic involid and not thinking
of the troubles of other people of less seriousness. I am not going to lecture you,
for I have had so many of those curtain lectures myself that I know how tiresome
they get to be.

The papers you ask for are being sent to you so that you can think over
the gold matter.

There is not much news of interest except that we are rather

rapidly liquidating our London balances while the exchange market is strong, following a suggestion from Governor Norman that we do so.

Nearly half have been sold

in the market at not less than 4.86 3/16, and we are suggesting to him that he buy
no gold for our account except it would otherwise certainly come to us, and unless
the price is right.

But we are not liable to get any gold so long as the exchange

remains at the present level and so long as Argentina is skimming the London market
of the surplus and taking some gold directly from South Africa.

The exchange

in

their favor is the result of large exports.
Very confidentially, I have had some talks with Mason about his plans,
and, last Thursday, discussed it fully with our directors.

It seemed desirable to

await your return before going ahead further, as there was a strong reaction at
the board meeting in favor of considering Logan as a possibility.
I have just returned frOm four or five days at Woods Hole where me-had
execrable weather, and I had a bad trip back on account of fog and the whistle
blowing all night.




I suppose you have had equally bad weather at Marthas Vineyard.

**,

fEr.iERAL RESERVE BANK OF NEW YORK

2

8/24/27.

Mr. George L. Harrison

You are doing quite right not to fatigue yourself with too much exercise,
golf, etc.

You are in need of a rest and I am glad you are getting it.

care of yourself.

Affectionately yours,

,/

4if

Mr. George L. Harrison,
C/o Mrs. Geoffrey Keyes,
Jameetown, R. I.
4

BS/RAH




v

Do take

august 24, 1927.

Dear Mr. Harrison:

It relieved me to have your letter of the 113th and to learn that you
will extend your stay.

Until you had reaily left I do no chink I was ats con

scions as I should have been of your need for the rest and possibly it is explained
by the invariably self-centered point of view of a chronic invalid and not thinking

of the troubles of other people of le.se seriousness. I am not going to lecture you
for I have had so many of those curtain lectures myself that I know how tiresome

they get to be.
The papers you ask for are being sent to you so that you can think over

the tolc matter. There is not mtch news of intereet except that we are rather
rapidly liquidating our London balances while the exchange market is strong, following a suggestion from Governor Norman that we ao so. Nearly half have been sold

in the market at not less than 4.66 3/16, and we are suggesting to him that he buy
no gold for our account except it would otherwise certainly come to us, and unless

the price is right.

But RS are not liable to get any gold so long as the exonange

remains at the present level and so long as Argentina is skimming the London market

of the surplus and taking come gold directly from South Africa.

The exchange in

their favor is the result of large exports.
Very confidentially, I have had some talks with Mason about his plans,

and, last Thursday, discussed it fully with our directors. It seemed desiTaole to
awsit your return before going ahead further, as thrq't5 Was a strong reaction at
the board meeting in favor of considering Logan ati a possibility.

I have just returned from lour or five days at loods Hole there we had
execrable weathtr, and I had a bud trip back on account of fog and the whistle
blowing all night.



I suppose you have had equally bad weather at Martnas Vineyard.

2

Mr. George L. Harrison

8/24/27.

You are doing quite right not to fatigue yourself with too much exercise,

golf, etc.

You are in need of a rest and I am glad you are getting it.

care of yourself.
Affectionately yours,

lir. George L. Harrison,

C/o Mrs. Geoffrey Keyes,
.4,mestown, R. I.




Do take

FEDERAL RESERVE BANK

OF NEW YORK

August 25,

1927.

Dear Mr. Harrison:

The time for our next Governors' conference is approaching,

and I am

anxious that

we should

make it an interesting one.

you feel about the date, and how

would you like

thought to topics while you are away?

How do

to give a little

Don't burden yourself with

it, but if you happen to have a pencil and a piece of paper in your
pocket, just jot it down like Doctor PanLloss.
We have

liquidated a

total of 1=7,000,000 sterling, and now

are about to increase the price.

The sterling market is still strong.

Don't bother to write it you are disinclined to.
With best regards to you,
Faithfully yours,

Mr. George L. Harrison,
C/o Mrs. Goeffrey Keyes,
Jamestown, Rhode Island.*
BS/RAH




-- !Mac. 4 A 180 M 1-28

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
0
FROM

Mr. Harrison

DATE

October 17,1927

SUBJECT

Governor Strong_

I have told you of my talk with Yr. Crane. I will take this matter
up with you as soon as he returns to the office.




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213LLURETIA GL-P,X FLYY 16
ORGI: 1-1AP.P, I S

YALE C.LUD
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TO YOU COOli 27: I 27,TD

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1.7,ATZT LY

LI.TIJ SIT-ill': C.,

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Aie,k,twq(24.11t
Misc. 24. 1 40 M 5-25

FEDERAL RESERVE BANK
OF;N EW YORK-

7,:CCarriek

SENT BY.'"7
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gEND To

LES

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COPY OF TELEGRAM

Fob. 9,'1108

aeorho L. lafraz,0
Good llo-oc Plantation
Ridgeland South Carolina,
Govor/nor
'

plms to z-.) to 1",t1ntic City on

February 16 for a fow wecks
ns,rch 17 or Apr-1.1 1

c:

7. 11 rY.61.)b1y sail on

vri 1.n
McCarrick.

_




-

4..0)1

t.1.4.41 J

THIRTY THREE LIBERTY STREET
NEW YORK

February 11, 19?13.

bear Mr. Harrison:
Mr. Strong

has

asked me to augment the letter Miss McCarrick

wrote you Thursday by saying he hoped very much you would take a little
extra vacation.
In case Miss McCn.rrick's letter did not reach you

owing to

your change of address, she wrote to you on Thursday that Dr. Miller had
advised Mr. Strong to go to Atlantic City for a couple of weeks, and to
postpone his sailing until after the middle of March.

So Mr. Strong is

planning to go to Atlantic City on about February 16 and to sail either
March 17 or April 7, depending upon the steamship. accommodations.

She also wrote you that Mr. Strong was trying to arrange a
meeting consisting of you, Congressman Strong and himself at Atlantic
City.

But since then Governor Young has arranged for Congressman Strong

and himself to meet at Governor Strong's apartment on Monday, the

13th,

so there probably will be no meeting at Atlantic City.
Mr.. Strong continues to improve steadily, I think, and his

spirits keep up in spite of another postponement of his trip.
Very truly yours,

Mr. George L. Harrison,
C/o F. L. McGinnis,
J&MeH Deering property,
Miami, Florida..




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Tri:;en 3 Lib rti

C) Charge to the account
CLASS '7-7. SERVICE DESIRED

2-7),0t)44,44-,0) 64.4.4.4Z:.25

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TELEGRAM

4...1

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Form 1228A

NO.

CASH C' CHG

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DAY LETTER
CHECK

NIGHT MESSAGE
C7."-"*"

NIGHT LETTER

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

THE

5.7
TIME FILED

1

MESSAGE

WILL SE TRANSMITTED AS A
FULL-RATE TELEGRAM

NEWCOMB CARLTON,

PRESIDENT

GEORGE W. E. ATKINS.

FIRST VICE-PRESIDENT

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

February 15, 1928
George L. Harrison
Hotel Poinciana

Palm Beach Florida

Strong loaves Friday for Atlantic
2,waiting advice
City and will be at Hotel Brighton
disposition opera tickets




No news

McCaroick

MISC. 3. 160M.7.27

FEDERAL RESERVE BANK

OF NEW YORK

GeTICE CORRESPONDENCE
To

7r. Harris on

FROM

DATE

19").S

192.

Governor btro

SUBJECT

I told you by telephone about Dr. 17111 er s report
and now I am enclosing a copy of it. In view of this I havo

decided to return to Nevi Yolk. on :lednesday by the 2130 train.
dhile it is all right down here T don't believe the advantage
of climate compensates fac sons of the inconveniences, and I

am anxious to start in with the lamp as soon as possible.
I am relyinp: on you or someone to arrange about ?List
and Quesnay,. whom I assume should stop with me at the liarguery.




March

1.7r.

,

1928.

73en ja min Strong,

Hot el Bright on,

Atlantic City, N. J.
Dear Governor Strong:

I have your letter and am sorry t 1-2 t everything has not
gone entirely
ou w mild like at At la:nt ic City, hut on the whole
I do not think your report is d is co-tu-aEir7 . Nor do I think it
indicates any s lipping back. I feel very c onf id ent tl.at you have
not really had any renewed act ivity of your old trouble and conse (Nen tly , I feel V: e have more freedom in allowing you liberty concerning your plans. Therefore I do not feel it is necessary to
ins is t on your staying at At lant; ic City at the -ire sent time. If
the matt ers that d raw you to New York are really import ant ad you
really could attend to them in the way you 1..ndi cat e in your letter,
I think it would be all right to c cue hack. If you do so I should
want you to arrange to have your la mp treatment wh ich I t kink would
be a real advantage. :le can then see just hT.,w you a re and, after
all, it is a simple nrntter to go back to -=4,;lantic City if you have
to, even though you do not get just t he rooms you would e specially

li

.
On the other hand, I think it is quite lik-e ly you may not
have to return at all.




Very sincerely yours,
( Sig tm d )
James ,lexander Miller




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LL

Royal Hotel,

Evian-lee-Dains, July 20, 1928.
Dear Mr. Harrison:

Mr. Dean Jay has just sent ma a copy of his cable from New

York No. 64,802, in whiCh (Paragraph 5) I notice a rather disturbing
expression of views about the money market position in New York.

It

suggests to my mind the desirability of your having a little talk with
some of them at Morgan's office, to ascertain upon What their views are
based,

le must not have any calamity in the money market, and I be-

lieve it is wholly in our power to prevent it.
I will be glad to be home in order to discuss all these problems
with you and the others.

Best regards to you all.
Sincerely yours,

Mr. G. L. Harrison,
83 Liberty Street,
New York.
DS:M





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102